Senate debates

Wednesday, 6 September 2017


Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017; Second Reading

9:32 am

Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

The Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2016 contains two main changes to the act. The first change is an administrative one. It allows the government's agency to use Efic expertise on the basis of a fee-for-service arrangement. This is not controversial and the opposition supports it. The second makes it easier for Efic to lend money to companies wanting to expand their offshore operations. Ideally, this would allow Australian companies to take advantage of trading opportunities, therefore benefiting the Australian economy. However, an earlier version of this bill would have also made it easier for Efic to lend money to a company wanting to relocate its manufacturing operations offshore or to set up a call centre overseas. I can assure you, given my recent experience with Telstra's call centres in the Philippines and in India, no-one could possibly want to have that happen. It was truly an appalling experience to see how those facilities, which were moved from Australia to the Philippines and India, have left an appalling level of service for Australian customers of Telstra. I'm glad to see the government moved amendments in the other place that reduced that risk. I see the government has indicated it will accept further amendments, which the Labor Party will be proposing, to further reduce that risk.

Efic's internal policy stipulates that any loan that a corporation provides must not result in a net loss of jobs in Australia. Labor does not believe this in itself is a sufficient safeguard. We believe that taxes paid by Australians should be used for the benefit of Australians. It's a fundamental Labor value that Australian jobs should be put first, and that's why we moved to refer this bill to a committee of inquiry. It was necessary to check whether the changes in Efic's role would have had unintended damaging consequences.

The committee heard evidence from a range of community groups that share Labor's concerns about this bill. In its submission, for instance, the Australian Fair Trade and Investment Network said:

It is a reasonable and in fact modest requirement that firms receiving support from Efic actually produce goods and/or services in Australia and employ Australians … In the absence of such a requirement, there would be no incentive for firms receiving Efic loans to have any Australian content. This would lead to the perverse situation of an Australian government institution being able to provide support for firms providing no employment in Australia.

It said:

The removal of local content requirements from the legislation would enable firms based in Australia but providing no local employment to have access to Efic support. It would provide no incentive for firms to continue to conduct operations in Australia and provide local employment.

The Australia Institute commented:

While the change to specifically recognise service exports may be desirable, the current proposed amendment seems to remove any focus on products that are produced in Australia. The effect of this could be the further offshoring of Australian manufacturing. For example, a garment company based in Australia could move all production offshore, but still be eligible for Efic's services.

This has the potential to not only deprive finance to companies that produce in Australia, but also to give advantage to their competition in other countries.

The Australian Council of Trade Unions submission declared:

It is in the national interest that companies which receive government loans are required to use that money in a way which benefits Australian employment. The removal of these provisions will be yet another blow to the Australian manufacturing and services sectors. It could potentially lead to jobs being offshored.

So we see those various submissions producing comments on the same theme. They gave a warning which I think was justified and should have been heeded, and that's why Labor did not accept the recommendations of the government majority on the committee that the bill should be passed without amendment. We acknowledged that when the bill was considered in the House of Representatives, and we are moving amendments that go some way towards allaying the concerns. The most important of these amendments stipulates that an applicant for a loan or guarantee:

… must certify, by writing given to EFIC, that the person reasonably believes that the loan will result in a net increase in the number of people employed in Australia by the business or a related business during the term of the loan.

Nonetheless Labor believes that this is insufficient, so we are moving two further amendments, and we're pleased that the government has indicated that it's prepared to accept those amendments. I understand, Minister, that that remains the case. These amendments provide that, at the completion of any loan or guarantee that it is to be used for the dominant purpose of direct investment outside Australia, the applicant must provide Efic with a certification stating whether a net job increase occurred as a result of Efic's financing and that this information must be publicly released by Efic. Further, for businesses with a turnover of more than $150 million in a financial year, the company must certify that any loan or guarantee to be used for the dominant purpose of direct investment outside Australia will not be used to offshore substantial parts of the business. These amendments will allow closer scrutiny of the use of taxpayers' money for direct foreign investment. This will help ensure that Efic's finance will result in net job growth in Australia.

