Madeleine King (Brand, Australian Labor Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

[by video link] Thank you very much, Deputy Speaker Claydon. It's very good to see you again, and I look forward, of course, to seeing you again in person when we are able to. Today I am speaking in support of the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. From the outset, I will be clear: Labor does support this bill. This bill seeks to broaden the range of transactions that Export Finance Australia can finance by enabling it to make equity investments.

As an open trading nation, Australia has been among the architects of, and a beneficiary of, the multilateral rules based trading system that has operated for decades, and Australian businesses have benefited from these rules to support export growth. As businesses have benefited, so too have the people of Australia, as there are an increasing number of job opportunities in those export related industries. On average, Australian businesses that export hire 23 per cent more staff and pay 11 per cent higher wages than non-exporters. In 2019-20, Export Finance Australia supported 136 Australian businesses with $1.1 billion in support, enabling $2.5 billion of export contracts which supported just under 10,000 jobs right around this country. Australian businesses from all sectors of the economy have been the beneficiaries of Export Finance Australia's support to grow their exports, and I'm going to take the House through a few examples of the companies and businesses around this country that have had support from the EFA which has benefited us all.

Australia is a world leader in both mining and what's known as METS, or mining, engineering and technology services, and EFA is assisting Australian companies to sell this expertise all over the world. A company known as RUC Mining utilised EFA support to support their underground coppermining business expanding into the dynamic South-East Asian markets. After securing a contract in one of the world's largest copper deposits in Mongolia, the Australian company needed special hoists, known as winders, that are used to raise and lower conveyances within the mine shaft. Australian banks had little appetite finance equipment for use offshore, and Mongolian finance had steep interest rates. Fortunately for this company, AEC Mining, EFA was available and worked with this company and granted them a US$12 million loan. This assisted AEC Mining to grow their workforce from 120 workers in 2004 to over 2,000 today.

In renewables, Australia supports Australian businesses on the cusp of the booming international demand for renewable energy exports—for example, Altus Renewables, which produces and markets biomass based fuels, converting wood based waste into densified wood pellets and absorbents for domestic and industrial use. Around 95 per cent of Altus's operations are export facing. After securing a contract with a Japanese buyer last year, Altus Renewables turned to EFA to support the upgrading of its facility for greater capacity and to enable it to complete the construction of a dedicated storage and export facility at the Port of Bundaberg.

Then there's Western Australian company Biogass Renewables, which specialises in the construction and operation of bioenergy plants using a technology known as anaerobic digestion, in which the plants convert organic matter, like food and agricultural waste, into biogas. This can then be used for electricity generation and heating and can even be converted to natural gas. One of Biogass Renewables's upcoming projects is to install an onsite biogenerator for a major Australian grain business, enabling that business to generate their own electricity and expand their operations to increase their exports. Though Biogass Renewables aren't a direct exporter in this project, their work is a critical part of their customer's export supply chain. So EFA is providing this innovative company with a performance bond and warranty bond totalling A$850,000 to provide securities under the construction contract. It's a very practical means of an Australian credit agency providing support for an emerging industry that is helping global supply chains for other Australian industries.

In the areas of pharmaceuticals and science, as well as general chemistry research, Export Finance Australia's contract loans have enabled Perth based Epichem to expand and grow its business workforce and capabilities. I visited Epichem in May of this year. The CEO, Colin La Galia, kindly showed us around his laboratories and technology park in Bentley, where he oversees an amazing workplace culture, with hardworking, friendly and enthusiastic staff working on the cutting edge in entrepreneurial pharmaceutical development. Epichem carries out a vast range of services, including custom synthesis and analytical services as well as technical problem-solving for scientific and chemically related problems. Epichem's customers range from small operators to large multinational pharmaceutical companies in over 35 countries, yet it operates out of a couple of small laboratories in Bentley, Western Australia. Over 80 per cent of the business's revenue is derived from an international customer base made up of many well-known pharmaceutical companies, biotechs and research organisations, as well as some not-for-profit NGOs. The laboratory I visited in Bentley was in part financed by an EFA export contract loan of $750,000. That lab is now double the size it was and I'm sure it will continue to grow, and it will all be because of that initial kick-starter loan that EFA was able to provide where others were not.

Another beneficiary of Export Finance Australia has been local Australian designers seeking to enter the global market—for example, jeans company ThreeByOne, which comprises three high-quality brands: Neuw Denim, Rolla's Jeans and Abrand Jeans. These brands are sold in stores across the world, including Canada, Japan, Norway, the UK, and the US, and through online retailers like ASOS and boohoo. With global expansion has come higher demand to keep stock on hand, putting pressure on their working capital. So Export Finance Australia provided ThreeByOne with a $2.5 million export line of credit to support their expansion overseas. With the finance able to cover the cost of stock, the brand can continue to focus on building their presence in the global market. The company has since doubled its USA business in the last 12 months, with this trend projected to continue. It's a great Australian business success story—and in fashion, which is not something I speak about much. Congratulations to all those involved in these projects.

