Senate debates

Wednesday, 4 March 2015


Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014; Second Reading

9:31 am

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

I rise today to support the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. This side of politics has long supported the Export Finance and Insurance Corporation and its mandate to provide finance to export businesses in circumstances where private sector finance is not available. We remain committed to expanding Australia's international trading opportunities because that is the way to ensure that we generate jobs, growth, high wages and better living conditions for Australians.

The legislation before the chamber reflects but does not directly replicate the Efic amendment bill introduced by the Labor government into the last parliament. While not as ambitious nor, in our view, as effective as the previous bill it does contain some broadly similar provisions. I want to traverse some of the content of the legislation.

The bill contains a number of minor technical amendments and two substantive changes. The latter include the widening of Efic'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.

The government is seemingly ignorant of its potential economic impact, stating in the explanatory memorandum that the amendments 'will have no direct financial impact'. I would have hoped that there would be an anticipated increase in Efic loan activity as a result of the changes proposed in the bill.

In addition, the government has published no assessment of the impact of these changes on Efic's risk profile or profitability and, in turn, how this will impact on the government's capital and other funding arrangements with Efic.

This failure was not overlooked by the Senate Foreign Affairs, Defence and Trade Legislation Committee in its report on the bill. That report noted as follows:

While the Explanatory Memorandum states that the bill "will have no direct financial impact", it may have indirect implications for the Commonwealth in two ways:

      It would have been preferable for the government to consider some of the indirect financial implications of the changes proposed in the bill. These financial impacts are relevant in the context of the need to manage the operations of Efic and provide taxpayers with a dividend from its operational activity.

      I turn now to the capital and non-capital goods change. This is the first substantive change in the bill, which changes the definition of an 'eligible transaction' by replacing the words 'capital goods' with 'goods,' and by repealing the definition of 'capital goods'. It is a change which will enable Efic to provide direct loans in relation to non-capital goods as well as capital goods, a change described colloquially as funding for the milk and not just the cow. Given that only about four per cent of Australian exports are capital goods, the opening up of the remaining 96 per cent of non-capital exports as eligible transactions has the obvious potential to expand the ability of Efic to support Australia's export businesses.

      In relation to competitive neutrality, that is encompassed in the second substantial amendment, which expands this provision in the EFIC Act to encompass all of Efic's operations. It is an amendment recommended by the Productivity Commission and was included in Labor's previous bill. As a government corporation, Efic is currently exempt from a number of Commonwealth and state taxes. This bill removes the competitive advantage this government entity has in relation to private sector, privately owned businesses. It is a change intended to generate competition between public and private businesses. Once the bill is enacted, the Minister for Trade and Investment will be able to specify a number of payments that Efic must make to achieve this competitive neutrality. Such payments may be made by way of a debt neutrality charge, guaranteed fees and/or tax equivalent payments. Again, as a result of this, one would anticipate increased cash flow from Efic to the Commonwealth.

      The government has promised to renew its focus on small to medium enterprises with export potential, with the laudable objective of boosting jobs and growth. However, the government has not elected to pursue this objective through legislation. Rather, the focus is reflected in a new ministerial statement of expectations issued to Efic. Until November 2014, more than a year into the life of this government, Efic operated under the ministerial statement of expectations issued by the former trade minister, Dr Craig Emerson. The new statement of expectations was issued on 13 November last year, with Efic's required response, in the form of a statement of intent, not being finalised until last week. In this revised statement, the minister has directed Efic to focus on SMEs seeking to expand their opportunities in overseas markets.

      By way of contrast, the policy objective of enhancing the support to small and medium enterprise was sought to be given effect under the previous government by way of legislating a requirement for Efic to focus on SMEs. This provision was included in the lapsed bill that the previous government put into the parliament. It was a legislative proposal consistent with Labor's record of support for Australia's small and medium-sized businesses. One might recall that this government has presided, since it came to government, over a tax increase for Australia's SMEs.

      In the export sphere, Labor established Efic itself, as well as the EMDG scheme—that is, the Export Market Development Grants scheme—and the Asian century business engagement grants. Regrettably, what we have seen from the government is an approach to small business characterised by cuts and tax hikes. Since coming to office, the government has removed the tax concessions for small business introduced by the Labor government; it has axed critical skills and training programs; and it has abandoned Labor's plan for harnessing the opportunities presented by the Asian century. That is not much of a record, and it is useful, whenever the coalition champion themselves as the supporters of small business, to recall that in government their actions speak louder than their words, and their actions demonstrate a lack of support for small and medium enterprise in this country.

