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Thursday, 30 August 2001
Page: 30658


Ms ROXON (1:37 PM) — While I was listening to the member for Pearce addressing the bankruptcy legislation, my heart went out to her as she sounded like she had the flu that I had earlier this week. She has done remarkably well to get through her 20-minute speech with a voice like that. Listening to the speech by the member for Pearce, I was interested to hear her say that issues relating to small businesses, in particular the way that government policy might have an impact on a small business's sustainability or in fact on whether a business was in a situation of bankruptcy, were one of the elements that first got her interested in running for parliament. I have had a similar but in some ways quite different experience. It was not focused so much on small business but on the impacts of small, medium or large businesses being able to restructure and use phoenix company arrangements where they can claim protection either under bankruptcy legislation or other types of legislation, refuse to meet any of the debts that are owed to creditors—particularly to their employees—and are then able to start up the next day under a new guise. It seems we still have not done anything effective to be able to prevent that.

So it is interesting that the member for Pearce and I have been motivated in some ways by some similar issues. We have seen the damage that can be caused if the laws allow individuals or businesses to be able to flout their intention, rather than the laws being used for the very unfortunate situations in which people or businesses might find themselves unable to continue and in need of declaring themselves bankrupt. I think anything will be very good indeed that moves us towards a position where we can separate the unfortunate and unforeseen circumstances that some people find themselves in and some businesses find themselves in from those where people are wilfully abusing the systems that we have set up. But it is a great challenge for our draftspeople to be able to find exactly the way to do that.

The member for Barton, who spoke immediately prior to the member for Pearce, asked me to recognise students from Francis Xavier School, who arrived in the gallery while he was speaking and whom he failed to mention. There is a visiting group from that school in his electorate, and he was anxious that I mention that he noticed that they were here and was sorry that he could not speak to them directly. The member for Barton also outlined Labor's position in relation to this bill, which is broadly to accept it with a number of suggestions which have been moved as a second reading amendment. I would like to focus mostly on one of those, being the early discharge provisions.

Before I do that, I think that it is important that I also deal with something that the government has been very quiet about, which is the fact that bankruptcies are growing. In preparing for this speech I had a look at some of the business headlines over the past couple of months, from May to July. We see time and time again commentators and businesspeople sheeting home the blame for the large increase in the number of bankruptcies to the GST and the damage that it has caused many people. These are just a couple of those headlines from May and onwards: `GST—Dealing with the Stress'; `Small Business Takes GST Hard'; `Survey Blames GST for Rising Bankruptcy'; `Bankruptcy and Soft Job Market Temper Optimism'; `Bankruptcies Rocket as GST Bites'; `Surge in Bankruptcy Refuels GST Row'; `GST One Year on—Insolvencies up as Problems Compound'; this one is rather depressing— `Boom Time for the Bankruptcy Sector'; and `Small Businesses Hit One After Another'.

In debating a bankruptcy bill in the current environment, it is impossible for us not to ask a question about the causes of bankruptcy. We can regulate as much as we like how we treat people or businesses once they get into the situation of needing to be declared bankrupt, but a responsible government would be dealing with how we might be able to prevent people getting in this situation to start with, rather than introducing policies which seem, at least if you look at the commentary—and I think there is plenty of other evidence to go with it, and I am sure that the member for Hunter will be dealing with this, as well—to actively increase the number of businesses and people that are forced to use these bankruptcy provisions. So I do not think that government members can come in here and say that it is fantastic that we are dealing with these bankruptcy issues and treat it as if it is just a technical issue when they, in fact, are responsible—as a government—for introducing the GST, which has actually caused the most problems with small business in recent times of all other government policy changes. I think that needs to be on the record.

