Ms JULIE BISHOP (5:06 PM) —This building is not an old building. In fact, the parliament only opened its doors some 15 years ago. Just five general elections have passed since that day. Yet it would be very fair to observe that it is unlikely that this place has ever been so sombre and so wrenched or the atmosphere so grave as it was in the week beginning 14 October 2002—nor is it likely to be again, we pray. As each day of that week wore on, as we inched that little further away from the events of that terrible Saturday night in Kuta, so we seemed to fall as a parliament and as a nation into the morass of despair. In fact, I have never felt quite so sad as I did in that memorial service in the Great Hall, seeing the family and friends of the victims united in their grief.

On that Saturday night, 12 October, in Paddy's Bar and the Sari Club on Kuta Beach in Bali, a foul crime was committed. That night, 180 young people in the prime of their lives—Indonesian, Australian and others—were murdered and hundreds more were maimed by bombs planted by Islamic terrorists. In the days after this atrocity, as the news reports, the television scenes, the recriminations and the tears washed over this nation, we came to the realisation that we are all New Yorkers now. We have as a nation been touched by the hand of terrorism. I was in Bali a few weeks back with a tourism task force, an initiative of the Indonesian government organised by Gavin Anderson and Co., to look at the impact of this terrorist attack on Bali tourism, which is, in a word, devastating. Standing on the levelled site that was formerly the Sari Club, I was left with the awful realisation that, as it has happened there, it could happen here.

This government has reacted to these circumstances with commendable energy. We have redoubled our commitment to the international fight against terrorism, we have strengthened Australia's counter-terrorist forces and we have made a genuine effort to enlist into action the greatest advantage a free nation has in battling this scourge—the eyes and ears of its citizenry. It is to the discredit of some, including some in this place, that the good faith of the great majority has been disparaged by the politicking of a small minority. No sensible person could judge the recent national security campaign to be anything but an appropriate response to the terrorist challenge, yet there has been this absurd theatrical response to the campaign—the fridge magnet campaign, if you will. That response ought to be considered with the disdain that it deserves.

The federal government has also taken the first steps to bolster Australia's economic defence against terrorism by reforming our insurance laws. In fact, some 13 days after the Bali bombings on 25 October 2002, the Treasurer announced the details of a scheme for replacement terrorism insurance. The bill before us today, the Terrorism Insurance Bill 2002, will address the public's very real concerns about the inaccessibility of affordable insurance—particularly for commercial property and vital infrastructure—against terrorist damage. A survey conducted by the Association of Risk and Insurance Managers of Australasia in early 2002 revealed that more than 40 per cent of companies had had terrorism excluded from policies renewed after 11 September 2001. Of those companies yet to renew, 64 per cent had been advised that cover would not be available. This has, in turn, had an impact on the economy more generally.

The Australian Bankers Association has advised that the absence of terrorism insurance is likely to delay or deter large-scale infrastructure projects in the future. As the Treasurer noted in his second reading speech, this inaccessibility is an instance of genuine market failure. A gap exists in the provision of information concerning terrorist risk, while the costs of any terrorist attack are likely to be considerable. This is not, of course, a problem unique to Australia. Other nations have sought to ensure that any market failure occasioned by fears of terrorism was resolved through public intervention.

In Britain, a nation that has endured over three decades of Irish republican terrorism, a pool reinsurance company, Pool Re, was brought into being in the early 1990s to ensure that British property remained insured against terrorist attack. Across the Channel, the French government took a similar step in the wake of September 11, instructing the state owned insurance company, Caisse Centrale de Reassurance, to cover the costs of damage above an annual $1.5 billion ceiling. The Bills Digest notes that similar schemes have been adopted in Spain, South Africa and Israel. In the United States, where total insurance losses stemming from the September 11 attacks have been estimated at between $US35 billion and $US75 billion, Congress passed the Terrorism Risk Insurance Act late last year.

The Australian initiative, of which this bill is integral, will provide replacement insurance to cover commercial property and infrastructure for damage and associated costs that might result from terrorist attack, whether in the form of explosion, flood, fire, aircraft impact or biological or chemical weapons. Under the new arrangements, to be administered by a statutory corporation to be known as the Australian Reinsurance Pool Corporation, insurance companies will be required to provide this cover but will be able to access a fund pool of premiums expected to be worth approximately $300 million. Should—God forbid—any terrorist attack occur in the future, the industry would bear the first $10 million in claims, with each company having an exposure limit of $1 million annually. Beyond that $10 million, the federal government would step in, first through the $300 million funds pool, then with up to $1 billion from a commercial loan facility operated under Commonwealth guarantee and finally up to $9 billion through the direct reinsurance of the federal government.

Interested stakeholders, including the Property Council of Australia and the Insurance Council of Australia, have welcomed this initiative, and this bill ought to be welcomed likewise by the members of this House. I would hope that all of us in this place are generally sceptical of government economic intervention. We all ought to recognise that intervention occasions unexpected as well as expected consequences, negative as well as positive. Yet we should also remain cognisant that there are some—and I emphasise `some'—instances of market failure in open economies. There is a need for certain public goods and there is occasionally a need for legislation of this type to bridge difficulties generated by extraordinary circumstances.

There has been wide consultation in relation to this bill and, while it has received the support of the Property Council of Australia and the Insurance Council of Australia, I can understand the criticism from some sectors of the insurance industry as to the compulsory nature of the scheme, given the range of risk that could be applicable—from negligible to high. But I also appreciate the fundamental need for the accumulation of a credible funds pool, particularly within a reasonable period. Furthermore, I certainly share the Treasurer's hope that the market will in time restore a commercially viable and reasonably priced system of private terrorism insurance and end the need for this new arrangement. Not only will such a development be welcome for its inherent advantages but also it will signal the final victory of free peoples over the terrorist gunmen and bombers. I commend this bill to the chamber.