Another local brand Aje was in high demand overseas, but the company couldn't finance its move into the international arena without affecting the cash flow of its Australian business. In just over a decade, the company has grown its retail presence locally from one store in Noosa in Queensland to more than 20 stores across Australia, one store in New Zealand and an online platform, ajeworld.com.au. EFA provided Aje with a $350,000 small business export loan to ensure that the cash flow of its Australian business was uninterrupted and that it could fulfil its export orders. This enabled Aje to strengthen relationships with existing buyers and reach new customers in the UK, US and Asia. And, can you believe it, Deputy Speaker, Adrian Norris, co-owner of the company, came across the EFA and its services via a newspaper article! It's good to see print media doing what it needs to do, and to see advertising within print media by EFA and others doing its job and bringing greater awareness of what's available to new and emerging export industries and their ability to access funding through Australia's export credit agency.

We know that Australia is renowned for its agricultural exports, so it goes hand in hand that Export Finance Australia would also support this integral industry in our economy. One beneficiary of EFA is Australian Organic Meats, AOM. This is a Queensland based exporter of premium quality, grass-fed, certified organic beef to wholesalers worldwide. Founded in 2011, AOM is a partnership between two longstanding traditional organic farming families, the Tully and O'Leary families, which each have over 100 years of farming history in Australia. AOM's key export markets are the Middle East, Asia and the US, with export sales making up around 80 per cent of the company's revenues. The high cash-flow nature of the business means it's important to have a substantial forward finance strategy in place to meet any growth in demand. Given the significant working capital required to meet increased demand from its distributors, AOM needed additional finance to manage this preshipment phase. Export Finance Australia provided a $500,000 export working capital guarantee to help AOM, enabling it to borrow the additional working capital.

More opportunities to export Australian goods and services to the world means stronger Australian industries, and that means more jobs for more Australians. The current lack of an equity investment power restricts Export Finance Australia to a narrower range of transactions. An equity investment power will complement its existing suite of financing powers, comprised of loans, guarantees, bonds and insurance. The amendment outlined in the bill before us today, the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill, will align Export Finance Australia with export credit agencies in other countries like the USA, China, Japan, Canada and South Korea, and also with other Australian government financing agencies like the Northern Australia Infrastructure Facility and the Clean Energy Finance Corporation. The kinds of equity investments that it will enable are matters such as shareholding in companies and in unit trusts, and participation in partnerships and joint ventures. This increased financing power will be used to support important infrastructure investments in the Indo-Pacific or export-linked projects in Australia, similar to the ones I mentioned earlier.

This bill will also give legislative effect to the government's decision to provide Export Finance Australia with the ability to offer guarantees for overseas infrastructure transactions without needing to provide a loan for the same transaction. This improves the flexibility and efficiency of EFA and the Australian Infrastructure Financing Facility for the Pacific, which oversees infrastructure financing activities, particularly in the Pacific where transactions may be most appropriately financed in local currencies. Export Finance Australia providing a guarantee for another lender's loan in the local currency is an effective way of facilitating local currency borrowing, and this will inject finance directly into emerging economies in our region. EFA's equity investment power will also be available to the AIFFP, which relies on EFA's governing legislation for delivery of its loans. Importantly, the bill has appropriate safeguards which constrain government spending in this arena. Any equity investment will be on EFA's national interest account, which requires government approval. EFA's other account, its commercial account, will remain unable to be utilised for equity investments. There will be no legislated cap on equity stakes; however, every transaction will require ministerial approval.

I will reflect for a moment on how this bill may assist our investment in the Pacific. The government has claimed that the bill will support Australia's economic engagement with the Pacific and Indo-Pacific. In 2019, EFA was granted wider powers to support financing infrastructure in the Pacific in line with the government's so-called Pacific Step-up initiative, which we know has broadly failed to make a meaningful impact and has simply taken resources away from South-East Asia. We are yet to see a step change in EFA's operations following this. Officials argue that this is the nature of inherently long-term infrastructure projects. But we do know of an undersea cable in Palau, wind farms in Vietnam and an airport in Fiji which have all been beneficiaries of the EFA's increased pivot into the Pacific.

Despite the talk about a Pacific step-up and engagement in our region under Prime Minister Scott Morrison, Australia is more dependent than ever on China for our exports and export related jobs, and, in fact, we depend on the Chinese market more than any other country in the world. At the same time, Australia's economic relationships with some of our other most important neighbours, including India and Indonesia, have gone backward, and backward by a long way.

