Wednesday, 19 March 2014
Questions without Notice
Export Finance and Insurance Corporation
My question is to Senator Cormann, representing the Minister For Trade and Investment. An article in the Sydney Morning Herald yesterday reported that the Export Finance and Insurance Corporation will be providing BHP Billiton and Rio Tinto over $110 million in finance for a mining joint venture in Chile. EFIC has previously come under criticism, not least from the Productivity Commission in 2012, for focusing its activities on large corporations rather than meeting its mandate to offer loans and insurance where it would otherwise not be available. EFIC’s own website states: 'EFIC supports the growth of Australian companies in their international activities by providing tailored financial solutions when the private market faces constraints.' Can the minister please provide information on what market constraints were faced by these two companies, which together made nearly $20 billion profit between them last year.
I thank Senator Xenophon for that question and for some notice of it. The Export Finance and Insurance Corporation was established by the then Labor government in 1991. The way it was set up and continues to operate is important to note: it is completely independent of government, within an established commercial framework, supporting viable companies where there is a financial gap in the market. My advice is that this transaction was approved under such a market gap test. I am further advised that, when working within global supply chains, our small and medium sized enterprises need the opportunity to be drawn into the orbit of larger projects. This is a decision taken by EFIC, fulfilling its role and responsibilities as it sees fit and, as I said, entirely independently of government, as is appropriate. The advice I have also been given is that this will assist small and medium sized enterprises to enter the global supply chain. If we are going to compete globally in this supply chain, they need to be in that orbit. In the case of this particular loan, I am advised that the financing will be to the benefit of some 80 Australian companies, large and small, who are engaged in the global mining supply chain. In this case, the longer loan terms required could not be met by the financial market in Chile, and EFIC of course does not undertake projects that do not have any Australian content.
Mr President, I ask a supplementary question. Can the minister advise whether the government will be acting on the Productivity Commission's criticisms of EFIC back in 2012; and, given the government has spoken at length about ending 'the age of entitlement' for Australian businesses and have refused to provide assistance to Holden and SPC Ardmona on this basis, can the minister explain how this loan from EFIC is consistent with the government's views and policies?
The government is not at present planning any changes to EFIC other than, of course, to work through the issues as a result of Labor in government, when they were last short of cash—which was a permanent state of affairs—raiding their capital reserves. We are having to deal with some legacy issues there, potentially. But beyond that we are not currently planning any changes. If there is anything further to add to that after I have consulted the minister, I will come back to the chamber and add to my answer.
Mr President, I ask a further supplementary question. Does the government consider that the Productivity Commission's criticisms of EFIC were without merit, therefore; and, given the complaints I receive regularly from SMEs about the hurdles and difficulties they face in obtaining EFIC loans and assistance, can the minister provide a breakdown of what percentage of EFIC's assistance goes to SMEs in both dollar terms and the number of businesses assisted, and how SMEs are defined by EFIC for this purpose?
Let me first reassure Senator Xenophon and the Senate that the government always takes very seriously the advice that is provided by the Productivity Commission. We of course consider Productivity Commission findings and recommendations as we make judgements on how the operations of government can be made more efficient, better targeted and generally improved. Having said that, as I have said in a previous answer, we do not have any current plans to make changes to EFIC.
In terms of the latter part of the question, I am advised that small and medium sized enterprises signing continues to dominate EFIC's business and it is at a level of 80 per cent. Global financial markets, I am told, are not continually efficient, as this case demonstrates and as the small business sector has experienced in Australia over the last six years. The longer loan terms required could not be met by the financial market in Chile. When working within global supply chains, as I said earlier, our small and medium sized enterprises need the opportunity to be drawn into the orbit of larger projects— (Time expired)