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Wednesday, 27 May 2009
Page: 4567

Mr TREVOR (6:58 PM) —I rise tonight to speak on my government’s Car Dealership Financing Guarantee Appropriation Bill 2009. In so doing, I would like to speak about the support that this bill will provide to many small- and medium-sized businesses, not only in the electorate of Flynn but throughout the whole of Australia, particularly in regional Australia, and the boost to business confidence that we are already starting to witness in the car retail sector as a result of early government intervention in this area. In no uncertain terms—and we all accept this—the car industry in Australia is hurting and hurting badly. The global financial crisis has taken a heavy toll on this industry, as with many others.

To look at the sales statistics is quite frightening. For example, figures released this month by the Federal Chamber of Automotive Industries tell a very sobering story. New passenger and commercial motor vehicle sales for April this year have fallen by 23.9 per cent compared to April of last year. On a year-to-date basis, sales have fallen on average by 23.3 per cent compared to the same period last year. I note that among the sharpest falls are sales of vehicles used by many small and medium businesses, such as light buses, trucks and heavy commercial vehicles, with a fall in sales of between 30 to 45 per cent year to date when compared to the 2008 figures.

On an annualised basis, it is forecast that some 172,000 fewer vehicles will be sold in 2009 compared to last year. This sharp fall in demand at the shopfront has filtered back to the factory floor with four local Australian vehicle manufacturers reducing production and implementing temporary stand downs, even introducing a four-day week for component manufacturers in an effort to get through these very tough times. As I said earlier, the Australian car industry is hurting very badly and we all recognise that.

Falling sales and production figures are not, however, the only bad news that this industry has had to face. You could be mistaken for thinking that matters could not get any worse for this industry, but late last year two large automotive finance companies announced that they would be withdrawing from the Australian market due to the global financial crisis. These companies, as we know, were GE Money Solutions—a part of the General Electric group—and GMAC, the automotive finance arm of the General Motors Corporation. It is estimated that up to one-quarter of new car dealerships relied on these two companies to obtain their wholesale floor plan finance.

Floor plan finance is a critical aspect of the retail car sector. Without it, the first option is to simply use the businesses cash flow to purchase vehicles for use in show rooms, which is not an option for many in the industry with the high upfront costs required to stock a dealership. The second option is, quite frankly, empty car dealerships with no stock on hand to sell. Both of these options provide little relief to an industry already hit with falling sales of around 20 per cent on average.

As we have heard in this House before, the Rudd government believes that it is not only the responsibility of governments to step in when the private sector retreats but the obligation of government to fill this gap. This has been the attitude of my government, which has stimulated our economy in the light of the global financial crisis and this is the attitude that the government has taken to help an already suffering car industry and the 66,000 Australians who are employed by it and their families who depend on it. Not only does the Rudd government believe in stepping in when the private sector retreats, we believe in doing so without trepidation and without hesitation to instil confidence where it belongs, in Australian businesses and in Australian homes.

In an effort to instil this confidence, particularly to an industry already hit hard by the global financial crisis, the government has introduced the Car Dealership Financing Guarantee Bill 2009, which will help fill the gap left by the departure of GE and GMAC and assist car dealerships access vital floor plan financing. The bill does this by the establishment of a special purpose vehicle, to be known as OzCar, which is a legally established trust that was set up on 2 January 2009. It, along with the support of Australia’s main four banks, will provide liquidity to eligible car dealers who would have otherwise been left without floor plan financing arrangements.

The government will not be providing direct funding to support OzCar; nor will it become involved in retail financing. Rather, this bill provides for a Commonwealth guarantee on the securities issued by OzCar that are risk rated below AAA by Standard and Poor’s. This guarantee will then ensure that all securities issued by OzCar will be rated AAA. The four major Australian banks will then provide the loan funds necessary to facilitate floor plan financing by subscribing to these AAA rated securities issued by OzCar. Credit Suisse is to take the role of the program manager and has entered into contractual arrangement and agreements with Treasury.

As the establishment of any trust is a very complex process and as government transparency and accountability are of the upmost importance, it is pleasing to see that the trust deeds and supporting material that outline the structure of OzCar are available to members of the public on the Treasury web site. Quarterly reports are also expected to be made available to parliament on the performance of OzCar. To help ensure that the risk to taxpayer funds is limited, funds will only be able to be advanced to dealerships that are not subject to any insolvency measures and loans will be consistent with the usual commercial lending criteria. Under this program, it will be possible to advance loan funds until 30 June 2010 and any notes issued will have a three-year maturity date. The government’s guarantee will continue to apply until these notes mature or are retired.

This bill will assist the Australian car industry over the next very challenging 12 months and, in conjunction with the Rudd government’s 50 per cent small business and general business tax break, provides further support for car industry businesses, many of which are small and medium sized, and many of which are in regional centres, providing employment opportunities for local communities throughout Australia, including rural and regional Australia. It was reported by the Advertiser on 6 May 2009 that new car sales are forecast to recover as a result of the assistance provided by these two government initiatives combined.

I have been lucky enough as the federal member for Flynn to have been able to gain firsthand insight into the recent challenges faced by the retail car sector by having in my electorate the president of the Motor Traders Association of Queensland, Mr Greg Klease. Mr Klease is a longstanding community champion of the people of the Gladstone region, and has been for many years. He has extensive knowledge of the retail car industry, particularly in regional and rural parts of Australia. Throughout this difficult time faced by the retail car sector, Mr Klease has kept me reliably informed on various issues that have arisen and that affect his members, including floor plan financing. I thank Mr Klease for his efforts in this regard and for standing up for his members and his association. He has done so with distinction.

It is due to this bill’s widespread benefit across Australian communities, and the certainty and confidence that this bill helps create for businesses, employees and households that I wholeheartedly commend the Car Dealership Financing Guarantee Appropriation Bill 2009 to the House.