Senate debates

Monday, 18 October 2021


Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021; Second Reading

12:20 pm

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

I rise today to speak in support of the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill. This bill seeks to broaden the range of transactions Export Finance Australia can finance by enabling EFA to make equity investments.

As an open trading nation, Australia has been a beneficiary of the multilateral rules-based trading system that has operated for decades. Australian businesses and Australian jobs have benefited from these rules supporting export growth. On average, Australian businesses that export hire 23 per cent more staff and pay 11 per cent higher wages than do nonexporters. People might refer to or recall my many contributions in support of various trading arrangements which refer to the impact on employment and wages to the benefit of working Australians.

The current lack of an equity investment power restricts Export Finance Australia to a narrow range of transactions. An equity investment power will complement EFA's existing suite of financing powers, which comprise loans, guarantees, bonds and insurance, and it will align EFA with export credit agencies in other countries, including the US, China, Japan, Canada and South Korea, and with other Australian government financing agencies like the Northern Australia Infrastructure Facility and the Clean Energy Finance Corporation. The increased financing power will be used to support important infrastructure investments in the Indo-Pacific or export-linked projects in Australia.

The bill will also give legislative effect to the decision to provide Export Finance with the ability to offer guarantees for overseas infrastructure transactions without needing to provide a loan to the same transaction. This will obviously improve flexibility and efficiency. Both the EFA and the Australian Infrastructure Financing Facility for the Pacific, AIFFP, oversee infrastructure financing activities, particularly in the Pacific, where transactions may be most appropriately financed in local currency. Export Finance providing a guarantee for another lender's loan in local currency is an effective way of facilitating local-currency borrowing. This will enable the injection of finance directly into emerging economies in our region. This equity investment power will also be available to the AIFFP, which relies on Export Finance Australia's governing legislation for the delivery of its loans.

We note that the bill has appropriate safeguards which constrain governments' spending. Any equity investment will be on Export Finance's national interest account, which requires government approval. There is obviously another account, the commercial account, which will remain unable to be utilised for equity investments. There is no legislated limit or cap on equity stakes, but every transaction would require ministerial approval.

I want to address some of the government's claims in relation to the Pacific and the Indo-Pacific. The government claims that this bill will support Australia's economic engagement in the Pacific and in the Indo-Pacific. In 2019, Export Finance Australia was granted wide powers to support financing infrastructure in the Pacific in line with the so-called Pacific step-up. Since then, we have had many flashy announcements from this government about investing in the Pacific, but Mr Morrison's failure of diplomacy has turned his so-called Pacific step-up into a series of Pacific stuff-ups. The Prime Minister announced the $2 billion Australian Infrastructure Financing Facility for the Pacific back in 2018. Two-and-a-half years later, it has provided less than $90 million of the promised $2 billion in Pacific infrastructure financing, and Mr Morrison's failure to take serious action on climate change, including the government's continued and very public failure to commit to legislating net zero emissions by 2050, continues to undermine its own Pacific step-up and damage Australian interests.

Australia should be a renewable energy superpower and we should be helping our neighbours address climate change and secure their energy supplies through our own renewable energy expertise. This is the unique role that EFA is equipped to play for our region, but it's a role that will be filled by others because the Morrison-Joyce government is dithering on climate change policy. Instead of making announcements, Mr Morrison needs to do the legwork and ensure Australia is a real partner of choice in the region. Let us also not forget that Mr Morrison's plan for an agricultural visa will directly undermine our Pacific labour mobility programs, including the Seasonal Worker Program and the Pacific Labour Scheme. I note that Senator Payne is in the chamber and I would say to her that this is another example where Mr Morrison is selling out our Pacific family to satisfy National Party colleagues, and it is a matter of great regret that this foreign minister, unlike Ms Bishop before her, has gone along with it. All at the same time, this government has failed to diversify what we as a country export and where we export.

Despite the talk about a Pacific step-up and despite the talk of engagement in our region, under this government we are in fact more dependent than ever on China for our exports and our jobs—more so than any other country in the world. At the same time, our economic and trade relationships with some other of our most important neighbours, including India and Indonesia, have gone backwards. Australia wants a region that is stable, prosperous and respectful of sovereignty, a region that is resilient to threats such as the pandemic, and other pandemics, and climate change. All of this requires deeper partnerships in the region, comprehensive support for pandemic recoveries and a genuine plan to boost Australia's trade and investment, especially as some of our neighbours now face a lost decade of development gains.

In conclusion, Labor will support this bill, because we need to invest in all of the levers of our national ability to boost our engagement to support and build the region we want. Central to achieving our objectives is ensuring that Australian businesses and investors can contribute to and benefit from our region's recovery and future growth. But the Morrison-Joyce government needs to do much more. It needs to boost Australia's support for the region's pandemic recovery, it needs to have a real plan for trade diversification and it needs to fully and properly commit to net zero emissions by 2050 and work with our partners to address the existential challenge of climate change. As long as the Morrison-Joyce government insists on being part of the problem rather than part of the solution, Australia will simply fall short of being a credible partner of choice in the Indo-Pacific region.