These are outcomes that I think are positive. They reflect Labor's resolve to put Australian firms and their workers first. Far too often the Abbott-Turnbull government has done nothing while Australian jobs have been sent offshore. On this occasion we thank the government for its willingness to negotiate around these amendments, and it's a much better bill as a result than it was when it was first introduced. We hope that this government will continue to be willing to agree to measures that actually reduce the risks of jobs being lost in this country.

9:39 am

Photo of Sarah Hanson-YoungSarah Hanson-Young (SA, Australian Greens) Share this | | Hansard source

I rise to speak on the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017 before us today. The Greens have significant concerns with this bill and believe the government missed an important opportunity to reform and progress meaningful reform to Efic, reform that we know is very much needed, before we expand the powers of this particular body. Chief among our concerns is the fact that Efic already has a very poor record in assessing the impacts of its investments and has a very poor record of being transparent with the parliament and with the Australian people—the taxpayers that fund these operations. Yet, despite this history, the first amendment of this bill expands Efic's powers. According to the explanatory memorandum:

The policy objective of the first amendment is to allow Efic to offer its specialist financial capabilities in the operation and administration of Commonwealth financing programs, where there is no connection to exports.

Expertise, I guess, is in the eye of the beholder. When you see the very dark, opaque way that Efic has been operating, you have to wonder what expertise indeed we are talking about.

Instead, we need to strengthen the accountability practices of Efic before we consider and contemplate expanding its powers. Efic must get its own house in order before it starts telling other government agencies what to do and how to do it. Efic has repeatedly demonstrated a failure to conduct proper due diligence, evidenced by human rights and environmental violations at Efic sponsored projects overseas. One of those violations is in Efic's work in PNG, one of the most illustrative examples of Efic's poor decision making and lack of transparency—namely, in support of the ExxonMobil led PNG LNG project in 2009. It was at the time the largest single loan that Efic had given. Much of this transaction was done on the National Interest Account and was thus undertaken with the cooperation of DFAT. Nonetheless, it never could have happened without passing Efic's due diligence standards, which have clearly been found wanting.

In 2009, and again in 2012, Jubilee Australia found two major shortcomings of the project. Firstly, from a macroeconomic point of view, the expected financial impacts on the PNG economy were likely to be mixed, and poor governance in PNG meant that it was likely that this project would undermine any predicted widespread benefits for the ordinary people of PNG. Secondly, Jubilee warned that the unrealistic promises, combined with inadequate landowner mapping and political pressures on the landowners to sign on to the project agreement, would eventually lead to landowner discontent. We know that that indeed is what has happened. Jubilee Australia further warned that if this discontent caused low level conflict, the PNG government might send in the military, which would lead to an escalation and bloody civil conflict in the area. This is precisely what has happened. Efic was grossly incompetent in assessing this project's social, economic and political risks.

I question the expertise of Efic in relation to other government agencies and projects and the ability to expand Efic's powers under this piece of legislation. This is just one example, and there are others. One is that Efic has been unable to assess the risks associated with other large resource projects. In the early 1980s, Efic financed and assisted in the expansion of the Rio Tinto controlled Panguna mine. The exploitation associated with this mine led to the Bougainville Civil War. Efic has never really taken responsibility for the role that it played in this, the largest and most destructive conflict in the South Pacific region since World War II.

I don't just highlight these as one-off examples. This is an ongoing systemic problem we have with this agency and its ability to conduct proper risk assessment on social, economic and political risks and take responsibility for the role that this agency has had in escalating problems throughout our region.

The list, of course, goes on. We get to the role that Efic has had in relation to the Northern Australia Infrastructure Facility, the NAIF. In addition to the overseas projects, we now know that Efic is tightly entwined in the operation of funding of projects through the NAIF. Efic's role in the Northern Australia Infrastructure Facility does nothing to inspire confidence in its ability to provide advice to other Commonwealth entities and agencies and to assist them in conducting due diligence. With Efic's support, the NAIF is a secretive organisation that is considering blatantly unethical and illegitimate investments like Adani's billion-dollar rail line from its proposed Carmichael coalmine to the Galilee Basin. NAIF and Efic have advanced the project to the due diligence stage, despite the fact that Adani made clear on 5 December that the loan was 'not critical' and that they applied for it 'because it's available' and 'it doesn't mean it's a make or break for the project'. In light of that statement, the Adani project clearly fails NAIF's own investment mandate. You have to wonder why Efic has allowed it to progress to the due diligence stage.

