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Thursday, 28 May 2009
Page: 4717


Mr BALDWIN (11:13 AM) —I rise today to speak on the Car Dealership Financing Guarantee Appropriation Bill 2009. I am going to spend a couple of moments reflecting on comments from the member for Oxley in his contribution to this debate. The member stated how expeditiously this government had acted on this matter. Well, it is true that this package was introduced on 1 January this year but it is now 28 May. What we have had is—let us be very sure about this—the government guarantee of taxpayers’ money to industry, and yet they have had five months to bring this legislation to the House. That means that this legislation and the actions of this minister have been very, very tardy indeed.

There is no doubt that, with the falling volume of sales, some financial institutions have got very nervous about the motor vehicle market, in particular the withdrawal of GE Money Motor Solutions—a subsidiary of GE Money, which is a division of GE Capital—and GMAC Australia from the automotive and motorcycle finance business of Australia. It created a huge problem. But this problem was exacerbated by this government. This came about directly because of the actions of the Rudd Labor government. When they rushed in and provided that unlimited deposit guarantee, a lot of money was stripped from financial institutions and locked into the banks. So we have seen not market driven per se but government driven readily available finance shifted into the banking sector because people wanted this ironclad, gold plated guarantee by the government—and by that I mean now the taxpayers—through the banks.

This special purpose funding vehicle was initially set at $2 billion, and the current estimates are that the exposure will be more in the vicinity of $550 million, and will operate for about 12 months. It is funded by the big four banks but it is guaranteed by the Commonwealth to provide finance to dealers unable to secure commercial finance. I should clarify at this point that this finance is not for consumers to buy motor vehicles. This finance is purely restricted to the financing of floor stock. I have had discussions with motor vehicle dealers in my area and, without going into individual names, a most interesting comment came from one of the dealers who said, ‘We are paying far too high an interest rate, which means we are making very little profit.’ This guaranteed finance is two per cent above the market rate. He said, ‘If we do not sell the car within 30 to 40 days, the interest starts to rack up significantly at a rate we cannot afford.’ As such, this year they have taken to having no new stock on the floor and to only ordering it in when there is a direct request from customers to purchase a vehicle. I am talking about a motor vehicle dealer in a regional and rural area. This is not the magic mile of motors where you have an endless stream of motor vehicle dealers and lots of floor stock; this is a small country area with a relatively small turnover in motor vehicles and where the cost of providing floor stock for display can be very expensive. Make no bones about it: these motor vehicle dealers need to be extra competitive in their pricing because of the deals that are offered by the magic miles of motors in the major cities.

It is important, though, that this funding was put into place; otherwise, we would have had a collapse of the motor vehicle industry. I will look at some of the figures for motor vehicle sales from the Federal Chamber of Automotive Industries. The new vehicle sales figures for April 2009, released on 5 May 2009, showed that 63,965 passenger motor vehicles, SUVs and commercial vehicles were sold in April 2009—a fall of 23.9 per cent when compared with the same month in 2008. The year-to-date total is 276,935 new vehicles sold—a fall of 20.3 per cent compared with the same period last year—suggesting annual sales of 840,000 in 2009 compared with 1,012,164 in 2008. So not only are sales dropping but also it means the floor stock is sitting on the dealers’ floors for much longer and that, in turn, means greater cost to the dealers. This has occurred, as I said, in part because of the government’s mismanagement of the economy by rushing in to provide unlimited deposit guarantees to the banks. We have already heard that some of the financial institutions, not GE Money or GMAC necessarily but some of the smaller financial institutions, have actually locked up their capital and are not allowing people to withdraw or shift their money to the banks because they would face a severe liquidity problem.

These are the issues we have to deal with, but this is no different from Ruddbank. The Ruddbank was set up for failed overseas financial institutions. The Ruddbank was set up to hold finance for toxic assets—in other words, huge office blocks and facilities in major cities—but it was not available to small to medium enterprises. This was put together with the banks with a government contribution—and, again, that government contribution comes from the taxpayers of Australia. Do those small to medium enterprises that pay their tax and fund the Ruddbank and fund OzCar—this special purpose financing vehicle—have this sort of money? Let me tell you what is happening right now out in the business community. One sector of the building and construction industry is flying along brilliantly because of the first home owner grants—and I think that is a worthy contribution. But it is one sector. Many builders cannot access the capital to actually enter into that market. What is happening is that you are getting a narrowing confine of people able to actually work in the construction industry because of the lack of access to capital and finance. So where is this government’s guarantee of finance to that sector of the industry? The other thing that the First Home Owner Grant scheme has done is to inflate the market in the first home owners finance sector.


Ms Plibersek —Mr Deputy Speaker, a point of order on relevance: I noted earlier that you asked the member for Oxley to focus on the content of the legislation before the House. I wonder if you would do the same here.