12:27 pm

Photo of Dorinda CoxDorinda Cox (WA, Australian Greens) Share this | | Hansard source

This is not my first speech. I rise today to speak on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. I would like to note that this bill makes changes that affect Export Finance Australia, also known as EFA. EFA is the government's export credit agency. It provides finance to support Australian exporting businesses and overseas infrastructure projects. This bill expands a range of transactions that EFA can finance. The bill allows EFA to make equity investments and offer standalone financial guarantees for overseas infrastructure transactions. Under these changes, EFA will be able to help exporting companies by providing a guarantee to private banks that, if the company fails to meet its borrowing obligations, EFA will take responsibility for the repayment of the loan.

The Greens have significant concern about the expansion of EFA's powers. EFA has a track record of investing billions in propping up the fossil fuel industry. This includes providing guarantees for financially risky projects like the Wiggins Island Coal Export Terminal and the Gladstone LNG project, which is along the Great Barrier Reef. In contrast, EFA has provided only $20 million in refinancing for renewables since 2009. As it currently stands, this bill imposes no restrictions on EFA making more investments into fossil fuels. This means even more public money could be used to prop up coal, oil and gas projects and accelerate the climate crisis.

As the global transition to net zero emissions gains pace, fossil fuel companies' banks and insurance institutions are finding it more difficult to access finance. Even if finance is secured, fossil fuel projects still face high risks of becoming stranded assets as global markets move to sustainable energy options. The Jubilee Australia Research Centre has found that export credit agencies providing guarantees or early-stage loans can give unwarranted confidence to private lenders by derisking large fossil fuel projects which they might otherwise have avoided.

This bill, like recent amendments in the Northern Australia Infrastructure Facility Act, will allow more public money to be used to prop up coal, oil and gas projects that the private sector deems to be too risky. As Jubilee noted, this could leave the government holding a stake in stranded fossil fuel assets long after the market has lost interest in investing in them. DFAT and EFA advised that the equity power in this bill would only be used sparingly and that the majority equity position would only be taken in exceptional circumstances. The ministerial statement of expectations will also be updated to prevent EFA from taking majority equity stakes unless there are compelling reasons otherwise. However, no detail has been provided as to what exceptional circumstances or compelling reasons would justify significant investment.

Given this government's stubborn, negligent attachment to coal and gas, we need to explicitly prohibit EFA financing fossil fuel projects. This is why the Greens will be moving an amendment, in Senator Waters's name, to stop EFA from investing in fossil fuels and fossil fuel based infrastructure. I'd like to come to the second reading amendment that has been circulated by the Greens in relation to this bill. EFA has been a critical player in the development of Australia's LNG export industry. A $254.7 million loan from EFA to Santos was part of setting up their Gladstone LNG project in 2011-12. Last year EFA contributed $164.12 million to refinancing the Ichthys LNG project in the Northern Territory. And let's make no mistake: gas is as dirty as coal. Direct emissions of methane, a gas more than 80 times more potent than CO2, are responsible for over 20 per cent of Australia's emissions and are growing at a rapid rate due to the boom in Australia's LNG projects. The world is beginning to act, with the European Union and the United States now leading the Global Methane Pledge, which would require member countries to reduce their methane emissions by at least 30 per cent on 2020 levels by 2030. Over 30 states have signed up, including nine of the world's 20 largest methane emitters. If we hope to keep global warming in check and limit global temperature rise to 1.5 degrees Celsius, then we must ensure that all parts of government, including our finance agencies like EFA and NAIF, are doing their part in reducing methane emissions. That's why we'll be moving a second reading amendment that calls for all investments by EFA to be in line with Australia also doing its fair share to reduce methane emissions according to the Global Methane Pledge.

When introducing this bill, the minister said this reform would align Australia with other countries, like the USA, China, Japan, Canada and South Korea, which are making equity investments to support development and commercial objectives. What the minister failed to note in his second reading speech is that many of these countries have taken steps to prohibit export finance agencies investing in fossil fuel. Earlier this year President Biden directed the US export credit agency to identify steps through which the United States could promote ending international financing of carbon-intensive fossil fuel based energy. The UK government has banned its export credit agency from funding any new coal and gas projects overseas. This was followed by UK Export Finance committing to net zero by 2050. South Korea has also committed to ending its public financing for overseas coal-fired power plants. While other countries do the heavy lifting on climate action, Australia continues to bury its head in the sand. If this government were serious about aligning Australia with other major economies, it would wake up and stop EFA from financing fossil fuel projects.

Alongside those climate risks, we also have concern around EFA's transparency and accountability. At the moment, EFA has a partial exemption from the freedom-of-information laws in relation to commercial and national interest account transactions. This makes it virtually impossible for taxpayers to find out where EFA directs its funds. Limited access to this information undermines the efforts to evaluate the effectiveness of the projects that have been funded or assess the return on investment of public money. The government has ultimate fiscal responsibility for the operation of EFA and is EFA's financial guarantor, as sole shareholder. Given this, taxpayers should be able to access this information about the purpose of projects being funded, instead of being kept in the dark. The Productivity Commission has previously recommended that the FOI exemption be removed, and noted that the FOI Act already includes protections for national security and commercially sensitive data. Other jurisdictions, including the UK and US, do not provide a blanket exemption from disclosure for their export credit agencies, and there's no justification for Australia to maintain this exemption. It's clear that EFA's current practice falls short of the transparency expected for the investment of public funds. This is why the Greens are moving an amendment today to repeal EFA's exemption from the Freedom of Information Act.