      I also want to turn to the National Commission of Audit. I suspect you will not hear much about the National Commission of Audit in this debate. This, of course, was the political audit commissioned by the Treasurer and the Minister for Finance, the membership of which was hand-picked by the Prime Minister's office. It had some interesting things to say about the sorts of cuts that this government was contemplating. Relevant to what is before the chamber, recommendation 33 of the phase 1 report of the National Commission of Audit said this:

      As the benefits of exporting accrue primarily to the business undertaking the activity, the Commission considers that there is scope to reduce current Commonwealth assistance for exporters by:

      a. abolishing the Export Finance and Insurance Corporation, ceasing funding for Export Market Development Grants, tourism industry grants and the Asian Business Engagement Plan, halving funding for Tourism Australia and significantly reducing the activities of the Australian Trade Commission

      which we would know as Austrade.

      The second part of that recommendation was:

      b. moving any residual functions of Tourism Australia and Austrade into a commercial arm of the Department of Foreign Affairs and Trade, with the existing loan book of the Export Finance and Insurance Corporation also transferred to the Department of Foreign Affairs and Trade to investigate options to on-sell or wind up the loans.

      In other words, the Commission of Audit report by persons handpicked by the Prime Minister's office recommended the entire abolition of Efic, the ending of funding of the Export Market Development Grants, as well as a massive restructure and downgrading of Australia's government export and trade infrastructure. One would have thought that, at a time at which Australia is seeking to continue to diversify its economy and encourage growth in the non-resources sector, the last thing we would need is to lessen those government frameworks that help businesses find their way into overseas markets.

      How did the government respond to this attack on Efic, the attack on the Export Market Development Grants and the attack on Austrade? Did it dismiss this ideological assault on support for exporters out of hand? Did it defend the work of Efic and Austrade? Well, unsurprisingly, it did not. On budget night, the Treasurer and the Minister for Finance issued a response to the National Commission of Audit. In relation to recommendation 33, it simply says this:

      Reforms to Assistance to Exporters will be considered following the 2014-15 Budget.

      In other words, they left it on the table.

      So this government is now putting into this chamber a bill seeking to reform how Efic operates, a bill that seeks to give effect to the Labor government's policy position of better focusing Efic on SMEs. No doubt the minister will trumpet the passage of this legislation, which the opposition supports, as a demonstration of this government's commitment to increasing exports, all the while refusing to rule out the recommendation from the government's own Commission of Audit that Efic be abolished, as well as Export Market Development Grants and a complete restructure and downgrading of Austrade and the support for our exports.

      I say to Australian business: I think Australians know that you cannot trust this government when it comes to Medicare. Nor can you trust them when it comes to superannuation. Nor when it comes to higher education—I am sure my colleague Senator Carr will say much more about that today. I would say this: you cannot trust this government when it comes to export assistance for business, because it simply does not believe in the institutions and programs that provide support to the Australian business community now. The axe this government placed in the hands of the National Commission of Audit is still hanging over Efic, despite this bill being before the chamber. But, as I said at the outset, the opposition supports the legislation before the chamber, reflecting in large part the policy approach taken by Dr Craig Emerson and the Labor government.

      9:43 am

      Photo of Lee RhiannonLee Rhiannon (NSW, Australian Greens) Share this | | Hansard source

      The first part of the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 does extend the mandate of Efic's activities from supporting the export of capital goods, to all goods. So we are really going from a situation where so many of Efic's loans went for large mining projects and the infrastructure that supported them, and other related projects, to really being about services, consumer goods and many aspects of what are called SMEs, small and medium sized enterprises.

      Although it is the large infrastructure projects that the Greens and many in the aid sector have been concerned about, the extension of Efic's activities in the way set out in the bill should not go ahead without seeing the necessary reforms with regard to human rights and environmental protection being placed in low-income countries, because one of the enormous concerns with how Efic has operated is that it has provided money to projects where those companies are not able to get finance in the normal way, through the normal financial channels, and then many of those projects have been so damaging. That is often associated with mining projects, and there is the expectation that, when we are talking about small and medium sized enterprises, that will not be the case. But at this point, when we are seeing such fundamental change being proposed in Efic, this is the time to bring forward those needed changes that have been set out by many organisations, such as the Jubilee organisation and AID/WATCH. The Productivity Commission's report on Efic itself has identified many areas that need improvements.

