David Bradbury (Lindsay, Australian Labor Party, Assistant Treasurer ) Share this | Link to this | Hansard source

I move:

That this bill now be read a second time.

This bill amends the International Monetary Agreements Act 1947 to bring into force a bilateral loan agreement between Australia and the IMF that was signed on 13 October 2013.

The Treasurer first announced a US$7 billion (around A$6.8 billion) commitment as a bilateral loan to the IMF in April 2012 as part of a global effort to bolster the global financial safety net that provides a firewall against a possible renewed financial crisis.

While the IMF’s current resource base is sufficient to meet expected needs, the IMF estimated early last year there is a potential global financing gap if a severe financial crisis were to occur.

As such, the IMF considered that it needed to raise additional lending resources to ensure that it has adequate firepower to play its role in crisis prevention and resolution. These resources are in addition to the contribution made by the Eurogroup to increase the capacity of the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).

Increasing the IMF’s available resources in response to this potential need is thus essential for ensuring confidence that the IMF is fully equipped for its crisis prevention and resolution role.

On 19 June 2012, G20 leaders in Los Cabos committed to boosting the IMF’s resourcing through temporary bilateral and note purchase agreements, with the total commitment now standing at over US$460 billion. Australia’s loan agreement is part of this global push to increase the resources of the IMF to respond to crises.

It is not expected that the loan agreement will be drawn upon over the forward estimates period as the IMF has sufficient resources to cover its projected lending activities in current conditions.

The IMF may only make drawings under the loan agreement if its existing quota and New Arrangements to Borrow resources are insufficient to support its lending to borrowing member countries.

As noted by G20 Leaders in their 2012 Los Cabos declaration, these resources will be available for the whole membership of the IMF, and not earmarked for any particular region.

The IMF is a quota-based institution and in order to reduce the IMF’s reliance on voluntary borrowed resources such as this loan agreement, members of the IMF agreed on 15 December 2010 to a doubling of IMF quota resources with a corresponding reduction in the size of New Arrangements to Borrow credit lines.

As such, this loan is only in place temporarily to cover the IMF’s potential financing needs in the short term. Any drawings from Australia by the IMF would be repayable in full and with interest.

The bill provides a standing appropriation for payments that are drawings by the IMF under the loan agreement. The appropriation covers this specific loan agreement only, and any amendments to the value or term of the agreement would require the act to be subsequently amended.

In addition to bringing the bilateral loan agreement into force, this bill also corrects a technical issue with the existing act. It provides an appropriation to make payments for changes to Australia’s quota, which will provide greater flexibility in how these payments are made including by using a foreign currency, or possibly Australian currency, depending on the holdings of the IMF.

I commend the bill to the House.

Debate adjourned.