Finally, I would like to highlight the concerns raised by stakeholders around EFA's processes for assessing the environmental and social impacts of its projects. There are a number of weaknesses, including the fact that EFA's environmental and social review policy and procedure rely on relatively weak international standards and do not refer to climate change or require an assessment of the carbon emissions of proposed projects. It is also unclear how gender analysis is embedded across EFA's work. I understand that EFA's environmental and social review policy is being independently reviewed. It is critical that this review ensures EFA's policies align with international best practice regarding social and environmental issues.

As I've articulated, the Greens have significant concerns with this bill. Our support for this bill hinges on the government explicitly prohibiting EFA's investment in fossil fuel projects, as outlined in our amendment circulated in the chamber. The IPCC's latest warning on climate was our starkest warning yet: a code red for humanity. The world is heating fast, and we don't have any time to waste. In order to avoid catastrophic change, we must commit to no new coal, oil or gas. Australia cannot continue to ignore these stark warnings, and we must get out of fossil fuel projects at home and abroad.

Photo of Sue LinesSue Lines (WA, Deputy-President) Share this | | Hansard source

Senator Cox, are you moving that second reading amendment?

Photo of Dorinda CoxDorinda Cox (WA, Australian Greens) Share this | | Hansard source

I move:

At the end of the motion, add ", but any investment by Export Finance Australia must be compatible with the US-EU led Global Methane Pledge, which would require Australia to reduce our methane emissions by at least 30% by 2030 on 2020 levels".

12:37 pm

Photo of Paul ScarrPaul Scarr (Queensland, Liberal Party) Share this | | Hansard source

At the outset, I would like to make two preliminary points. First, I note that I'm following Senator Cox's first contribution in the chamber, so I'd like to congratulate Senator Cox on her election. I listened carefully to a thoughtful, articulate speech, which was certainly in keeping with the philosophy and the traditions of your fellow Greens members. Accordingly, I disagree with most of it, but I respect it. Second, I'd like to leap to the defence of my good friend Senator Payne, who was referred to by Senator Wong in her contribution. Senator Payne has done an absolutely outstanding job in terms of engaging with our Pacific family. I'll highlight two matters in particular: first, in terms of their response to COVID-19 pandemic and, second, with respect to the status of women in our Pacific Island family of nations. So I really do commend Senator Payne on her efforts in that regard. She's been a tireless foreign affairs minister and an outstanding one at that.

In relation to the bill before the chamber, the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021, from my perspective this is about opportunities. It's about opportunities for Australian businesses and Australian workers. It's about opportunities for the communities which will be positively impacted by projects which are provided finance by Export Finance Australia. Some of those communities are poor communities, communities which up to today haven't had the opportunities that we've had in Australia, and the finance provided by Export Finance Australia will help them tap into those opportunities for their communities and for their people. And it's about an opportunity for Australia to promote its strategic interests in the Indo-Pacific region. So this bill is about opportunity.

There are five key points I'd like to address in my contribution on the bill. I say this as someone who has a reasonably long background in the mining industry: I have been involved in arranging finance or finance negotiations for projects in many offshore jurisdictions, including jurisdictions in South-East Asia and our Pacific region.

The first point is that the impact of Export Finance Australia and the Australian Infrastructure Financing Facility for the Pacific being involved in a project is profound. It sends a message to many different stakeholders. It sends a message to other potential financiers, because of Australia's involvement through those agencies, that this is an opportunity which they should look at in terms of contributing finance to. It sends a message to equity investors that these are perhaps projects that should be invested in. It sends a message to all of our geopolitical stakeholders, and those with whom we engage, that we're interested in this region and we will assert our interests in the Indo-Pacific region. So it sends an important message and that message can translate into greater finance for a project, greater equity investment and greater opportunities to make the project a reality.

The second point is in relation to the type of finance. It is incredibly important that Export Finance Australia has the ability to be flexible with respect to the sort of finance which is contributed. That might be through direct advances of loan funds, but it needs to also be potentially through the provision of guarantees to address the point Senator Wong referred to—that in some countries the best approach is for a guarantee to be provided by an agency such as Export Finance Australia so that the lending is done by local finance providers in local currency. That's a real issue for some of our Pacific neighbours, in terms of currency, so I think that's a great benefit in terms of this legislation.

The third point is that this legislation provides flexibility in terms of equity investment. That is an important additional bow to add to the quiver. It is important that that flexibility is added but it is important that that is rarely done. I don't philosophically believe that the government should be a major investor in projects of this type. However, there will be a category of projects which are in the national interest—for example, in the critical minerals space—which on a very rare basis warrant an equity contribution from an agency such as Export Finance Australia.

The fourth point I want to raise is in relation to the Pacific step-up. I'm a passionate believer in the government's Pacific step-up policy. As someone who lived and worked in Papua New Guinea for about 2½ years I know how important our Pacific family is. And I know that Export Finance Australia, given this additional flexibility, will be able to do more good in our Pacific region and help bring projects to fruition.

The fifth and final point I want to make is that it's extraordinarily important that this legislation is passed in order to bring parity between Australia and some of our major trading partners—the USA, the United Kingdom, South Korea and Japan. Their export finance agencies have this flexibility. We need to also have this flexibility. We need parity in this respect. That's another important reason to support this legislation.