When it comes to the Pacific, the Prime Minister's delivery has fallen well short of its announcements. The Prime Minister announced the $2 billion Australian Infrastructure Financing Facility for the Pacific back in 2018. Now, 2½ years later, that facility has provided less than $90 million of the proposed $2 billion in Pacific infrastructure financing. With this government it's all talk, no action and all announcement, no delivery. The same could be said of this part of the EFA's remit into infrastructure funding in the Pacific. It surely must be a national priority to make sure it happens. This change enabling equity investments will be part of that, but this is many years later than when this initial $2 billion fund was promised. Our relationships with the Pacific and across the Indo-Pacific must be nurtured through years of hard work, relationship building and resources on the ground and not just hot air from a do-nothing, announcement-loving Prime Minister and his government.

Labor will support this bill, as I've said, because we support Export Finance Australia and the work it does and has done over many years. We support's Australia's economic engagement in the Pacific and the Indo-Pacific. We support emerging exporters, and equally we support those exporters that are having difficulty finding finance for their novel ideas that, with the support of EFA, turn into established businesses that provide jobs. Labor knows that helping Australian businesses and growing emerging economies in our region is in everybody's interest. With that, I will conclude and confirm that Labor does support this bill.

Zali Steggall (Warringah, Independent) Share this | Link to this | Hansard source

[by video link] I rise today to speak on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. This bill will make changes that affect Export Finance Australia, known in short as EFA, and the provision of financial assistance it is tasked with undertaking.

The role EFA plays in supporting Australia's exports industries is probably not well enough known by Australians. Formed in 1991, EFA, previously known as the Export Finance and Insurance Corporation, is Australia's primary overseas export credit agency—and keep in mind that these are Australian public funds that are being lent. Export credit agencies like EFA are common in other jurisdictions, and they act as an intermediary between national governments and exporters to issue export insurance solutions, guarantees for financing and loans. Export credit agencies often lend far more money than commercial banks and offer long-term, low-interest debt that makes a project much more bankable. According to EFA, it offers loans, bonds, guarantees, project and structured finance and information for exporters. EFA works with governments, small and medium enterprises and larger corporations to take on export opportunities and develop infrastructure in the Indo-Pacific. EFA provides, on average, $572 million a year in financial assistance for Australian exporting companies and has up to $1.2 billion in capital at any one time. This is a significant sum for a government agency.

The changes included in this bill will allow EFA to make equity investments to support infrastructure investments in the Indo-Pacific or export linked projects in Australia. The bill will also give power to Export Finance Australia to offer guarantees for overseas infrastructure transactions without needing to provide a loan with the same transaction. These changes come just after the government made similar changes to the governance structure and functions of the Northern Australia Infrastructure Facility, the NAIF—a similar agency that gives financial assistance to organisations with the aim of facilitating economic development in northern Australia. Call me slightly cautious, maybe, but I think there are similarities in these changes.

I don't dispute the efficacy and necessity of export credit agencies like the EFA; however, we need to be very cautious about whether these changes will increase the risk exposure of EFA through making equity investments. If investments do go badly, then it's the Australian taxpayer that could be left with the losses of an investment. An independent review by reviewer Stephen Sedgwick AO of the financial powers of the EFA is actually currently underway. I would suggest that it would be prudent for the government to consider the final recommendations of that review before it pushed ahead with the proposed changes. Those recommendations would limit poor outcomes and bad policies with, ultimately, public funds. We're already $1 trillion in debt, so we must be prudent in managing our finances if we're to recover, and we have to be especially watchful so that taxpayer money does not go to stranded assets or failing industries or to worsen what we know are the costs coming from climate change.

According to the Global Energy Monitor, over $100 billion of shareholder value could be lost in stranded assets just for gas. That doesn't include other fossil fuel assets like coal. I support the role of the export credit agencies in principle. However, EFA, like many other export credit agencies, has a very troubled history with fossil fuels. Australia and the world are at a crossroads. Only a fortnight ago, the Intergovernmental Panel on Climate Change released a summary report on the latest climate science and projections. The International Energy Agency and the United Nations have said that getting to net zero emissions as fast as possible and before 2050 will require wrapping up any subsidies or supports offered with fossil fuel developments. Unfortunately, export credit agencies have been providing large amounts to fossil fuel developments. Some estimates are that, between 2016 and 2018, G20 countries provided some $32 billion in support for fossil fuels through export credit agencies, and Australia is no exception.

In Australia, you may be aware, finance in general is drying up for fossil fuels. This trend has even been the subject of committee inquiry in this parliament. Investors don't want to touch carbon assets in a carbon constrained world. You only have to look in the media in any given week and you will see super funds, asset management businesses, institutional investors and the like all announcing net zero policies and divestment from any funding of fossil fuels. As a result, it is now public finance—public funds from export credit agencies like EFA—that is stepping into the gap to prop up these projects. Where private money doesn't want to go, we are risking public money. Within Australia, three of the top seven lenders to LNG projects between 2008 and 2019 were overseas export credit agencies. So, when we talk about subsidies, let's be very clear that it is fossil fuels that are getting government subsidies.