Illustrative of the Efic-NAIF problems is the recent resignation of Efic's independent non-executive director and audit committee chair, Annabelle Chaplain. As a board member, Ms Chaplain oversaw Efic's work for NAIF from the beginning until her recent resignation. She gave notice to the minister, Mr Ciobo, on 19 July, just weeks after Environmental Justice Australia publicly pointed out a potential conflict of interest; and, despite being referred to as a board member with a term to 31 July 2019 in Efic answers to questions on notice, Ms Chaplain has now resigned. Ms Chaplain's potential conflicts of interest were obvious. She was a board member of Efic, the body assessing the suitability of the Adani taxpayer loan, at the same time as she was a shareholder and chair of Downer EDI, which has an arrangement for $2 billion worth of work with Adani—of course, if it is to go ahead. She is also the chair of Queensland Airports Ltd, which owns the Townsville Airport, which is working to 'secure the opportunity for Townsville to be the FIFO hub for the Adani mine'. No public explanation has yet been made as to Ms Chaplain's resignation beyond 'unexpected commitments'; nor do we know what measures she took previously to avoid the conflicts of interest prior to resigning. In the committee stage, I will be asking the minister specific questions in relation to this opaqueness around Efic and potential conflicts of interest of board members, and I'm warning the minister that it'd be helpful if we could get some answers when we get to that point.

Perhaps the Productivity Commission said it best when it recently summarised its criticisms of Efic. It said:

There is much to be learned from the long experience of EFIC providing concessional export finance. Some of these lessons cover what not to do.

The assisted expansion of the Rio Tinto controlled mine is one example. The exploitation associated with the Panguna mine led to the Bougainville conflict war. These, of course, are things that have to be taken into consideration. The Productivity Commission's review of Efic found that it was failing to support small and medium enterprises where market gaps in access to export financing were likely. The commission also found governance problems such as insufficient internal and independent oversight of compliance with its mandate. The commission was not satisfied that the Efic board was provided with sufficient information in board papers to evaluate whether finance facilities submitted for approval met the requirements set out in the minister's statement of expectations. That, of course, has come directly from the Productivity Commission's review.

Given our concerns about Efic's actions overseas as well as at home, through the NAIF and through overseas exploitation, we will be moving amendments to strike out these provisions in the bill. We cannot support an expansion of Efic's remit when it is so clearly failing to fulfil its current requirements.

We are extremely worried about the lack of transparency to the parliament and to the Australian people in relation to the activities and funding of projects through Efic. We will be moving amendments to remove Efic's exemption from the freedom of information laws. Concerns about Efic's lack of transparency and accountability were identified during the Productivity Commission's inquiry in 2012. The inquiry found that Efic's exemption from the FOI Act should be removed and that Efic should be required to release more information about social and environmental impact assessments. Efic has failed to meaningfully improve its transparency and accountability mechanisms since the Productivity Commission's report, having only adopted a grievance mechanism and introduced a weak and secretive human rights policy. It is high time that we follow the Productivity Commission's recommendations and remove Efic's exemptions from FOI laws.

We will move this amendment, and I call on all members in this place, including the opposition and fellow crossbenchers, to support this amendment. There is no excuse for an exemption from FOI, particularly for an organisation that has proven itself to be untrustworthy when it comes to these issues, looking at the impact of the projects that it funds and taking responsibility for the consequences. This is, of course, taxpayers' money, and FOI exemptions such as what currently exists undermine the ability for the public and the taxpayer to know that their money is being spent appropriately and in line with common standards.

This bill also misses the opportunity to remove one of the many subsidies provided to the fossil fuel industry, which continues to be a bugbear with this government. These fossil fuel subsidies were estimated to amount to $7.7 billion of taxpayer funds in the 2016-17 financial year alone. It is well established that export credit agency funding for fossil fuel development should be considered a fossil fuel subsidy, as that funding is provided by the government. But of course we never hear an acknowledgement by the government of just how much Australian taxpayers' money is going to subsidise the fossil fuel industry, allowed by the federal government. Efic currently lacks policy guidance in these areas, and it is therefore not required to consider the carbon emissions associated with investments it supports. We believe that Efic should not be able to use taxpayer funds to subsidise the fossil fuel industry anymore. Of course, we're not happy with Australian taxpayer money being used to subsidise a mates-rates-type loan for Adani, and the last thing we want to see is the ability for Efic to fund more projects like this into the future.

