Bruce Billson (Dunkley, Liberal Party, Minister for Small Business) Share this | Link to this | Hansard source

Yes. It was a gripping presentation of this legislative proposal prior to question time and if I could continue in its introduction I would be most grateful.

Mr Fitzgibbon interjecting—

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

The minister has the call. The minister will proceed.

Bruce Billson (Dunkley, Liberal Party, Minister for Small Business) Share this | Link to this | Hansard source

I am being encouraged to go over it all again. It is great for your electorate, it is great for our nation, it is great for SMEs that are either current exporters or prospective exporters growing export markets and creating jobs and opportunities for our country. That is what this bill is about. It is also deregulatory, so we can do a better, more effective job and achieve deregulation outcomes, and that is what this is about.

I was explaining how the amendment to remove the word 'capital' from the definition of 'eligible export transactions' will see 'capital goods' replaced simply with the term 'goods'. Ninety-five per cent of goods exported from Australia are currently exempt or outside the reach of the direct support that EFIC is able to provide. This amendment deals with that by seeking to remove the word 'capital'. As a result of that amendment, it will be deregulatory in that it will reduce the time exporters face in not only doing paper work but also in multiple efforts to get the initial guarantee from EFIC and to go on to secure the funding facility from a bank that doubles the due-diligence processing time and requires two sets of documentation and legal fees. That is why this measure is not only good for enhancing the effectiveness of EFIC but is also a deregulatory measure. That will have a real benefit to Australian SMEs looking to secure export opportunities.

For example, consider the case of the South Australian family owned paint manufacturer Astec Paints. In recent years Astec Paints has been experiencing increased demand in Japan for its innovative paint products. The company's elastomeric paints, which are designed and manufactured in Adelaide, meet Japan's strict earthquake resistant building codes, giving them a competitive edge in the market. Thanks to the elimination of all tariffs on paint products under the Japan-Australia Economic Partnership Agreement, the company anticipates that strong demand and strong growth will be there for its products in the Japanese market and that this will continue.

To meet this demand, Astec required additional working capital to scale up its production to be able to secure that delicious opportunity that it had identified. Although Astec's bank was supportive of their growth plans, it was unable to assist without additional security. EFIC stepped in to provide a $600,000 export working capital guarantee to Astec's bank. This allowed the bank to provide the funds that Astec required. However, under the current arrangements Astec had to make two separate applications—one to EFIC and another to their bank. As a result, they had to pay two sets of lender fees and charges.

Another EFIC client, PCT Global, manufactures EnduroShield, an easy clean surface treatment. This product was recently used to coat the spire of the new World Trade Centre building in New York. PCT also produces home do-it-yourself kits, which it distributes domestically through Bunnings Warehouse. The DIY product was recently featured as one of Time magazine'stop 10 most compelling products. Building on this success, PCT secured a multimillion dollar supply agreement with Home Depot in the United States, the world's largest home improvement retailer. PCT needed additional working capital to expand production, but their bank was unable to provide further assistance. In response, EFIC worked with PCT's bank to provide a US$650,000 working capital guarantee facility. This enabled PCT to meet the increased demand for this business changing contract. However, without the benefits of the proposed deregulatory measures, PCT faced additional fees, interest charges and administrative costs to secure the guarantee facility and to secure the export opportunities and the growth and jobs dividend for our economy.

These are just a couple of examples of how these changes will assist Australian SMEs and why this is such an important amendment to EFIC's direct lending arrangements. However, to ensure that these changes do not bring EFIC into direct competition with private sector financiers, the government has decided to apply competitive neutrality principles. This also implements the recommendation on competitive neutrality in the 2012 Productivity Commission report on Australia's export credit arrangements. To achieve this, this bill provides for EFIC to pay a debt neutrality charge and a tax equivalent payment. This will allow EFIC to help commercially viable exporters overcome financial barriers without discouraging or displacing private sector participation in the market.

In conclusion, the amendments in this bill will be of particular benefit to small and medium sized businesses, the engine room of our economy, while at the same time aligning with and contributing to the government's commitment to reduce business compliance costs by $1 billion per annum. I commend the bill to the House.

Debate adjourned.