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Thursday, 1 March 2007
Page: 134


Mr SLIPPER (10:45 AM) —I am pleased to be able to join the debate in the Main Committee on the Bankruptcy Legislation Amendment (Debt Agreements) Bill 2007 and the Bankruptcy (Estate Charges) Amendment Bill 2007. As you mentioned, Madam Deputy Speaker, this is a cognate debate. The honourable member opposite referred to household debt. Obviously when people are falling into financial difficulty that is a matter of concern. I think we have to recognise, however, that we are a free society and people do have the opportunity, if they wish, to buy things. If they want to borrow to acquire possessions then that is a matter for them. You cannot have a situation where the government regulates everyone from the cradle to the grave. We do have free choice and we do have assistance for those who need guidance with respect to whether or not they should undertake certain debts, but it is wrong to say that it is the fault of the government that we have rising debt levels. The member opposite also mentioned home loan affordability. He referred to repossessions by mortgage companies—


Ms Hall —Madam Deputy Speaker, I seek to intervene.


The DEPUTY SPEAKER (Hon. BK Bishop)—Is the member for Fisher willing to give way?


Mr SLIPPER —Yes.


Ms Hall —I was listening to the contribution of the honourable member opposite and I noticed that when he was referring to household debt he stated it was purely and simply the role of the individual. My question to the honourable member is: does he believe that government has a role to ensure—


The DEPUTY SPEAKER —It has to be a quick question.


Ms Hall —It is a quick question. Does he believe that government has a role to ensure that the proper checks and balances are in place to see that people do not access finance when they cannot afford to repay their debts?


Mr SLIPPER —I am pleased that the honourable member has been listening to what I have been saying. Obviously in a free society everyone should have an opportunity of free choice. Everyone must make decisions in life. We make good decisions and bad decisions, and we stand by bad decisions. Clearly there would be in place certain provisions to stop predatory lending practices. Indeed, government has a role in this particular area. However, you cannot have a situation where before someone undertakes a debt it has to be run past the Attorney-General so he can personally tick it off and approve it. That is an absolutely ridiculous proposition. But we do have a situation where lending institutions do not lend more than a certain proportion of the value of a property.

One other reason that we have higher home prices is the failure by the Labor states in this country to give access to land. Land is not being released at anywhere near the rate it should be and prices have gone up because of shortage of supply.

Bankruptcy historically has been around for probably hundreds of years as a mechanism to take someone out of the market when that person becomes insolvent. In 1996, an important initiative was introduced whereby debt agreements could be used as an alternative to bankruptcy. I do not think we should look at bankruptcy as a penalty. Bankruptcy or a situation of insolvency ought to be a chance for someone to remove debts and then possibly go on to be once again a productive member of the community. That is why these debt agreements, as an alternative to the draconian measure of bankruptcy, really have been a good idea. I think they are broadly supported in the community and they have become increasingly popular as the years have gone on.

However, at times it is necessary to finetune legislation, particularly when the legislation is not necessarily delivering the outcomes that it was intended to deliver. The amendments made by these bills are designed to improve the operation of debt agreements under part 10 of the Bankruptcy Act to ensure that they remain a viable means of dealing with unmanageable debts.

It is important to look at both the interests of the creditor and the interests of the debtor and to achieve a balanced situation. The amendments to these bills currently before the chamber are appropriate and I believe they achieve the balance that we seek to achieve. There has regrettably been, with respect to part 10 agreements, a reasonably high failure rate and one of the aims of the amendments currently before the Main Committee is to reduce the failure rate of these agreements.

The member for Wills has conceded that the Attorney-General, as is his practice, has consulted widely in the community. The Attorney-General does not bring in half-baked proposals to the parliament. There has been a period of consultation. These bills are very important. They are broadly supported in the community and this is very important.

The amendments address key concerns that have led to a lack of confidence on the part of creditors in the effectiveness of the debt agreement system. In particular, the amendments are designed to ensure that debt agreements are used only by debtors for whom they are suitable and who can afford them. Where a debt agreement is the correct option, the return to creditors is significantly better than bankruptcy. I think this indicates that a successful debt agreement should be a win-win situation. It should be a win for the debtor and also it should be a win for the creditors insofar as receiving so many cents in the dollar from a debt can be considered a win.

The objects of the Bankruptcy Legislation Amendment (Debt Agreements) Bill 2007 are to provide for enhanced regulation of debt agreement administrators, specify the duties of a debt agreement administrator, encourage creditors to make decisions based on the debtor’s capacity to pay, provide a more effective means of dealing with default by the debtor and simplify, streamline and clarify a range of provisions to improve the operation of the legislation.

The other bill, the Bankruptcy (Estate Charges) Amendment Bill 2007, has as its purpose to extend the application of the realisations charge and interest charge to money received by debt agreement administrators pursuant to debt agreements. These charges are in accordance with the government’s cost recovery policy and will enable the cost of regulating the debt agreement system to be recovered from those who benefit from it—that is certainly an appropriate way to go.

The government accepts that some people will inevitably become formally bankrupt. However, we do wish to prevent as many people as possible from going down that road because if you can have successful debt agreements, it means that the creditors benefit, it means that the debtors benefit and it means that the debtors are able to make an ongoing positive contribution to the Australian community. These two pieces of legislation are thoroughly worthy of our support. I am pleased to commend them to the chamber.