As the world moves to address the crisis posed by climate change, and especially in the light of the Paris Agreement coming into force in 2016, the role of fossil fuel subsidies is increasingly under international scrutiny. We must end these polluting subsidies, and this is an opportunity to do that here today. That's why we'll be moving an amendment to ensure that Efic does not fund transactions that directly or indirectly support the extraction of fossil fuels in relation to the NAIF or any other agencies that Efic lends its expertise to.

One of the other issues in relation to this bill—and this was covered by Senator Carr extensively in his speech on the second reading—is of course the concerns in relation to offshoring of Australian workers' jobs overseas. We are concerned that this bill will result in further offshoring of Australian manufacturing positions and deprive companies that produce in Australia and in some cases give advantage to their competition in other countries.

I will be keen to see further clarification around the opposition's amendments when we get to committee stage, and we look forward to seeing if we can in some ways improve that aspect of the bill. We do know that the ACTU wrote that it could not agree with this part of the bill, because they feared it would make another blow to Australian manufacturing and the services sector. The Greens welcome the government's recognition of these concerns, but we are yet to see what true action will come from fixing it up in relation to that part of the bill.

Despite the possibility of some of these safeguards in relation to offshoring of jobs, the Greens will not and cannot support this bill as it stands. We have major concerns that the government has missed the opportunity to reform the accountability mechanisms and issues related to Efic. They've missed the ball. This was the bill to do that. We cannot continue to see and we will not support the continuation of such a secret organisation operating with huge amounts of taxpayer funds in the dark without the information being available to the parliament or, indeed, the taxpayer. We don't want to see further taxpayer funds spent on subsidising the fossil fuel industry.

For all of these reasons the Greens will not be supporting this bill.

9:56 am

Photo of Chris KetterChris Ketter (Queensland, Australian Labor Party) Share this | | Hansard source

I rise to make a contribution in respect of the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017. I want to start off by saying that Labor does support the good work of Efic, but it's important to note that that's not without some concerns as to some aspects of its operation and with regard to proper scrutiny of the work of Efic. It's right and proper that the government plays a role to support our exporters by providing financial services where the private sector cannot, and Efic has played its part in supporting Australian jobs and growing our economy. It is to be commended for that.

It would appear that the government's been on a bit of a journey in respect of this issue. I note that in 2014 or thereabouts the government released a report of the National Commission of Audit that made a number of recommendations. At that point of time it was the view of the National Commission of Audit that Efic should cease to exist. That's a quite extraordinary recommendation from the National Commission of Audit, which generally is seen as reflecting fairly extreme right-wing views, but it's good to see that we still have Efic performing a function. But, as I say, it's not without the need for scrutiny.

And EFIC isn't without its flaws, as I indicated. I'm mindful that its processes in the past have let Australians down. So it's important that, when we look at legislation that amends Efic, we ensure that Efic does really deliver for everyday Australians. The Labor Party is committed to the objectives of growing our economy and creating more well-paying jobs here at home.

The bill seeks to amend the Efic Act in two ways. Labor support one of those amendments and will seek our own amendments to address concerns with the other ground of the Efic bill. The first part of the bill—the support for Commonwealth entities—expands Efic's function to include the provision of services to Commonwealth entities and companies, subject to the approval of the Minister for Trade, Tourism and Investment. This would allow Efic to offer its specialist financial capabilities in the operation and administration of Commonwealth financing programs where there is no connection to exports.

As it currently stands, there is only one other body that Efic can currently provide services to, and that is the Northern Australia Infrastructure Facility. I am the chair of the Senate Economics References Committee, and we are inquiring into the governance of the Northern Australia Infrastructure Facility. Some submissions have noted concerns in relation to the arrangements between Efic and NAIF, particularly that there is little public information provided about how Efic serves NAIF and that the processes governing this arrangement are robust. In the course of the proceedings of that inquiry we heard evidence from Professor Thomas Clarke, professor of corporate governance at the University of Technology Sydney. Professor Clarke talked about the fact that there was no effective transparency in the NAIF's governance framework, including in its project assessment and approval processes. He commented that it is unheard of for a publicly funded body to work in these conditions of absolute secrecy. He said all meetings, information and decisions are kept secret until they are approved, and the public is denied any knowledge of specific projects and who is proposing the projects. He said that this is not compatible with accountability and probity in public office, and neglects all established principles and protocols in public service in Australia and internationally.