In conclusion, from my perspective this bill is about opportunity—opportunity for more jobs for Australians and greater opportunity for Australian businesses—and enabling communities in our Indo-Pacific region to translate opportunities into reality and for projects to be built which provide them with the employment opportunities and the infrastructure they need in order to progress.

12:44 pm

Photo of Jordon Steele-JohnJordon Steele-John (WA, Australian Greens) Share this | | Hansard source

[by video link] I rise, both digitally and metaphorically, to speak to the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. I want to begin by congratulating my now affirmed and sworn-in colleague Senator Dorinda Cox on her first not-first speech in the chamber. It's a great shame that I wasn't there to be with you when you were sworn in earlier, matey, and I can't wait to be working alongside you in this space for the truth, for justice, for healing and for treaty and not to be stuck on the other side of a computer in doing so.

The coming of this bill at the beginning of this parliamentary sitting is in many ways really prescient. It comes at a moment when the community is alive with a desire to see two primary outcomes from their parliament this week. They want to see a strong response and a strong and urgent action plan in relation to climate change formulated and taken to Glasgow—they want to see a plan which has a strong target in relation to 2030 and doesn't continue to engage in the myth that, if we leave the action till 2050, we can actually address it—and they want to see an end to the drought of action, now 1,000 days long, in relation to the implementation of a national integrity commission. The Australian community are sick and tired of people who were elected to do the work of the community in decision-making spaces instead going into those spaces and working on behalf of vested interests, often fossil fuel corporations. Yet the first piece of legislation we're dealing with today is a bill arguably designed to facilitate the transfer of public wealth into private hands or, rather, to use public finances to facilitate support for private corporations—fossil fuel corporations, potentially—in building projects not only in Australia but also throughout the region. It really does speak to a fundamental disconnect. At a time when the community want to see action on climate change and want to see politics cleaned up because they believe there is too much closeness and a revolving door between the big end of the town and the fossil fuel powers in this country, the first thing we are dealing with is a mechanism by which public money may be given to private entities to develop fossil fuel projects.

Why do we have this concern in relation to these amendments? We as the Greens have these concerns primarily because if you look at what this agency does, as Senator Cox pointed out, it provides finance support to Australian exporting businesses seeking to invest in overseas infrastructure projects. It expands the range of transactions that Export Finance Australia can finance. It allows EFA to make equity investments and offer standalone financial guarantees for overseas infrastructure transactions. Under these changes, EFA will be able to help exporting companies by providing a guarantee to private banks that, if the company fails to meet borrowing obligations, EFA will take responsibility for the repayment of the loan. This comes in a context where it is very clear that global finance institutions do not want to touch fossil fuels. They have seen the writing on the wall that there needs to be urgent action and that investing in fossil fuels is a bad investment for them. So in sail these amendments to potentially offer support to projects that would not be able to get support through other mechanisms.

As Senator Cox articulated, the Greens have significant concerns about the expansion of EFA's powers, particularly given that this is an agency with a track record of funnelling billions of dollars into fossil fuel projects. It has invested, as Senator Cox rightly pointed out, nearly $2 billion in fossil fuel projects. Senator Cox made reference to the Wiggins Island Coal Export Terminal and the Gladstone LNG plant adjoining the Great Barrier Reef. This is in the context of a measly $20 million in financing for renewables since 2009. So it is very clear where the priorities of the EFA currently stand.

We know that, as the globe transitions to net renewable emissions, fossil fuel companies, banking companies and insurance companies particularly are finding it more difficult to get finance. This is a global financial reality. It is the market responding to the risk of climate change. As I say that, I want to be really clear here. I am a member of the Greens and, as a member of the Greens for Western Australia, I am the last person you will ever find advocating for the free unleashing of the invisible hand of the market or to particularly put huge amounts of credence in the global views of international finance organisations. If the renewable energy transition is saving the climate and climate justice was left solely to global corporations and the machinations of the international global finance market, we would have a transition to renewable energy and to net zero but we would have climate action that would comprehensively come too late and leave out those most impacted by the climate crisis.

This is not an area that we can leave solely to the whims of the market or where we can read their indications as law. In this case, we see, I would argue, that global financial institutions are far too late to the party and have done the bare minimum in waking up to the reality that a room filling with smoke will eventually suffocate them. That's what they've done. They had an opportunity in the 1980s when they first found out that fossil fuels were causing climate change to advocate for a transition, and they decided instead to advocate for decades more of public subsidies for their projects. Having said all that, though, it is important that we factor the international financial reality into policy-making. But that is most certainly not the sole gospel upon which to make decisions.

The other thing that's really important to take account of when we consider this legislation is that, because we are ultimately considering a bill that is about the financing of projects beyond our shores as well, Australia is a member of the Asia-Pacific region and is a key actor within the immediate region in relation to island nations specifically. There is great focus among our regional neighbours in the Asia-Pacific on the need for climate action. There is a broad reality that Australia for the last 10 years or more has played the role of wrecker in international forum after international forum, blocking climate change action again and again and undermining our position within the Asia-Pacific and our relationships with our island neighbours. This has resulted in a historically poor and broken relationship between Australia and these countries, because our political articulation here within Australia has been diametrically at odds with the needs of Pacific island nations. We have, quite frankly, looked nations such as Vanuatu and Tuvalu in the eye and said, 'To be honest with you folks, the profits of BHP, Woodside, Andrew Forrest and Gina Rinehart and their willingness to continue to donate to us as major political parties is more important than whether you have a place to call home and whether your traditional island nations continue to exist.' This has been the message that has been continually repeated to Pacific island nations in international forum after international forum by virtue of not only our failure to act but our opposition to action.

