Tanya Plibersek (Sydney, Australian Labor Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

I rise today to support the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 on behalf of the opposition. This support is founded in support for economic growth through export trade and our small and medium-sized businesses. Labor is committed to expanding Australia's international trading opportunities to generate jobs and growth for the future, and this bill is broadly consistent with that objective.

This bill is similar to, but not as extensive or ambitious as, Labor's prior bill that lapsed at the end of last year: the Export Finance and Insurance Corporation Amendment (New Mandate and Other Measures) Bill 2013. It is disappointing that the government has failed to reach the same level of ambition in its re-engineered version of this lapsed bill.

Labor's record with the Export Finance and Insurance Corporation goes back to its establishment. In 1991, the Hawke Labor government passed the original Export Finance and Insurance Corporation Bill to re-establish the Export Finance and Insurance Corporation, known as the Export Finance and Insurance Corporation. This original bill established the Export Finance and Insurance Corporation as an independent statutory corporation separate from Austrade, offering competitive export credit facilities for Australian exporters.

The origins of the Export Finance and Insurance Corporation were grounded in a report to the Hawke Government by the Departments of Industry, Technology and Commerce; Foreign Affairs and Trade; Primary Industries and Energy; Treasury; Finance; and the Prime Minister and Cabinet on the effectiveness of the Export Finance and Insurance Corporation and its export finance and insurance services. The scope of the number of government departments involved is illustrative of the reach of the Export Finance and Insurance Corporation's activities and the importance of export markets across the Australian economy.

The Export Finance and Insurance Corporation is Australia's well respected export credit agency. Its mission is to provide finance and insurance support to assist Australian exporters to grow their international businesses in circumstances where there are gaps in, or constraints on, the private market financial sector. The Export Finance and Insurance Corporation's operations are subject to requirements in both the Export Finance and Insurance Corporation Act and the minister's Statement of Expectations. We are pleased to note that the Export Finance and Insurance Corporation still today operates under the minister's Statement of Expectations issued by Labor's former Minister for Trade, Dr Craig Emerson.

Over the years, Labor governments have guided the Export Finance and Insurance Corporation and have sought to keep its operations efficient with changing markets. On 1 September 2011, the then Assistant Treasurer and now opposition leader, Mr Shorten, released the terms of reference for the Productivity Commission inquiry into the Export Finance and Insurance Corporation. The inquiry considered the role for government involvement in the provision of export credits, insurance, reinsurance and other financial services. It also considered the Export Finance and Insurance Corporation's funding arrangements, capital adequacy requirements and the interaction between the Export Finance and Insurance Corporation's operations and other government programs, international agencies and the private sector. After extensive consultation and deliberation, the Productivity Commission delivered its report, which contained multiple recommendations in relation to the Efic's operation. The Labor government accepted the majority of these recommendations and introduced two bills to amend the Export Finance and Insurance Corporation Act. One bill passed in 2013 and is currently in effect. The other bill lapsed when parliament was prorogued ahead of the last election.

It is good to see that the current government has picked up the substance and spirit of this former Labor bill. However, as previously noted, it is disappointing that the government's re-engineered version is not quite as ambitious. The bill only has two principal changes, only one of which was recommended by the Productivity Commission. These changes are the widening of the Export Finance and Insurance Corporation's direct lending function to all goods, not just capital goods; and the widening of the competitive neutrality provisions as recommended by the Productivity Commission.

In relation to the impact on small to medium-sized enterprises, the Minister for Trade and Investment and the Minister for Small Business put out a media release on 8 October 2014 entitled 'EFIC's renewed focus on SMEs to boost jobs and growth'. The statement said:

… Export Finance and Insurance Corporation … will be refocused to increase its capacity to finance small and medium sized businesses seeking to capitalise on global trade opportunities.

If there is any refocusing, it is not stated in the bill before the chamber. In Labor's lapsed bill, we saw fit to clearly legislate a requirement that the Export Finance and Insurance Corporation focus its activities towards small and medium enterprises because Labor is a party that supports small business. It is not a party that talks up SMEs but remains buried in the coat pocket of big business. Labor's record on small business is a very good record and one that we are proud of. In government, Labor supported and established a range of programs to assist small businesses to expand their trade and export opportunities.