We generally support the work of Efic. Of course, the issue of NAIF governance and operations is a question for the board of NAIF. One doesn't know the full extent of the advice given by Efic to NAIF in some of these issues, particularly in relation to due diligence arrangements. But there is a question mark as to what is happening with NAIF and the processes that are there to deal with applications that are coming before the NAIF. I must say that NAIF is certainly not a model of transparency that we would like to hold up for others to follow. This all goes to say that, while Efic does do good work, we know it is not perfect. We can't necessarily blame Efic for the decisions of the NAIF board, but there are some concerns that NAIF is not operating in a manner that Australians would like to see.

Generally, the first part of the bill is quite sensible and the Labor Party supports that. Enabling the government to deliver services in a more productive way makes a lot of sense. However, the second part of the bill has raised quite a few concerns. The Senate Foreign Affairs, Defence and Trade Legislation Committee looked into this bill. It heard the concerns of the Australian Fair Trade and Investment Network and the ACTU that the bill might lead to Efic providing financing to companies that might offshore Australian jobs and remove incentives to produce or manufacture in Australia. So Labor has taken a constructive approach to improving the legislation so that not only are no Australian jobs lost in this process but there are assurances that Efic's finance is leading to net job increases here at home. I would like to thank the shadow minister for his work in tightening the amendments to ensure this happens. I also appreciate the minister working with Labor to improve this legislation. This is something that does not happen often enough in this place.

I note that the minister already has moved amendments to the original bill in the House of Representatives, which stipulated that, when applying for a loan or guarantee for the purpose of direct investment overseas, the person who carries on the business must certify in writing given to Efic that the person reasonably believes that the loan will result in a net increase in the number of people employed in Australia by the business or a related party of the business during the term of the loan. Labor supports this amendment, but it doesn't go far enough. There should be higher standards to make sure that a company has used an Efic loan or guarantee for its intended purpose and met all the requirements. We also know that what is promised and what is delivered do not always line up. When taxpayer funds are being used to assist companies, there is a responsibility for government and the parliament to make sure that Australian jobs are being created.

I now turn to the first amendment that Labor has proposed in respect of the Australian jobs test. Labor will move amendments to ensure that an Australian based business, if they are successful in receiving a loan or guarantee to be used for the dominant purpose of direct investment outside Australia, must provide Efic with certification as to whether a net job increase did occur in Australia as a result of Efic's financing at the completion of the loan or guarantee. This certification must also be publicly released by Efic. It makes a lot of sense for good governance that these results are made public. We do know that Efic has fallen short in the past, and measures like this help to tighten the governance framework. I also understand that the government will support this amendment and I want to thank the government for working with Labor to make this legislation stronger.

In relation to the second amendment that we propose, Labor is also concerned that an Efic loan or guarantee to an Australian based business for the purpose of direct investment overseas may be used to offshore existing parts of the Australian business. This may leave large numbers of Australians unemployed. Companies do this, but they shouldn't use taxpayer funds to do this. This is why Labor believes that an Efic loan or guarantee that is to be used by an Australian based company for the dominant purpose of direct investment outside Australia should not be used to offshore substantial parts of the business.

This was the position the shadow minister took to the minister: that an Efic loan or guarantee that is used for the dominant purpose of direct investment outside Australia should not be used to offshore substantial parts of the business. I understand the shadow minister met with Efic over the break and discussed the exact wording of the amendment, and it has been agreed that, for smaller businesses, there was a legitimate reason as to why some facilities may need to be sent overseas to help grow the business back here in Australia. Efic already defines a large business as one with a turnover of more than $150 million per annum. To ensure proper operation of Efic, Labor agreed that the proposed amendment should apply to businesses with more than $150 million turnover per annum. This is a sensible amendment, which will help to ensure taxpayers' funds are not used to offshore Australian jobs, while allowing for the growth of small and medium businesses.