This piece of legislation before us today is yet another demonstration of a lost opportunity and also an active failure to act. We could—and we will propose to, in our amendments—make it very clear that not a single additional cent spent by this agency would be spent on a fossil fuel project. We could do that, yet the government is refusing to do so in the legislation before us today. That is an absolute shame, and, quite frankly, in the context of the upcoming international meetings in Glasgow, it once again reveals the coalition's credibility in the climate space to be absolutely zero.

The final thing I'll say here is on the absence of transparency in relation to this kind of facility of government. As Senator Cox pointed out, the EFA is exempt from the FOI Act process, making it very difficult for us to get a clear picture of what is actually being done, in using public funds, by this vital agency and authority. That is not okay; that wouldn't be accepted in many other contexts. Again, we have an example of the material disconnect between what major party MPs, particularly those in the coalition, believe is acceptable in relation to the drafting of legislation and what the community expects. The community expects that we come to this decision-making place, to which we have been elected, and make decisions that move forward the community's collective agenda. It has been clear for more than a decade—in fact, for decades in some cases—that the Australian community want action on climate change. They do not want to see their money, public money, spent propping up poisonous, polluting, stranded assets, because doing so ensures the continual cycle of corporate money coming in and out of the major parties. They want to see action.

This bill could have been an absolute opportunity for the government to demonstrate its willingness to listen to the call of the student strikers that gathered together in Western Australia over the weekend to demand urgent action. It could have been an opportunity to echo calls from every part of the nation—from Mandurah in my state, where members of the community are fighting against the impacts of dirty developers and their connections with government in relation to Sterling First Projects, through to the desires of people across the state to see that nexus between the gas industry and the Labor government broken. It could have been an opportunity to take a step in the right direction and at least ensure that this agency is subject properly and fully to freedom-of-information requirements and that not a single cent of the money invested by this agency, public money from the Australian public purse, is spent on any new coal, oil and/or gas facility, particularly in the context where some of the most unscrupulous organisations that have ever existed in the world—that being global international banking organisations—won't touch it with a 10-foot barge pole. I thank the chamber for its time.

12:59 pm

Photo of Concetta Fierravanti-WellsConcetta Fierravanti-Wells (NSW, Liberal Party) Share this | | Hansard source

The Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021 grants Export Finance Australia the power to make equity investments. The intention is to enhance the ability of EFA and the government to support important overseas infrastructure investments and export-linked projects in Australia. The equity power will also be made available to the Australian Infrastructure Financing Facility for the Pacific, supposedly to further support Australia's Pacific step-up. The bill will also grant EFA the ability to provide stand-alone guarantees to oversee infrastructure transactions, improving EFA's and the facility's overseas infrastructure financing capabilities.

I think, though, it is important to put this bill into its proper historical context. It is important that there be investment in the Pacific countries to provide sustainable growth and to respond, most importantly, to the core priorities of Pacific island people. But equally important is that they not be saddled with heavy debt burdens. Development partners need to take into account the economic vulnerabilities of the region, as many countries have small formal economies.

Countries like Australia and Japan are committed to high standards of transparency in our overseas development assistance, and we encourage the same of all donors, including China. Our primary concern is to encourage effective ODA delivery that supports sustainable growth but does not impose heavy debt burdens. Whilst debt sustainability has made it on to the regional agenda, regrettably the debt-to-GDP ratios of Pacific island countries have deteriorated. When I became Minister for International Development and the Pacific in January 2016, it was very evident that Australia's soft power in the Pacific had steadily deteriorated. The Pacific should have been front and centre of our foreign policy. It is our neighbourhood, and our allies had expected that our focus should have been firmly in the Pacific. Regrettably, we dropped the ball. For example, under the coalition, vital short-wave radio services were cut. While some islanders had access to internet and FM, electricity is the first thing to go down in a cyclone, a tsunami or an earthquake, resulting in communication gaps. The stability, security and prosperity of our region should remain the primary objective of Australia, second only to the defence of Australia.

I pushed very strongly for the Pacific to be one of the five priorities in the Foreign policy white paper. Having travelled extensively in the Pacific—I did about 35 trips—I came to understand firsthand the talanoa and the importance of respecting the established regional framework of the Pacific Islands Forum and other bodies in the Pacific. Most especially, it became important that any unilateral action not cut across regional initiatives and hence jeopardise support for what we may want to do. Above all, I was careful that Australia was not seen as patronising. I took my guide from the great work Australia had achieved through RAMSI. I also strongly advocated for Australia to shift its overseas development assistance footprint to the Pacific. Indeed, while I was minister we had a record spend of $1.3 billion for aid in the Pacific. I advocated for us to spend a higher portion of our ODA in the region, including extending our diplomatic posts in each Pacific island country, given the vast distances and travel challenges that exist in the Pacific.