      The second part of the bill makes Efic subject to competitive neutrality arrangements that attempt to rein in any concessions the organisation has as a result of being a government agency. My colleague Senator Peter Whish-Wilson, who I have been working with on this issue, will outline some of the issues that are relevant there.

      As I said, this debate needs to consider the issue of how companies that access Efic's loans then operate in low-income countries, because we have seen in many cases considerable damage resulting to people in those countries, particularly people who are living in poverty, who are already experiencing hardship, because of the way those projects roll out. The other aspect that we need to be conscious of when we are having this debate about the role of Efic, which provides credit to exporters, is that that can actually distort the economy of low-income countries and add to the debt burden that they are already experiencing. That in turn puts them under so much hardship and often results in the International Monetary Fund or the World Bank—or the Asian Development Bank, in the case of the Asia-Pacific region—coming in and imposing structural adjustment programs on these countries. Those in turn put the financial burden on low-income people and often on the public sector, which can result in many jobs being removed from the public sector, taxes being increased and wages being reduced. So we need to look at the kick-on effect of how these projects operate.

      I mentioned earlier that the Productivity Commission undertook an inquiry and reported on Efic. It was disappointing that Efic really did not, I think, adequately respond to many of those useful recommendations. The Productivity Commission noted in its 2012 report on Efic that this market failure is much smaller for small and medium enterprises than for larger companies. The Productivity Commission actually said that it 'found no convincing evidence to indicate' that there are failures in financial markets 'that impede access to debt or equity finance for large firms'. So again it is not as clear cut in terms of the advantages that the government is setting out here.

      Efic, as we know, do give considerable amounts of assistance to large companies. What you would assume, if you looked at their annual reports and read the Hansard from last week's estimates when Efic gave evidence, is that there already has been an enormous change to giving greater support to SMEs. But this is where it is quite deceptive, in that the increase in support is not as large as it is made out to be, because, when you look at the figures, they are talking about the volume of the number of projects, not the actual capital that is put in. That is adding to the concern of many people who have tracked the damaging track record of Efic over the years—that what they are in fact doing is using SMEs as a smokescreen, by saying: 'Well, we've cleaned up our act. We're concentrating on small businesses. We're helping them penetrate the markets in low-income countries in particular. And we're addressing that all-important issue of the national interest that this government promotes so strongly.'

      However, when you look at the volume of money, it does not look like that much has changed, and that is where this needs to be tracked very closely. In its most recent annual report, Efic, as I said, was quick to tout that SMEs accounted for around 90 per cent of all facilities by the number of transactions for the 2013-14 financial year. However, 80 per cent of the value of those transactions goes to the large companies. That was the point that I was making. It is not the good-news story that Efic is trying to sell here.

      In fact, over half of the amount awarded in the 2013-14 financial year went to just one company: mining and metals giant Nyrstar. According to reports in some of the media, this deal was linked to a state government project to upgrade the Nyrstar lead smelter at Port Pirie in South Australia. Because Efic can now put money into projects in Australia, they awarded just over $290 million to a project run by a Zurich-based multinational listed on the Brussels stock exchange that in the last financial year had over €2.8 billion in revenue.

      As long as Efic continues to direct funds to large companies it is not meeting the requirements that I think people expect it to meet. It is not helping the small and medium enterprises that so many people here say is so important. Again, we need to add to that that it needs to be done in a way that ensures the environment in these countries is not damaged, that human rights are not abused and that people are not forcibly evicted when these projects take place. Those are all things that are linked with so many of the Efic projects to date and just because they are small projects does not mean there will not be abuses occurring.

      This type of corporate welfare can be a disaster. In the 2013-14 financial year 19 per cent of Efic's exposures through its commercial account were in mining LNG and a further six per cent was in other mining commodities. I have to emphasise that we should all have deep concerns about the environmental and social risks that these projects provide in low-income countries. At the end of the day, Efic's main aspect of its work has been helping large companies penetrate low-income countries. Why is that? Because nobody else will give them the finance to do it. Efic takes a risk and that is how these companies get going.