So, in summary, these Labor amendments are completely consistent with the policy positions we have taken in a number of areas recently. It is important that creating good, secure, well-paying Australian jobs is foremost in the minds of elected officials here in Canberra. Whether it is a policy on apprentices, steel production, Labor's proposed Australian skills authority, the skill-up training fund, saying no to labour loopholes in trade deals or protecting penalty rates, Labor is leading the way on putting well-paid Australian jobs first.

However, when you look at the current government, it seems to be more based on a free market, de-regulated, 'You're on your own' ideology, rather than on sound policy. Whether it's on shipbuilding, 457s, Work for the Dole, the Youth Jobs PaTH intern program, slashing funding to TAFEs and universities, the slow rollout of the regional jobs packages or cutting penalty rates, you see a picture: the government isn't taking these issues seriously and the government isn't taking Australians seriously. And that is unacceptable. However, as long as the government adopts Labor's sensible amendments, which will put Australian jobs first, I will support this bill.

10:09 am

Photo of Nick XenophonNick Xenophon (SA, Nick Xenophon Team) Share this | | Hansard source

I support the second reading stages of the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017, but I have real reservations about it. I believe it will be improved by the amendments that will be moved by the crossbench—by Senator Hanson-Young, particularly, in relation to FOI—and by the opposition in relation to the issue of Australian jobs. But it is important to make this point: at a point in time when manufacturing in Australia as a percentage of GDP has plunged by half in the last decade, and more than 200,000 local manufacturing jobs have been lost, this bill in its current form would introduce provisions that would see Efic being able to support Australian companies to set up manufacturing facilities offshore in preference to here at home. That is something that seriously concerns me. My understanding is that the government will agree to the opposition's amendments, and that is obviously welcome.

Whilst the committee report on this fairly drew out both the pros and cons of the impact this legislation would have, I believe it grossly underestimated the risks of this legislation in the context of an economic sector in a perilous condition. We know energy prices in this country are putting manufacturing at enormous risk. I will have more to say outside this chamber about AEMO later. I think AEMO have been abysmal in terms of their forecasting and in terms of their leadership in the energy sector because that impacts on manufacturing. In a sense, it does draw us back to this particular bill.

There are two key amendments. The first amendment seeks, in the words contained in the explanatory memorandum:

… to allow Efic to offer its specialist financial capabilities in the operation and administration of Commonwealth financing programs, where there is no connection to exports. Following Efic's provision of services to the Northern Australia Infrastructure Facility ("the NAIF"), Commonwealth departments have expressed interest in leveraging Efic's expertise.

On the face of it, this seems sensible. These are matters I've raised in estimates with Efic. It is taking a lot of resources in terms of the NAIF. There have been points raised by Jubilee Australia and the Australia Institute, particularly in relation to the dilution of focus. I think if we could get some assurances from the industry minister in relation to this, that would be very useful. Efic's annual report states:

Efic's primary purpose is to facilitate and encourage Australian export trade on a commercial basis. We provide financial support to Australian-based companies that are exporting, integral to a global supply chain or seeking to grow internationally.

The report also points out that the organisation compromises about 100 people. Any diversion of resource and function in such a small and focused organisation could only reasonably be expected to distract and prevent the organisation in respect of encouraging export trade. Exports are our lifeblood. The more we export, the better it is for the economy. I am a bit nervous that the Australian dollar is hovering just below 80 cents. I would prefer it to be way below that; around 70 or 75 cents seems to be a sweet spot for our exporters. So I want to be assured that Efic should and needs to remain tightly focused in facilitating export trade, and that is why I have been concerned about the first amendment. There are some transparency measures there. The FOI amendments by the Greens, I think, are good amendments and they ought to be supported to improve the legislation.

Now to the second amendment which I am concerned about. Under the current legislation, for a company to receive financial support from Efic, it needs to demonstrate there is some element of labour, goods and materials of Australian content. The level of Australian content in an export contract is an important factor in determining the amount of financial support that Efic provides. In essence, the higher the level of Australian content, the more financial support Efic can provide. The proposed unamended changes to the legislation seek to remove the local content requirement that invokes Efic's support and replace it with the need 'only for the benefit flowing back to Australia' to be present. That is incredibly imprecise, incredibly vague, and open to abuse. This creates a situation where Efic funding could be used to offshore a new manufacturing capability at the cost of Australian jobs.