The other issue I have already alluded to briefly in responding to the member for Pearce is my concern that we can change the provisions relating to bankruptcy as much as we like, but I am very concerned that we still do not seem to have an effective mechanism for dealing with businesses that actively set out to thwart the intention of bankruptcy legislation and the intention of other credit and workplace relations legislation so that they are avoiding their legal responsibilities. This is an issue that we have seen happen time and time again. Unfortunately, when we see it happen in dramatic circumstances like the Patrick dispute and the G & K O'Connor dispute, we see this government standing up and being a cheerleader for the businesses that do that. If government members were serious about the aims of this bankruptcy legislation, they would actually be standing up and saying, `We do not approve of businesses that are going to set out to avoid their responsibilities under the law and seek to maximise their benefit with a particular corporate structure and then restructure it in a way that means that they can avoid all of their liabilities.' I want to emphasise this, because politically it is a point that should not be lost on the community.

This bill includes provisions relating to early discharge and seeks to abolish some of the situations in which people might apply for early discharge from bankruptcy. The member for Barton has indicated that we intend to move an amendment in relation to this—as well we might—because the abolition of these provisions is going to hit, more than anybody else, individual people who are declared bankrupt—usually the lowest income earners and usually those in the most difficult of circumstances and probably, but not always, with the least culpability and planned intent in terms of getting themselves into a situation where they might need to be declared bankrupt.

It seems to me that when we have a government that does nothing to protect the community against businesses that deliberately set out to avoid the law, which operate in one guise and close or declare themselves bankrupt or insolvent and do so in order to avoid their legal responsibilities and then set up the next day as another company and operate happily, although everyone else is left without their entitlements, and when we have a government that will then save its harshest treatment for individuals who have personal debt which may have arisen in a whole range of circumstances, then it is very mean and petty and reflective of the sorts of views that this government takes on a whole lot of other issues, and it should be opposed. As I said, this is the area that I would like to talk about in the most detail, that is, that the bill proposes to abolish the provisions which allow early discharge for low income bankrupts.

As I have said, the first point to make on this is that those who will be affected by this measure will be amongst the most vulnerable in our society. You would think that the government should present compelling evidence as to why it would be necessary for the good operation of bankruptcy law in this country that those provisions be abolished. The government has not made a convincing case at all for the abolition of those early discharge provisions. There are a number of qualifications and disqualifications which make it clear to us that the abolition of these provisions will affect only low income earners and only in respect of their first bankruptcy. The early discharge provisions would not be available in respect of second or subsequent bankruptcies. There appears to be no evidence that these provisions are currently being abused and therefore the necessity to abolish them in these circumstances seems a little unfair. I believe that the abolition of these provisions is actually an expression of this government's attempt to divide Australians by scapegoating the most disadvantaged. As I say, we see this in clear contrast to the attitude the government takes to large businesses with a lot of money that actively set out to avoid the Corporations Law, workplace relations provisions and a number of other acts. However, no action is being taken against them.

When the Attorney-General introduced this bill, he said something that was quite outrageous. He said:

The provisions were targeted at a new category of bankrupt—consumer debtors with low asset backing who overextend and then cannot repay their debts. However, many believe that bankruptcy in this group is due more to the lack of financial responsibility than misfortune.

That is a pretty cold and heartless statement coming from the Attorney-General, who has already inflicted so much hardship on families and individuals—and struggling families at that—and then seeks to blame them for that hardship and not give them the opportunity to have the bankruptcy discharged early when they have complied with the provisions, which would mean that they would be able to seek to have such relief.

Instead, Labor will seek to amend the bill to retain the early discharge provisions but allow early discharge only after two years. So there is still a serious disincentive. It is not something that anybody would do lightly. In the circumstances of a low-income individual, it is not an option they would seek if they could find any other way. I wanted to place those issues on the record. I hope that the government will accept the amendments that will be moved by the member for Barton and take account of our concerns that we also need to treat seriously those businesses seeking to avoid their obligations under Corporations Law, and that the government takes a firmer hand with them rather than hapless individuals who will be caught up by the changes to this act.