Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

The opposition is pleased to support this legislation, which supports the International Monetary Fund in its vital functions, particularly in times of economic and financial difficulty and distress, in particular, for member countries of the IMF and when those difficulties are widespread in a particular region and require strong and robust intervention. The International Monetary Agreements Amendment (New Arrangements to Borrow) Bill 2017 gives effect to an agreement with the International Monetary Fund to provide a standing appropriation and authority to borrow payments to meet drawings made by the IMF under the decision to renew the new arrangements to borrow, or NAB arrangements, made by the IMF executive board in November 2016. The previous five-year arrangement will expire on 16 November, 2017. The new arrangement will go from 17 November 2017 to 16 November 2022. So this is a timely piece of legislation; it is a pressing matter. The opposition will therefore facilitate and support its expeditious passage through both chambers.

Under this agreement the maximum amount of Australia's lending commitment to the IMF is special drawing rights, SDR, 2.22 billion, around A$4.05 billion. The SDR is an international reserve asset which can be allocated to member countries in proportion to their IMF quotas. The agreement, of course, is only activated when additional funds are required to be lent to member countries. As I said at the outset, that is at a time of some fiscal distress for a particular country, which is often associated with regional distress that can take hold at a time of economic dislocation. This requires the agreement of the participant countries that make up 85 per cent of the total credit committed under NAB and the agreement of the IMF executive board where the quota of resources available to the IMF for lending is not sufficient for its lending needs. That is a particularly important point. This does not come into play in normal circumstances; it only comes into play when 85 per cent of the total credit is committed and the IMF executive board is in agreement.

The bill, it's important to note, has no direct impact on the budget bottom line. That has been the case under governments of both persuasions, although there is occasionally a suggestion otherwise or some scare campaign otherwise made by opponents of these sorts of measures—it is unusual, but it does happen, though it is not the case. However, if the agreement is activated and funds are provided, there is an indirect impact due to the government's lending to the IMF, which increases our borrowing requirement, and the interest payable on any money borrowed by Australia to meet an IMF drawdown exceeds the interest paid to the IMF in regard to that drawdown.

This agreement will be included in the budget papers as a quantifiable contingent liability in keeping with normal budgetary practice. The NAB became operative in November 1998 and arose out of concerns first raised in 1995 that more resources might be required for the IMF to respond to future financial crises. Of course, that coincided with the Asian Financial Crisis. Australia has been a participant in all of these new arrangements since their commencement.

These updates, an arrangement that we made in government, arose out of an IMF quota and governance reform in 2010. That legislation passed the parliament in September 2012 for the same special drawing rights, an amount of $2.22 billion, which at that time was worth around A$3.2 billion. This represents an important aspect of our international obligations as a member of the International Monetary Fund. Australia's been a proud member of the IMF since the IMF's inception in the postwar years. It was a matter of some debate in Australia as to whether we should join or not, but the Chifley government did join the IMF, as they joined the World Bank, as they should have at the time. It has received bipartisan support by governments of both persuasions in all those decades since. We have supported the IMF and the World Bank as important members of the global financial architecture. That architecture comes under some pressure from some other places in the international debate, but Australia stands firmly as good members of the IMF.

I support the Treasurer in his role as executive director of the IMF and the World Bank, as he should as Treasurer of the day and as would remain the case under a Labor government. This legislation continues that bipartisan tradition of support for the IMF, particularly since 1998, as it is resourced to undertake its important stabilising role in the event of a financial or economic crisis in any particular member or region of the world. I commend the legislation to the House.

Jane Prentice (Ryan, Liberal Party, Assistant Minister for Social Services and Disability Services) Share this | Link to this | Hansard source

Firstly, I would like to thank those members who have contributed to the debate on the International Monetary Agreements Amendment (New Arrangements to Borrow) Bill 2017.

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

That'd be me!

Jane Prentice (Ryan, Liberal Party, Assistant Minister for Social Services and Disability Services) Share this | Link to this | Hansard source

Indeed, thank you. The renewal of the International Monetary Fund's new arrangements to borrow forms part of a broader global effort to ensure that the global financial safety net remains strong and resilient in the face of economic crises. The IMF's mandate to support global economic and financial stability is of critical importance, given continuing risks to the global economic outlook. As an open economy that is exposed to global economic conditions, Australia has a strong interest in doing all it can to ensure that the IMF has the resources it needs to fulfil this role. I commend this bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.