The opposition's amendments are welcome, but I would put this question on notice—short notice—to the shadow industry minister, Senator Carr: what analysis has been done of these amendments in terms of preventing a bleeding of Australian jobs overseas in relation to that? I note the amendment. It is welcome, but I am still nervous about the fact that it could be rorted and that we could see money that Efic is providing—Australian taxpayers' money—go towards seeing jobs offshored, albeit with the stricter requirements in the amendments moved by the opposition.

Let's put this in context. This is not some esoteric argument I am raising. Australia's manufacturing sector has been in broad decline since 2008, with real output having contracted at every quarter since September 2011. Over 200,000 manufacturing jobs have disappeared since 2008, and the rate of job losses is accelerating. Employment in manufacturing fell six per cent in 2015 alone, and it's going to get much, much worse unless we deal with the energy crisis in this country. The fact that gas prices are double the price of Australian gas being sold in Japan, notwithstanding the liquefaction, the regasification and the transport of gas to Japan, means there is something seriously awry with our gas market in this country.

The impact it has had on manufacturers that rely on gas has been devastating. When new contracts come up, a lot of manufacturers will put their hands up and say, 'Do we want to do business in Australia?' That concerns me. I know there have been some measures, which I welcome, from the government, but this is an existential crisis for manufacturing in this country, so I don't want to make it worse with what this bill is proposing. These amendments from the opposition, which I understand the government is supporting, will at least help to ameliorate that concern. That is my concern, and that is something that should be explored in the committee stages of this bill.

Some of the submitters made the point that the loosening of the Efic reins may assist companies to set up marketing promotions offshore. While these sort of initiatives must be encouraged and supported by government, there are other programs better suited to marketing such as the Export Market Development Grants Scheme. To pull the Efic lever to facilitate promotion is to pull the wrong lever, and that is why I still have serious concerns about this bill. The amendments moved and the concessions by the government are welcome. But I will still reserve my position in the third reading stages of this bill, because I would not want to see Efic, an arm of government funded by taxpayers that is meant to encourage Australian exports and, by extension, Australian jobs and the growth of our economy, to be used as a Trojan Horse to fund the expansion of manufacturing overseas. That, to me, is a bridge too far and should not be supported. With those words, I support the second reading stage of this bill. I believe the bill can be improved in the committee stage, but I still have serious reservations about it.

10:17 am

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

I rise to speak on the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017. Have you got a good business idea? Have the banks refused your requests for a loan? Then get a loan from the government; it's getting back into the banking business. It has got the Clean Energy Finance Corporation, which will provide you with a loan if you tell the public servants that your business idea will save the climate. The Abbott government had wanted to abolish this green bank, but after the Senate rejected the idea and we got a new Prime Minister, the government is now an enthusiastic supporter.

The government wants to establish the Regional Investment Corporation, which will provide you with a loan if you tell the public servants that if you don't get a concessional loan your farm will be taken over by a larger, more-efficient farmer—we just couldn't have that. Now, the government is expanding the role of the Export Finance and Insurance Corporation, so it doesn't just provide loans. If you've got a business idea relating to the exporting of manufactured goods that no bank will touch, now the Export Finance and Insurance Corporation, through this bill, will offer loans. If you've got a business idea relating to tourism but can't get a loan from a bank because they assess your idea as bonkers, all you need to do is point out to the public servants that some of the tourists you hope for will be foreigners.

The same applies if you've got an idea for an online business. If you point out to the public servants that some of the online customers you hope for will be foreigners, you're in. If your idea relates to intellectual property, and no bank thinks it's worth a pinch of salt, then you're in luck too, provided you point out to the public servants that some foreigners might use your intellectual property. You'll even be able to get a loan from the government's Export Finance and Insurance Corporation if you want to invest overseas, provided you mention to the public servants that some indirect benefit will flow back to Australia. So what are you waiting for? If you want a loan and the banks have knocked you back, there's a government bank that's ready to hand you some taxpayers' cash. Commercial viability is no longer a prerequisite. All you need is to have an idea that suits the political breeze.