Australia's own EFA is currently giving fossil fuel developments their last line of help and lease on life—but I don't hear that coming from any speeches made in the chamber today. Between July 2009 and June 2020, EFA provided over $1.5 billion in financing for fossil fuel projects. Renewables received only $20 million. So, $1.5 billion for $20 million in the same period—that is, 80 times more being funded for fossil fuel projects. Projects like the Gladstone LNG plant received a $254 million loan, the Ichthys LNG project was refinanced with $164 million in support, and the Wiggins Island coal export terminal received a loan of $124 million. The Wiggins Island coal export terminal, in particular, has been a diabolical investment. Three project partners have gone bankrupt, costs have blown out and investors lost billions in shareholder value. Yet EFA is lending.

Transparency is a major issue. This may be only the tip of the iceberg, but we will never know. There is a real lack of transparency around the EFA's operations, especially with regard to environmental and social matters. Jubilee Australia has identified over 100 transactions between 2009 and 2020 with companies involved in fossil fuels, but the projects and the purpose of the funding is unclear. EFA has an exemption under the Freedom of Information Act for its commercial and national interest accounts. That means that large transactions of public funds cannot be evaluated by the taxpayer. In 2011, the UN Independent Expert on Foreign Debt and Human Rights, Dr Cephas Lumina, was concerned about this practice and said that he 'fully supports the view that the absence of transparency requirements raises serious questions about the agency's accountability to taxpayers and to citizens of the developing countries where EFIC supported projects'. Dr Lumina was ultimately of the view that 'EFIC should be required to publicly disclose information concerning its activities,' and I absolutely agree.

The Productivity Commission in 2012—some nine years ago—recommended that freedom of information exemptions should be revoked, stating at the time:

… the FOI Act exemptions reduce the ability of the public and the Australian Parliament to examine facilities for their environmental, social and human rights impacts.

EFA being exempted is also completely out of step with other jurisdictions in Australia. For example, both the United States and the United Kingdom do not provide blanket exemptions to their export credit agencies. Australia must follow suit. The taxpayer has a right to know about where and when money is being spent.

For this reason, I will be proposing amendments during the consideration in detail phase of this bill to, firstly, prohibit the EFA further financing of fossil fuels projects; and, secondly, remove the exemption from Freedom of Information for EFA's commercial accounts. This is public money and should be open to scrutiny. I very much call on the members of parliament, the government and the opposition, Labor, to support those amendments because they are vital to ensure proper scrutiny over those funds. If the coalition and Labor have the temerity to tell the Australian people that they are committed to climate action, then they must walk the talk and end EFA's fossil fuel spending spree. It is time for decisive action. We deserve accountability and transparency on where public funds are going.

The latest IPCC report was a red alert for all of us. It would be simply hubris for both the government and Labor not to listen. We all need to ensure that EFA's actions are actually able to be seen by Australians. We need those FOI exemptions to be revoked and we need to ensure this public money that is lent via EFA is actually to the benefit of Australians and future generations. There must be sound investments, and that cannot be to continue lending and supporting extending the life of fossil fuel projects.

David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

I thank members for their contribution to this debate on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. These amendments will support infrastructure development in the Indo-Pacific and export linked projects in Australia as well as provide enhanced financing capabilities to the Australian Infrastructure Financing Facility for the Pacific, further supporting Australia's Pacific Step-up. The bill maintains Export Finance Australia's robust processes for assessing commerciality, risk and environmental and social impacts. Furthermore, Export Finance Australia's partial exemptions under the Freedom of Information Act will provide certainty to its customers and other financial institutions that their sensitive, commercial, financial and other information will remain confidential.

The government wants to ensure Export Finance Australia has the tools it needs to continue supporting Australian export trade and overseas infrastructure development. The amendments will bolster Export Finance Australia's ability to support Australia's national interests and priorities. They will enhance Export Finance Australia's capabilities and will complement its existing suite of financing powers, comprised of loans, guarantees, bonds and insurance. However, the equity investment will be used sparingly where there is a national interest case. Debt solutions, like loans, guarantees and bonds, will continue to be the mainstay of Export Finance Australia's support to Australian exporters and for infrastructure development in the Indo-Pacific. The bill will boost Export Finance Australia's important role in supporting Australia's economic growth and facilitate stronger links between Australian businesses and the Indo-Pacific region, while maintaining its robust processes for assessing commerciality, risk and environmental and social impacts. I commend this bill to the House.

Question agreed to.

Bill read a second time.