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Monday, 1 June 1998
Page: 4386

Mr Andren asked the Minister for Primary Industries and Energy, upon notice, on 26 August 1997:

(1) Has his attention been drawn to the submission to him from the Primary Industry Financial Co-operative Limited (PIFCOL) outlining an alternative form of farm finance to that offered by traditional lenders.

(2) If so, will he (a) discuss the PIFCOL proposal with Cabinet and Treasury and (b) make an announcement regarding the "Letter of Comfort" being sought by PIFCOL.

(3) Is the scheme outlined by PIFCOL capable of providing a viable and attractive alternative form of finance for primary producers; if not, will the Government introduce alternative measures to reduce the interest burdens faced by Australian primary producers.

Mr Anderson (Primary Industries and Energy) —The answer to the honourable member's question is as follows:

(1) Yes.

(2) (a) The matter of commercial finance is outside my portfolio responsibilities.

Matters for discussion in Cabinet are confidential.

(b) The Government has advised PIFCOL that it is unable to assist it in their request for a "Letter of Comfort".

(3) Legal advice obtained by my Department indicates that a "Letter of Comfort" which would enable PIFCOL to obtain a AAA rating could place the Government under a legal obligation to cover losses, should the organisation fail.

The Treasurer has also advised me that provision of a "Letter of Comfort" as requested by PIFCOL would result in shifting PIFCOL's financial risk and potential liabilities onto the Commonwealth.

The Government's approach to improving the cost of finance for all businesses is through further reform of the finance sector by implementing the recommendations of the Financial System Inquiry.

The Government's commitment to responsible macroeconomic policy, through reducing the Budget deficit and committing to an inflation target, has ensured the maintenance of low inflation and continuing low interest rates. This has allowed real progress to be made in reducing business input costs and has provided a boost to Australia's international competitiveness.

The Government has also convened the Consultative Rural Finance Forum, chaired by my Parliamentary Secretary, Senator Judith Troeth. The Forum which was announced as part of the Agriculture—Advancing Australia initiative, is examining a number of issues impacting on the level of financial sector competition in rural areas. The Forum has been established to promote regular consultation between the rural sector, financial institutions and Government following a recommendation of the National Rural Finance Summit Activating Committee.