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Thursday, 4 June 2009
Page: 5758


Mr ZAPPIA (1:34 PM) —I welcome the opportunity to speak in support of the International Monetary Agreements Amendment (Financial Assistance) Bill 2009. I will confine most of my remarks to the bill, but before I do, having listened to the member for North Sydney, I want to say that here we have another clear example of the coalition again simply talking down the Australian economy. They simply cannot accept that, as a result of the prudent management of the Australian economy by the Rudd government, Australia is in a much better position to withstand the global economic recession than just about any of the other 30 OECD countries. We are not out of the woods as yet. Contrary to what the member for North Sydney said, this side of the House have never said that it is mission accomplished. We are not out of the woods yet, but we did see in the last quarter 0.4 per cent growth in GDP in this country, growth that is a result of a strategy that is protecting Australian jobs while investing in nation-building infrastructure for the future.

I wish to speak about at length the substance of this bill. The purpose of this bill is to simplify the process for Australia to accept agreed amendments to the articles of the International Monetary Fund and the International Bank for Reconstruction and Development, commonly known as the World Bank. This bill amends the International Monetary Agreements Act 1947 to establish a framework for Australia to provide financial assistance to a country in support of World Bank or Asian Development Bank programs.

The International Monetary Agreements Act already provides such a framework for assistance provided to a country in support of International Monetary Fund programs. The International Monetary Agreements Act 1947 established Australia’s membership of the IMF and the World Bank. Under the current legislation, any amendment to the fund and bank agreements requires an international monetary agreement act in the Australian parliament. This bill will alter the definitions of the articles of agreement of the IMF and the World Bank to include any amendments of the relevant articles of agreement that enter into force for Australia without the need for further legislative changes.

The IMF and the World Bank were conceived at the United Nations Monetary and Financial Conference, also known as the Bretton Woods conference, held in Bretton Woods, New Hampshire, in the USA, in July 1944. Both organisations were founded with the intention of managing the global economy to prevent a repeat of the global financial economic meltdown and subsequent Great Depression of the 1920s and 1930s. The intention of the World Bank was the reconstruction of postwar Europe. The intention of the IMF was to manage a system of fixed exchange rates to facilitate world trade and economic growth. Following the remarkable reconstruction and economic recovery of Europe in the years following World War II, the World Bank’s focus shifted towards funding development and poverty reduction in Africa, in Asia and later in eastern Europe. From the 1970s onwards most countries moved from fixed exchange rates to setting their own exchange rates, reducing the need for the IMF to manage the exchange rates system. The IMF’s role then shifted to assisting countries experiencing a balance of payments crisis, such as was seen during the Latin American debt crisis of the 1980s and the Asian financial crisis of the late 1990s.

Crucially, in recent years both the IMF and the World Bank have put reducing poverty at the forefront of their work, and this is a subject I will return to later in my speech. In addition to reducing poverty, climate change has been given greater prominence in the policies of both the IMF and the World Bank, because it is the poorest countries of the world that will be affected first and most dramatically by climate change. It is timely that we are now discussing the changing roles of these international financial institutions. The world is experiencing its greatest economic crisis since the Great Depression. This global crisis has had a very significant impact on developing countries, particularly on their financial sectors and their government’s ability to access credit. The IMF and the World Bank will play crucial roles in the recovery of the world economy, particularly in developing nations.

I refer to the specific action that this bill addresses. In December 2008 the Prime Minister announced that Australia would provide $1 billion to Indonesia as a stand-by loan—I repeat, as a stand-by loan—to help mitigate the effects of the global economic crisis. This loan is required not because of bad policy or problems with Indonesia’s economy but because the global economic recession has seen financial markets effectively close to countries like Indonesia. This stand-by loan is another step in the strong relationship between Australia and Indonesia. The focus on our nearest neighbour as a trading partner and a regional ally was driven by Paul Keating during his time as Prime Minister and continued under the previous government, which in November 1997 issued a similar stand-by loan to Indonesia to assist during the Asian financial crisis. Given that the Labor Party in opposition supported the then government’s loan in 1997, I understand and welcome the bipartisan support for the loan proposed in this bill. Australia’s relationship with a stable and prosperous Indonesia has numerous benefits beyond the economic, as we cooperate in areas such as security, people smuggling and combating terrorism. The changes in this bill will allow Australia to provide a loan to Indonesia if needed by mid-July 2009. This demonstrates the Rudd government’s willingness to act decisively to tackle the economic crisis at home, in the region and internationally.

The World Bank estimates that in 2009 an additional 55 million people will be living on less than US$1.25 per day as a result of the global economic crisis. After strong growth in recent years, the global economic crisis has had a devastating impact in developing countries, resulting in a severe slowdown in economic growth; slowing exports, particularly in the commodities sector, which is such an important source of foreign exchange and tax income for developing countries; limited access to finance, which is what this bill is all about; reduction in private investment; and worsening of government budget positions. In the same way that Australia faces a $210 billion tax revenue shortfall because of the global crisis, developing countries are finding similar shortfalls in their own budgets. For the same reasons, they will have to borrow offshore.