The Export Market Development Grants scheme is a terrific example. The scheme offered financial assistance for small and medium businesses in a wide range of industry sectors and products. The scheme reimbursed up to 50 per cent of eligible export promotion expenses above $10,000, provided that the total expenses were at least $20,000, and it provided up to seven grants to each eligible applicant.

To boost business links with Asia, Labor established the Asian century business engagement grants for Australian business organisations to improve links with Asia and help broaden their reach into emerging business centres.

The TradeStart program was another platform to assist small- and medium-sized enterprises to achieve long-term success in international business. The Women in Global Business program was established to provide support to women involved in export related activities, offering networking, training and business assistance to increase female participation in international trade and investment, delivering increased economic benefit and job creation through greater diversity. Labor created the Anti-Dumping Commission within the Australian Customs Service to ensure our anti-dumping and countervailing system was strong and robust. These programs were designed to assist small businesses to be export ready and provide them with the tools they need to grow their business and market opportunities internationally.

It is a shame that Labor's legislative mandate to focus on SMEs was not taken up by the coalition in its re-engineered version of this bill. Indeed, the government has shown in many areas that its rhetoric of support for small business is not matched by action. For example, the Prime Minister and his Minister for Small Business demonstrated the little regard they have for Australia's two million small businesses by removing Labor's small business tax concessions, the tax loss carry-back and the instant asset write-off provisions, plus the special depreciation rules for motor vehicles. This will be a significant cost to small businesses across Australia, with the government cutting more than $5 billion of direct tax assistance. Small businesses employ more than five million Australians and are well placed to increase their productivity and employment with the right policy settings. That ought to be a focus of government. Labor initiated and completed many reforms in government to assist these very same small businesses, and in opposition we will continue to support changes that better support small business.

This bill changes the definition of an 'eligible transaction' by replacing the words 'capital goods' with 'goods', and repealing the definition of 'capital goods'. This change now enables the Export Finance and Insurance Corporation to provide direct loans in relation to non-capital goods as well as capital goods. Given that only about four percent of Australia's exports are capital goods, the opening up of the remaining 96 per cent of non-capital exports as 'eligible transactions' has the potential to have significant ramifications for the operations of the Export Finance and Insurance Corporation. The government has failed to outline the anticipated increase in the Export Finance and Insurance Corporation activity and estimate the expected increase in loans as a result of the changes proposed in this bill. Further, there is no statement from the government on how this change will impact the Export Finance and Insurance Corporation's risk profile or profitability, and in turn how this will impact on the government's capital and other funding arrangement with the Export Finance and Insurance Corporation.

The second substantial amendment affected by this bill is to expand the competitive neutrality provision in the Export Finance and Insurance Corporation Act to encompass all of the Export Finance and Insurance Corporation's operations. Currently, such provisions only apply to short-term insurance contracts. In practice, this is an outdated theoretical provision as the Export Finance and Insurance Corporation now lists only medium-sized insurance as a product. Previously, however, when it did provide short-term insurance contract products, the Export Finance and Insurance Corporation made tax-equivalent payments of $2 million in the 1999-2000 financial year and $0.8 million in the 2000-01 financial year. This amendment was recommended by the Productivity Commission and was included in Labor's lapsed bill.

As a government corporation, the Export Finance and Insurance Corporation is currently exempt from a number of Commonwealth and state taxes. This exemption has the potential to give the Export Finance and Insurance Corporation a competitive advantage over private sector lending institutions. In its 2012 inquiry report, the Productivity Commission recommended that the Export Finance and Insurance Corporation should pay a tax-equivalent charge and a debt neutrality fee in order to ensure that the Export Finance and Insurance Corporation's activity on the commercial account complies with competitive neutrality arrangements. This bill, similar to Labor's prior bill, implements this recommendation. Once implemented, the Minister for Trade and Investment will be able to inform the Export Finance and Insurance Corporation in writing of applicable debt neutrality charges or guarantee fees. This will in turn raise revenue for the Commonwealth. Again, however, the government has not provided any additional information on such estimated revenues.

In conclusion, although we are disappointed with the lack of scope and vision in the government's re-engineering of a lapsed Labor bill, Labor does support this Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. We support economic growth through trade and through our small- and medium-sized businesses. These amendments, when coupled with the promised government direction to the Export Finance and Insurance Corporation to focus on SMEs, have the potential to have a positive impact on exporting small- and medium-sized businesses.

Debate adjourned.