I hear the cynics out there pooh-poohing this development. They say that government banking makes us poorer by diverting cash to ideas that aren't as profitable as the ideas supported by commercial banks. They say that, when loans turn bad, government banking makes unwilling taxpayers instead of willing bank shareholders take the hit. They also make annoying references to the history of government banks—but it will be different this time, somehow! I don't think it will come as a surprise that the Liberal Democrats oppose the establishment of government banks, which make us all poorer. I will be opposing this bill. Unfortunately, I'll probably be alone in doing so.

10:20 am

Photo of Arthur SinodinosArthur Sinodinos (NSW, Liberal Party, Minister for Industry, Innovation and Science) Share this | | Hansard source

Let me begin by thanking the senators for their contributions to the debate on the Export Finance and Insurance Corporation Amendment (Support for Commonwealth Entities) Bill 2017. The Export Finance and Insurance Corporation, Efic, plays an important role in supporting the growth of Australian exporters, with a focus on small and medium-sized enterprises, SMEs. Efic delivers simple and creative finance solutions for Australian exporters. Efic provided 130 Australian SME exporters with over $150 million in support in 2016-17. This government wants to make it easier for Australian exporters to access Efic's support for jobs and growth, which hopefully will lead to higher wages as well. We need to foster an environment where Australia's exporters can grow. As it stands, the bill will look to do this by improving Efic's support for businesses who cannot obtain private sector finance to expand their reach overseas.

To address a point made by Senator Leyonhjelm: Efic are addressing a gap in the market, particularly when it comes to smaller enterprises wanting to expand overseas who may not have a great track record in the private sector here. Private banks may not be willing to finance their exports overseas, so Efic do fill a gap. Yes, they do take a risk. It's possible that some of these firms may not work out, but it is a gap in the marketplace that facilities like Efic are seeking to fill.

This bill will enable Efic to lend directly to an expanded range of Australian exporters and will ensure Efic's support for overseas direct investment results in more jobs in Australia. The evidence is very clear that Australian companies that export abroad are more productive, pay higher wages and, in that sense, make a premium contribution to the Australian economy. This bill prioritises the needs of a wider range of small and medium-sized enterprises across Australia to grow exports and jobs and expand their presence overseas, including tourism operators, online businesses and exporters of intellectual property and other related rights. In particular, we want to be able to keep the intellectual property here, but also to use it as a platform for exports.

This government responded to issues raised during the Senate committee review process by passing amendments in the House which have been noted and which legislate a net-positive jobs test for overseas direct investments and maintain local content requirements. The net-positive employment stipulation for Efic support for overseas direct investment means businesses will have to certify in writing their reasonable belief that Efic's support for overseas direct investment will result in a net increase to the number of people employed in Australia. I understand the opposition will shortly move two amendments to build upon this. One amendment will ensure Efic publicly discloses the business certification. This requirement is an extension of Efic's existing policy to publish the details of its high-level commercial transactions. We have no objection to this. The second opposition amendment will ensure large businesses with annual revenue of $150 million or more certify to Efic that they will not move all or a substantial part of their business overseas as a result of Efic's support for an overseas direct investment transaction. The idea that Australian taxpayers would be subsidising the offshoring of Australian jobs is clearly something that would not go down well with the Australian public. This requirement codifies Efic's existing policy to ensure its support for overseas direct investment will not result in plant closure or net job losses in Australia, and again we have no objections to this.

With around 100 employees today, Efic operates in the financial services sector with experience and specialist expertise regarding finance arrangements. This bill enables Efic's expertise to be made available to a wide range of commonwealth entities and companies on a fee-for-service basis beyond its current work for the Northern Australia Infrastructure Facility, subject to ministerial approval. This government responded to issues raised during the senate committee review process by passing amendments in the House to require Efic to charge fees for any services provided to Commonwealth entities and companies. In this way, additional resources will be provided to Efic so that Efic's support for SMEs remains undiminished. Australia's exporters are among the best businesses in this country. This bill will enable us to help even more of them receive the financial support they need to win business, employ more Australians, grow internationally and achieve export success. I commend the bill to the Senate.

Photo of Cory BernardiCory Bernardi (SA, Australian Conservatives) Share this | | Hansard source

The question is that the bill be read a second time.