My activities and observations on my many trips and during my many conversations were well documented, including the necessary debriefings upon my return. I saw firsthand what the communist regime was doing in the Pacific. My honest and forthright public comments in January 2018 about debt-trap diplomacy and the CCP's activities not only started an international debate but highlighted that the Pacific is where the difficult and complex issues are and where the focus of our diplomacy should have been. Rather than heeding my prescient warnings, those driving our foreign, trade and defence policy chose to ignore Beijing's skulduggery in favour of a policy of appeasement of the communist regime.

My comments about debt distress in the Pacific reflected concerns raised by the IMF, academics and commentators. At that time, the external debt to GDP ratios of these vulnerable economies ranged from 25 to 90 per cent. At the time I was minister, the debt level in the Pacific was about $5.5 billion, of which about $2 billion was owed to international banks, and about $1.5 billion was owed to China and Chinese banks. At the time, the Lowy Institute released its Pacific map which showed that Australia remained the highest grants donor in the Pacific. About 70 per cent of China's aid was in the form of loans, and little was known about the arrangements of these opaque debts, including how many were debt for equity, like the Port of Hambantota in Sri Lanka.

Whilst every country has the sovereign right to borrow, invest and run their own economies, debts need to be repaid when they become due. This means that scarce government resources have to be diverted to debt repayment and away from critical spending such as health and education. When a vulnerable country with limited resources owes such vast sums to one country, it places the country in a vulnerable position. We have seen that Beijing has not been forthcoming in forgiving debts. We have seen countries in the Pacific with large debts due. Some have had interest concessions from Beijing, but they have been forced to sign up for the Belt and Road Initiative.

After leaving the role in August 2018, we started to see the rollout of some of the extensive work that I had started as a minister. However, Scott Morrison's downgrading of the role to an assistant minister, and the subsequent revolving door of L-platers, has seen us lose the momentum that I had generated over my constant engagement and interaction. Indeed, I was very surprised by the announcement of the $3 billion Pacific step-up, of which $2 billion was for the Australian Infrastructure Financing Facility for the Pacific. It had three components: this facility, the export financing component and grants. It was supposed to be for the Pacific. However, I note that the goalposts have now shifted, and the government is now focusing on the Indo-Pacific rather than just on the Pacific, which is what it was intended for. In all the work I did as a minister, this facility was never raised with me. Given my public comments about debt levels in the Pacific, I certainly have grave concerns about increasing those debt levels through more lending. It seems that this was another thought bubble emanating from the 'prime marketing office', with little regard to its application and how such unilateral decision-making would be received by our Pacific neighbours. I labelled it the 'DFAT bank'. One thing DFAT should never do is run a bank!

I said that I would put this in a historical context. I go back to the Pacific Island Forum in 2016, where we committed to a framework for regional disaster preparedness and development, and its key component, the Pacific Resilience Fund. I advocated that this would be an independent fund that Australia and other key development partners should contribute to capitalising—in short, a fund that Pacific island countries can draw on without owing one country. The fund would enable Pacific island countries to borrow small amounts at very concessional levels to do basic climate-proofing of vital community infrastructure such as schools, community halls and hospitals. This is the critical infrastructure so vital to the life of small island communities. Hence, it makes much better sense to weatherproof them before they are damaged or destroyed.

The Pacific is one of the most disaster-prone areas in the world. Seven of the 10 most disaster-prone countries are in our region. Adverse climatic events exacerbate existing development challenges. They constrain economic growth, affect oceans, fisheries, marine and coastal ecosystems, and have the potential to affect the stability and security of the region. There will always be another cyclone or tsunami. This is the reality of the Pacific and climate cycles. Surely we can assist our neighbours to weatherproof the region as best we can so that critical infrastructure can be preserved rather than having to expend funds to rebuild post cyclone or tsunami.

Now, the Pacific Resilience Fund remains a key regional priority driven by the Pacific Islands Forum, and it is clear, from my many discussions with key Pacific stakeholders, that this was what the Pacific needed, and we should have been responding accordingly. Capitalisation of the fund would require about $1.5 billion. The fund would be independent, transparent and ensure that Pacific Island countries who borrow from the fund would not be beholden to one country.

It is eminently more preferable for us to be contributing to this fund rather than international climate funds or Beijing's Asian Infrastructure Investment Bank, to which we also contributed $1 billion, and its associated Belt and Road initiatives. I have argued that Australia, as a key partner, should lead the way and not only commit a substantial initial capitalisation of the fund but encourage other development partners in our region to do likewise. A better option would have been to use a sizeable portion of the $3 billion Pacific step-up to contribute towards capitalisation of the fund, rather than saddling the Pacific with more debt through the more dubious $2 billion so-called Australian Infrastructure Financing Facility for the Pacific.

It is all very well to support the development of large infrastructure, but, before you do so, you need to secure basic infrastructure like schools, hospitals and community halls so that they remain intact during storms and cyclones. This critical infrastructure is vital to building resilience in villages on those small islands in those communities right across the Pacific. Neighbours need our help in practical and meaningful ways. The Pacific Resilience Fund is a far more sensible and practical way of helping the people of the Pacific as they face the day-to-day challenges of storms and cyclones.