      Today, more than 60 per cent of the world's poorest people live in countries rich in natural resources, but they rarely share in the wealth. We do need to come back to this point when we are considering this mode of operating. Secrecy and corruption often mean that the income from oil, mining, gas and logging activities never reaches ordinary people. Meanwhile, they are the ones who carry the burden, as their livelihood is ripped apart and as the environment is destroyed. They are often moved to other areas. They get very few jobs out of so many of these projects. We do need to bring the human element into this debate.

      To take Africa as an example, $148 billion of Africa's income is lost every year due to corruption in a continent where 2.5 billion people do not have access to a proper toilet and where nearly one billion lack access to clean water. That amount of $148 billion is equivalent to one-quarter of Africa's income being lost. That is one-quarter of the whole continent's income lost—not lost altogether but lost by the African people to some of the world's richest companies. We need to bring this debate back to people's lives.

      African exports of minerals, oil and gas in 2010 were worth roughly seven times the value of international aid to that continent: US$333 billion versus US$47 billion in aid. There is clearly a problem here. If those resources were harnessed effectively in the fight to end extreme poverty, resource-rich countries could exit from their dependency on international aid, a sustainable solution that surely we all want to see happen. Again, this is very relevant to the debate on Efic. You cannot see Efic divorced from the hardship that is occurring in so many countries and the way Efic operates is furthering that divide between rich and poor.

      Efic has its own history funding projects that prioritise mining multinationals over the needs of local people. It is not good enough to say that it has all moved on and that we are now looking at SMEs in a more thorough way. Those are very telling figures. You need to look at the volume of projects and realise that they are talking about volume of projects, not the quantity of money.

      I do congratulate Jubilee Australia for doing extensive work on how Efic operates overseas, exposing many of the abuses. Jubilee Australia's 2012 report on the PNG LNG project revealed contract favouritism to ExxonMobil and local corruption has meant few, if any, benefits have flowed to ordinary people. I continue to have concerns that corporate welfare doled out by Efic will damage the livelihoods and human rights of local people in Papua New Guinea and other low-income countries. These large projects remain a problematic part of how Efic operates. Nothing in this bill says that the SMEs are going to be favoured over the big projects. That has still not been clarified.

      Considering the negative impact that mining has had on many communities in low-income countries, it is imperative that Efic ensures that human rights are protected and that local people gain considerable benefit before money is poured into such projects. We need to get those standards right before the money is put in and the projects race ahead. Otherwise, the infrastructure is put in place, the indigenous people and other local people are moved out and their livelihood that is so often drawn from the environment in which they live is destroyed. Projects that are pitched as bringing great wealth to a certain country can often result in extreme hardship for most people.

      My hope is that this bill can address some of these issues. By opening up Efic's eligible export transactions to include all goods, it is expected that more funds will flow to SMEs. This means less corporate welfare for mining giants operating in the world's poorest communities. We are not saying that this bill is totally wrong, but it has certainly missed out on an opportunity of bringing in some of the recommendations from the Productivity Commission. It does need to be tightened up in terms of where the bulk of the assistance goes. There is no guarantee that things are going to change in any substantial way. We will need to monitor it closely. I note that Labor and the coalition are supporting this bill, so we understand that it will go through. For all of the comments made by the Labor spokesperson on this legislation, they have been right there in supporting Efic in the way that it has operated. They have not responded to the considerable criticisms and the widespread documentation of the abuses and crimes that many of these companies which have received Efic funding have gone on to commit.

      The bill includes no obligation on Efic to lend to SMEs, nor does it impose any restrictions on how much it lends to larger companies or to mining operations within Australia. That is one of the major flaws in this bill. Respect and protection for human rights of local people and for their local environments must be a priority consideration for Efic when deciding how to spend its funds. The issue of how Efic needs to be brought into line because of so much damage resulting from projects that it was funding has been raised year after year with successive governments. Those requests have been ignored for so long. It is disappointing that we are, again, seeing that same trend occur with this bill.

      At the moment we do not feel confident about how the government is managing Efic. The change, we acknowledge, has the potential to shift how the funding arrangements of Efic occur. But this bill certainly should be tightened up in some very considerable ways, particularly regarding the standards under which companies that receive Efic assistance operate in low-income countries, ensuring that the SMEs do come under Efic in a more considered way and that it is not left in its current vague form.

