Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

I rise to speak in support of this bill. This bill gives effect to an agreement with the International Monetary Fund to provide a standing appropriation and authority to borrow for payments to meet drawings made by the IMF, under the decision to renew the new arrangements to borrow made by the IMF executive board in November 2016. The previous five-year arrangement will expire on 16 November 2017, with a new arrangement to go from 17 November 2017 to 16 November 2022. Under this agreement, the maximum amount of Australia's lending commitment to the IMF's special drawing rights is $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 is only activated when additional funds are required to support lending to member countries. This requires agreement from the participant countries that make up 85 per cent of the total credit committed under the NAB and the IMF executive board that the quota resources available to the IMF for lending are not sufficient for its lending needs.

The bill has no direct impact on the budget bottom line. However, if the agreement is activated and the funds are provided, there is an indirect impact due to the government's lending to the IMF increasing our borrowing requirement, and where the interest payable on any money borrowed by Australia to meet an IMF drawdown exceeds the interest paid by the IMF in regard to that drawdown. This agreement will be included in the budget papers as a quantifiable contingent liability.

The NAB became operative in November 1998, arising out of concerns first raised in 1995 that more resources might be required for the IMF to respond to future financial crises. Australia has been a participant in these arrangements since their commencement. This updates an arrangement that we made in government, which arose out of the IMF quota and governance reforms, in 2010. That legislation passed the parliament in September 2012 for the same special drawing rights amount of $2.22 billion, worth around A$3.2 billion at the time. This represents an important aspect of our international obligations as a member of the International Monetary Fund, and Labor will be supporting this bill.