Now, the other key component of the $3 billion Pacific step-up was the allocation of $1 billion in callable capital to the export financing agency. One of the challenges in the Pacific is private sector investment. Opening up markets and greater business expansion is good for Australia and Pacific island countries. I supported this component of the step-up because it will enable Australia to support investments effectively as a guarantor to private enterprise and afford more innovative financing options rather than impose greater debt.

The establishment of the trilateral partnership between the US, Japan and Australia for infrastructure investment, with the objective of mobilising private capital, has also been important, especially in the energy, natural resources and connectivity sectors, where there is private sector interest. The partnership can assist Pacific island countries with the logistics of getting projects up and running—including cost-benefit analysis and all those other things that are important to put deals together. But my concerns remain about this Australian Infrastructure Financing Facility for the Pacific. Thus far, our ODA to the Pacific has been in the form of grants. It still remains unclear how much dialogue, if any, was undertaken with Pacific island countries or the Pacific Islands Forum before the announcement of this loan facility.

Given my past comments, I am conscious that we do not increase debt levels in the Pacific. Loans need to be repaid with interest. Loans are made using Australian taxpayers' money. In view of these existing debt levels, I expect that very few countries can meet the requirements for repayment. So, if you know the debt is not going to be repaid, why are you lending it in the first place? Is it not better to give assistance to our neighbours in the form of ODA and focus on those things that are going to be of greater benefit to a greater number of people across the Pacific and, therefore, support this fund? We all know there will be more adverse weather conditions, and so, in the spirit of talanoa, let's help our neighbours prepare for those events and help communities. Let's help the Pacific to help itself.

1:14 pm

Photo of Rex PatrickRex Patrick (SA, Independent) Share this | | Hansard source

I rise to speak on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. I'm a big fan of Efic. I sat here listening to Senator Fierravanti-Wells and she made some very, very good points that will play on my mind as I enter the chamber when the bells ring.

The main reason I came into the chamber was to talk to the Greens amendment, which is basically seeking to prevent investments in areas of coal, oil and natural gas. I think it's a good amendment and I'm going to spell out why that is the case. And I do that not from some far-left Green perspective but simply from my knowledge of the commercial world. Right now, what we're seeing in relation to oil, gas and coal products is a collapse in the market. That's probably not true for coal but it is certainly true for the other two. Here in Australia, perhaps to the benefit of the gas cartel, we are seeing less consumption of gas. As the states switch across to their programs of renewable energy, we are now seeing negative electricity prices appearing on the market in South Australia. If you go to AEMO's quarterly report for the first part of this year you'll see that from 8 am until 5 pm, the time of manufacturing, there's a good chance that the spot price of electricity in South Australia will be negative. Whilst I accept that electricity prices are in fact quite complex—with AEMO intervening in the market to get inertia into the system—it is a tell-tale sign and one that interested me when I saw it. I'm not pretending it was something that it wasn't, but it is an indicator.

We are seeing the gas market dry up. We will be forced, over time, to reduce our oil consumption simply by the arrival of electric vehicles. That is not necessarily helped by this government in terms of its national strategy. Simply, the reality is that car manufacturers have announced that they are moving away from internal combustion engine cars—that's all going. And that means, eventually, we will be dragged kicking and screaming into the electric vehicle market, which will reduce our dependency on oil. And that is happening overseas as well.

So the Greens amendment makes sense in terms of the economics, the way in which markets work. And I note that Senator Steele-John stood up and talked about the banks no longer being willing to invest in these areas. That ought to alarm people. If the banks aren't willing to invest in these areas then we shouldn't be putting government money into these areas. We shouldn't have underwriting of oil and gas investments in circumstances where the banks understand better than anyone in this place exactly where this is all going. I saw a tweet this morning by Senator Canavan counter to the banks. He said:

… My rule of thumb is, if something is good for the banks it is probably bad for me.

I was forced to tweet back to say that my rule of thumb is that if something is good for the Nationals, it is almost certainly bad for South Australia and indeed the Murray-Darling.

I'm glad that Senator McKenzie is here trying to interject. She has the Nationals streak through her. Did anyone not see the dumbest idea for 2021 coming from the Nationals over the break? They suggested that we invest $250 billion of taxpayers' money into investments that the banks won't touch. That is the dumbest idea in 2021, coming straight from the National Party.

I'm looking forward to seeing all those Nationals ministers who will have to resign when the cabinet make decisions on reducing emissions. They will have to make those decisions because that's the will of the Australian people, and they know it. So I will be interested to see when Mr Pitt, Senator Mackenzie or Mr Joyce resign because their position is somewhat different to that of the cabinet. Although we do know that Senator McKenzie wandered in here and tried to remove the 450-gigalitre requirement from the Murray-Darling Basin Plan. She was big and bold when she did that, but when she became a cabinet minister she sat quietly because she knows the cabinet's position is that the plan be delivered in full. So while the Nationals—

Photo of Claire ChandlerClaire Chandler (Tasmania, Liberal Party) Share this | | Hansard source

Senator McKenzie?

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party, Minister for Emergency Management and National Recovery and Resilience) Share this | | Hansard source

Senator Patrick knows there was no opportunity to discuss the 450. That can only be delivered if there is no socioeconomic detriment to the people that live in the Murray-Darling Basin. That is actually the test of whether that 450 will be delivered, and he knows that there was no opportunity to have that conversation in this chamber.