      9:58 am

      Photo of David LeyonhjelmDavid Leyonhjelm (NSW, Liberal Democratic Party) Share this | | Hansard source

      I rise to support the Australian taxpayer. Accordingly, I oppose the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. The Export Finance and Insurance Corporation, known as Efic, is a government-owned bank and insurer. Efic provides loans for exporters of capital goods, which represent five per cent of exports. This bill would allow Efic to provide loans for export transactions involving all goods, not just capital goods. As such, this bill represents a massive expansion of government-owned banking.

      Government-owned banking is not a great idea. The Treasurer put it nicely when he introduced a bill to abolish another government-owned bank, the Clean Energy Finance Corporation. He said:

      Setting up a government bank with $10 billion of borrowed money, underwritten by taxpayers, to invest in high-risk ventures should be a thing of the past century. You would have thought that the Labor Party would have learned its lessons when it comes to government banks.

      What the Treasurer was referring to came from the collapse of the State Bank of South Australia and the State Bank of Victoria. In both of those instances, the decision of governments to dabble in inherently risky lending caused considerable losses for taxpayers. That includes mum-and-dad taxpayers who, unlike mum-and-dad shareholders, never have the choice of withdrawing their money.

      For a while, it seemed that Labor did indeed learn this lesson. When Labor was in government it asked the Productivity Commission to consider whether Efic's mandate should be extended to all exports—the very issue we are debating today. The Productivity Commission found that there is little evidence of a market failure in export finance that would support a role for government in export finance. The commission explicitly recommended that Efic's mandate not be extended to all exports. The Labor government at the time—2013—wholeheartedly agreed with this recommendation. Fast forward two years and Labor has a new position: to support the extension of Efic's mandate to all exports. It is bewildering, it is unprincipled and it is thoroughly disappointing.

      One would have hoped that the coalition would reduce rather than increase the role of Efic too. After all, not only have they tried to abolish the Clean Energy Finance Corporation but they established the National Commission of Audit, which came to the following conclusion about Efic:

      As noted by the Productivity Commission, virtually all of Australia’s exports by volume and value take place without EFIC’s assistance. Support provided by EFIC has mostly been directed at a small number of large businesses, including major resource projects.

      There is no convincing evidence of systemic failures in financial markets that impede their access to finance. In recent years EFIC has earned most of its income through the investment of surplus funds and its capital and reserves, not the provision of financial services.

      The Commission considers that EFIC should be abolished as there is little evidence of genuine market failure in the provision of export finance.

      Given this, it is disappointing that the government is expanding the role of this government-owned bank for a handful of exporters. It goes to show that a vote for the coalition is a vote for the status quo, where corporate welfare goes to the few and is paid for by the many.

      This bill before us today again shows that Labor and the coalition are the option for lazy voters who want lazy government. For those voters who want the government to let us go about our lives without the risk of bank collapses hanging over our heads to soak up our taxes, the only option at the ballot box is the Liberal Democrats or, in New South Wales, the Outdoor Recreation Party—a sister party. For every parliament and every election across Australia it needs to be out with the old and in with the new.

      10:03 am

      Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

      I rise to support my colleague, Senator Rhiannon, in her comments about the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014 and the related bill—and, I suppose in the spirit of this debate, also Senator Leyonhjelm's comments on Efic.

      Interestingly, having sat through estimates last week and heard Senator Cormann talk about corporate welfare and crowding out of finance by the Clean Energy Finance Corporation, I find it odd—with the principle we discussed about long-term finance and high-risk finance—that the government is happy to discuss getting rid of the Clean Energy Finance Corporation loans. On the one hand this is because of an ideological position but on the other hand they are prepared to do the same thing for Australian export companies, be it for capital or noncapital purposes.

      The Greens have made our point very clear: we would actually like to see Efic abolished. We do not believe that it can be reformed. We do not believe that this legislation properly reforms Efic. You could draw the conclusion that perhaps by extending competitive neutrality you are effectively abolishing corporate welfare, because everyone has to compete on the same terms with private capital. But it begs the question: why would you even have it in the first place if that is the case?

      And then, when you delve even further into the detail, you start coming up with what potentially could be weasel words—that is, the minister has discretion, potentially on a case-by-case basis, as to whether finance will apply and whether a market failure is evident. 'Market failure' is a very important concept, and perhaps Senator Leyonhjelm and I may not agree on the philosophy of market failure, because I do believe that markets fail, but it needs to be very clearly spelt out: what externality is being caused; what information is available; and why a government would need to step in and provide finance or even co-finance on a risky investment offshore.