The DEPUTY SPEAKER (Mr PD Secker)—I will listen very carefully, Minister.


Mr BALDWIN —Mr Deputy Speaker Secker, I am directly correlating taxpayers’ guarantee of financial institutions and the fact that this government has cherry-picked industries but not broadly supported capital requirements, and I am providing the comparative analysis. Indeed, if the minister had been listening she would have understood that. I think she would have—


Mr Bowen —You’d better vote for ABIP if that’s your concern.


Mr BALDWIN —understood that all industries need support, not just some industries.


Mr Bowen —So you’re going to vote for ABIP.


The DEPUTY SPEAKER —The Assistant Treasurer!


Mr BALDWIN —The Assistant Treasurer should know better, because this is part and parcel of his problem. He was one of the people who led the charge to make sure that there were unlimited guarantees for the banks, which created a lot of this financial problem.

The development and building industry is suffering. Their loan facilities are being called in and they are not being refinanced. That is the equivalent of their floor stock as they deal with people in providing developments, including schools, houses and industrial lots, and job opportunities, particularly in regional and rural areas. Where is their guarantee of finance? Where is their taxpayer guarantee, funded through the four banks? It is not there. These people pay their taxes too, and when the Labor government provides these guarantees to other industries it is with their money. They just ask for a little bit of equity.

I am not against the motor vehicle industry being supported but I would also like you to consider the marine industry, which has just had its boat show on the Gold Coast. It has the same problem: it has stock that it needs to put on the floor and it needs finance. Where are its guarantees? They are not there.

It is no different in the tourism industry, which wants to embark on new ventures or buy new equipment. This government introduced the 30 per cent accelerated depreciation for investment allowance and extended it to 50 per cent for small business, but the problem is that people cannot get the capital. You can have all the incentives you want, but if you cannot get the capital you cannot commit with it. One reason they cannot get the capital is that the banks want more and more guarantees.

Constituents of mine say to me that if it is good enough for this government to use taxpayers’ money to guarantee the finances of one industry then why not do it for them? Why do they have to wait until they are on their knees? This government talks about how it is being proactive and decisive, but being proactive and decisive, when you are spending money collected from all taxpayers, means supporting all taxpayers in their industry and development. Clearly, this government does not understand where it is going in what it is providing here.

It is also no different for engineers and manufacturers. What about the support industries in the motor vehicle industry—the people who provide the wiring looms, the seats, the panels, the accessories? Why aren’t their capital requirements being guaranteed by the government? When you cherry-pick sectors you change the structural integrity of the market, and if you prop up one side of the market but not the other you create a massive imbalance. It is like being pregnant, to use an analogy. You cannot be a little bit pregnant. You have to be in either for the whole shot or not at all. I say to you that, in financing, the problem is that the government has created this imbalance.

The coalition have said that we will support this bill because it is important that we find a way through this economic crisis. The one key measure that has been left out in the way in which the government has dealt with financing is that it has done absolutely nothing to instil in our community confidence in our economy, because the confidence in the leadership of this nation is rapidly diminishing. The government can spend all the money it wants. It can create all the guarantees it wants at the expense of the taxpayer. But, unless this government drives confidence in the marketplace, confidence in the community so that they can invest and confidence in finance companies, we will get into a situation where finance companies and banks keep tightening up because of risk profiles. They will tighten up to the extent that the government will have to step in and provide more guarantees.

What the government has started here is an avalanche of underwriting capital requirements in Australia. Mark my words: we will be coming back here over the next few months with another industry on its knees because it cannot get finance and this government will say: ‘Let’s underwrite this; let’s guarantee this; let’s provide vehicles.’ And that will continue to distort the market. The initial step taken by this government, when it rushed in, did not consult with the coalition and did not sit down and get consensus opinion—it did not even listen to the people at the 2020 Summit, despite the great fanfare about listening to the greatest minds in Australia—is now having a downstream avalanche effect on the finance industry. So we will be back here regularly. There will be many bills providing financial guarantees for many industries, and I think that is the issue that we need to address.

I say to the government: you are going down this track but how are you going to explain to all those other industries that you are not prepared at this stage to underwrite them? What are you going to say to them? What are you going to say to all those people who become unemployed because you started an avalanche that they are now paying for? Always remember, as you go down this path of guarantees and cash handouts, that it is not your money in total; it is the money of the taxpayers of Australia and of the kids up in the gallery. It is their money and money that will be theirs in the future that you are handing out and playing with, and they expect nothing less than for you to be responsible in the administration of their finances. We have said we will support the bill and we will do so, but you need to think long and hard about the direction in which you are taking the finances of this country.


The DEPUTY SPEAKER —The member for Paterson would be well advised not to use the term ‘you’ so often.


Mr BALDWIN —I am sorry I reflected on ‘you’ through the chair, Mr Deputy Speaker. I obviously meant the Labor government.