The ACTING DEPUTY PRESIDE NT: Senator McKenzie, order! I don't think that's a point of order.

Photo of Rex PatrickRex Patrick (SA, Independent) Share this | | Hansard source

I will just make the point, Acting Deputy President, that if you let people interject and run a five-minute speech without a point of order this place will become rather disorderly. So I'd just ask that you might—

Photo of Claire ChandlerClaire Chandler (Tasmania, Liberal Party) Share this | | Hansard source

Senator Patrick, Senator McKenzie did not speak for five minutes, but I will take your point and allow you to continue with your contribution.

Photo of Rex PatrickRex Patrick (SA, Independent) Share this | | Hansard source

Some timing there would be good, thank you, Acting Deputy President. I know Senator McKenzie is a bit touchy about this, because she—

Photo of Claire ChandlerClaire Chandler (Tasmania, Liberal Party) Share this | | Hansard source

Senator McKenzie?

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party, Minister for Emergency Management and National Recovery and Resilience) Share this | | Hansard source

On a point of order, my name does not appear in the bill before the Senate at all. So I am struggling to understand why the senator feels the need to continually insert my name into debate on a bill before the Senate that he should actually be talking about, the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill. Please stick to the bill before the Senate.

Photo of Claire ChandlerClaire Chandler (Tasmania, Liberal Party) Share this | | Hansard source

Thank you, Senator McKenzie. You have reminded Senator Patrick of the bill that we are discussing today. Senator Patrick, please continue your contribution and be relevant to the bill.

Photo of Rex PatrickRex Patrick (SA, Independent) Share this | | Hansard source

I'll make it very clear: I am being relevant to the bill. I am talking about investment in fossil fuels, oil and gas, and I am talking about investment in coal. The link with the amendment bill is that the Nationals suggested over the break, in the dumbest idea of 2021, that the taxpayer set aside $250 billion to contribute to these investments. This is actually entirely relevant to the bill. Then I was just making the point that I will be interested, when decisions are made by the Liberal side of the coalition—because they must be made—to go down an emissions-responsible path in relation to these investments, to see how the Nationals stand and whether or not they will put their ministry ahead of their big coal, oil and gas investor-donors.

But I will come back to where I was going, and that is that we need to understand that, as the market dries up for these commodities, the investments that are being proposed under this bill will go bad. I put it to you that they will go bad more quickly than anyone imagines. They will go bad more quickly than the analysts think, because that is what happens. You end up seeing a collapse. That is the danger of the sorts of investment that could come into play under this bill. That is why the Greens amendment is important. I say that looking at it from an economic perspective, and I know that Senator Steele-John approached it in that manner as well. I found it very difficult to disagree with what he said, even though from time to time I do disagree with what he says.

So we need to rethink what we are doing. Investing in the export of these sorts of commodities or even assisting our Pacific friends to do such things is a bad idea. When it comes to exporting these products, the writing is on the wall. The writing is on the wall, and, unfortunately, the Liberal coalition is not reading the writing.

If we look at the UAE, the history is really interesting, in that, unlike other Middle East countries that have squandered and through corrupt processes distributed the wealth associated with the oil that had flowed from the Middle East, and we find that the UAE took a very country interested approach and invested in things that were going to be around when the oil dried up. They invested in tourism, an international airline, an international transport hub, manufacturing and other sorts of capabilities, rather than something they know won't be there forever. We need to be thinking about the same thing. We need to understand that these commodities that we are exporting are going to be turned off at some stage—not because the Nationals are standing behind, trying to pump the gas as it leaves the country, but because there won't be a market for it.

This goes back to the sort of thing that I've been pushing for for some time: in our consideration of where this country's going, we've got to stop thinking in terms of exporting rocks. We've got to stop just exporting rocks. In Whyalla we're struggling with the steelworks there, and there is an intention to turn that to green steel, and there are some good hydrogen projects that are spinning up there. But we've got to make sure that, instead of just exporting iron ore, we invest in exporting steel; instead of just exporting lithium, we export batteries—that we develop capabilities, we develop IP, we develop products that are exportable and we create jobs. That's the future. In looking at this bill and what it may allow or permit to happen, the reason we need to clamp down on it is the very thing that the Greens are putting up today, which is that investment in these false future markets will end in tears. We have to start rethinking the way we do business. The change is coming. Unfortunately, our thinking has lagged for too long and we've got to move forward, and I think their amendment goes a little bit towards that.

1:27 pm

Photo of Bridget McKenzieBridget McKenzie (Victoria, National Party, Minister for Emergency Management and National Recovery and Resilience) Share this | | Hansard source

I think honourable senators for their contributions to this debate on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill. 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.

I welcome the Senate Foreign Affairs, Defence and Trade Legislation Committee's endorsement of the bill and its purpose and its recommendation that the bill be passed. The government notes the Australian Greens' dissenting recommendations in the committee report but respectfully disagrees. The government sees no need to delay the bill or to remove Export Finance Australia's existing exemptions under the Freedom of Information Act.

As noted by the committee, 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 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, comprising loans, guarantees, bonds and insurance. However, the equity investment power 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 region.

In conclusion, the bill—

Debate interrupted.