      We have a situation at the moment. The point I make here is that we have a track record in history of providing inappropriate loans. Senator Rhiannon has talked about large loans to mining companies over a long period of time. These are capital loans in high-risk countries and potentially high-risk projects—and even for a subsidiary of a foreign company, which has accessed finance under our Efic system. Why is the Australian government stepping in and providing finance for mining companies in Third World countries?

      Risk-reward ratios exist for a reason. Corporations can assess the risks. They can assess the returns and the rewards in relation to those risks and make those decisions accordingly. They then operate, and of course the system in place is that shareholders will monitor the risk return and hold the boards to account. Why is it that the government needs to step in here and lower their risk?

      We believe that that is the case and it is necessary in relation to climate change because climate change is an externality and it is a very clear market failure. Some would argue that it is the textbook case of market failure and possibly the biggest one we have seen in our short history. It is a necessary requirement for the government to help close that externality gap.

      This is going back to basic economics, but we do not see that same situation applying in terms of export markets, and now we are changing the goalposts to include non-capital items, goods and services. What does that mean exactly? That is also a very grey area.

      On small and medium enterprises, Senator Rhiannon has talked about what guarantees we have and what controls there will be on them having access to this. If you include the competitive neutrality component of the bill, they are going to get access to finance on the same terms that they would if they went to the National Australia Bank export division and said, 'I need a loan to set up a factory or an office or a distribution business in Singapore.' They are going to get those loans on the same terms. Why have we even got Efic, if this is what this bill is trying to do? Why not just abolish it, let the market set the rates for export companies and let them assess the risk return, as they should do, and build their businesses on the back of that?

      The Greens would like to see Efic abolished. In this situation, we are not comfortable that it is possible to reform it using the guidelines that are set out in the bill in front of us, so we will be voting against this.

      10:08 am

      Photo of Marise PayneMarise Payne (NSW, Liberal Party, Minister for Human Services) Share this | | Hansard source

      I thank all members of the chamber who have contributed to the debate on the Export Finance and Insurance Corporation Amendment (Direct Lending and Other Measures) Bill 2014. This bill prioritises the needs of the engine room of our economy, small and medium-sized export businesses, or SMEs. In fact, the vast majority of Australian exporters are SMEs with sales of less than $5 million a year.

      In relation to a number of the points raised in the chamber relating specifically to Efic's previous support of a number of major resources projects—that has been referred to by other speakers—I would point senators to the new statement of expectations issued by the Minister for Trade and Investment to Efic, which has ruled out future lending to onshore resource projects and related infrastructure.

      These changes will enable greater lending support to small and medium-sized exporters. Efic plays an important role in supplementing the provision of credit for exporters, and it is the government's view that this bill is repositioning Efic to best support those exporters into the future. As senators would know, Efic is currently only able to provide support for the export of capital goods, which are used for the production of other goods but are not themselves the end product. According to the Australian Bureau of Statistics, however, only five per cent of Australian goods exports are capital goods. The remaining 95 per cent of goods exported from Australia are currently exempt from the direct support that Efic is able to provide. These include anticipated high-export-growth goods like pharmaceuticals or fibre, wine, food and medical products.

      So, in introducing this legislation, the government has decided to enhance Efic's capacity to support SMEs by enabling it to lend for the other 95 per cent of goods export transactions. To implement this measure, this Efic amendment bill is required to remove the word 'capital' from the definition of an eligible export transaction in the EFIC Act. We are also ensuring that the changes do not bring Efic into direct competition with private sector financiers, by applying competitive neutrality principles.

      I would like to take this opportunity in the chamber to thank the chair of the Senate Standing Committee on Foreign Affairs, Defence and Trade, Senator Back, and other members of the committee for the recognition that the direct lending amendment will provide a viable alternative for SMEs seeking access to finance to expand their exporting opportunities. Most importantly, the committee clearly acknowledged that the bill will assist small exporters who may be excluded by banks due to the lower dollar values of their transactions.

      In conclusion, the goal of this bill is to increase Efic's capacity to finance SMEs seeking to capitalise on global trade opportunities. These global trade opportunities benefit Australia greatly and will drive job creation and higher living standards for Australians. I commend the bill to the Senate.

      Question agreed to.

      Bill read a second time.