It is important that Australia is a good global citizen and does what it can to assist countries less fortunate than ours. The Rudd government has taken steps to support developing countries during this global economic crisis. At the recent G20 leaders summit in London, the Prime Minister and other world leaders agreed on a range of measures to boost the IMF, the World Bank and multilateral institutions such as the Asian Development Bank to help developing nations through the global economic crisis. These measures included an additional $500 billion in funding for the IMF, a trebling of its resources; $100 billion for various development banks around the world, such as the African Development Bank and the Philippines based Asian Development Bank in our region; $250 billion by way of trade finance to continue to support global trade; and an additional $250 billion to support global liquidity. Prime Minister Rudd described the IMF as the ‘global financial policeman’, and these additional resources allow the IMF to fulfil this role and support economies around the world.

In addition to the successes of the G20, Australia’s aid budget was increased from 0.33 per cent to 0.34 per cent of gross national income in 2009—working towards a 2015 target of 0.5 per cent. Despite a $210 billion shortfall in taxation revenue, the government has chosen to increase its aid budget, keeping the promise made prior to the 2007 election. There have been some significant changes in the countries where this aid budget is targeted. In his speech celebrating Africa Day on Monday, 25 May, the Minister for Foreign Affairs, Stephen Smith, noted that Australia had increased its aid to Africa by 40 per cent in recent budgets. According to the United Nations, of the 50 least developed countries in the world, 34 are in Africa. A further 14 are in the Asia-Pacific region. It is in these two regions—Africa and the Asia-Pacific—where Australia’s aid budget is now focused, ensuring that the assistance is targeted at those countries most in need.

I take a moment to speak about Australia’s increased support for Africa, particularly for those 34 African nations that are amongst the world’s 50 least developed. Of these least developed nations, almost 50 per cent of the population lives on US$1 per day. Only 58 per cent of the population in these countries has access to clean water. Nearly 140 million people in these countries live in poor housing conditions, often referred to as slums. In recent years these least developed countries have seen debt relief for past government loans, an increase in foreign investment, an increase in export income and positive trends in health and education, as some countries are on course to meet their Millennium Development Goals targets. In 2004, the 50 least developed countries recorded an average economic growth rate of six per cent—their best result for 40 years. Given the recent positive trends in these countries, it is important that the Australian government and international institutions, such as the IMF and the World Bank, work to support developing countries during this global economic crisis. It would be a tragedy if the progress of recent years was lost. The 40 per cent increase in Australia’s aid to Africa announced in the recent budget is just one of a range of measures that are strengthening Australia’s relationship with Africa.

I would like to elaborate on the very important point the foreign minister made regarding Australia’s future relationship with Africa, and using our ‘experience and expertise’ to make a ‘unique and positive’ contribution. There are many similarities between Australia and developing countries within Africa. Many of these countries, like Australia, are rich in natural resources. The challenges their governments face are the same as our own in working to ensure that the proceeds of these natural resources benefit as many people as possible and build the country’s long-term future. Like Australia, many developing countries have strong agricultural sectors that provide export income to drive economic growth. African farmers encounter the same issues on the global market that Australian farmers do, such as government subsidies and restricted market access. The Australian government is working, through the Minister for Trade, Simon Crean, to free up market access and reduce agricultural subsidies in areas such as the USA, Japan and the European Union. This will benefit not only Australia’s agricultural sector but also farmers in all developing countries.

There are many people of African descent within my electorate of Makin. They come from countries such as Somalia, Sudan, Liberia and Ethiopia. The increase in the number of people from Africa who migrate to, visit or study in Australia is further evidence of the strengthening relationship between Australia and Africa. I take this opportunity to mention the work being done by the Uniting Church in Modbury, in the electorate of Makin, to build bridges with people from the African communities. Every Tuesday the Modbury Uniting Church hosts their African Women’s Day. This provides a safe place for refugees and new migrants from Africa to meet in a non-threatening environment. The day has been expanded to include the teaching of skills such as sewing, computing and English language conversation. The church recently invited members of the South Australia Police to attend African Women’s Day, which allowed the many police men and women who attended to further build relationships with the African community. It was most fitting when recently the Modbury Uniting Church was honoured for its work with African Women’s Day by receiving a certificate of appreciation from the Premier of South Australia. This recognition is much deserved, and I congratulate Reverend Tony Goodluck, Pat Thomas and Wendy Sinnott from the church on this honour. Regrettably, the church hall that is used for these activities was the subject to an arson attack only about a week ago, causing extensive damage.

The IMF has been criticised in the past, particularly for some of the conditions attached to the support packages it provides to developing countries. The IMF has taken steps in recent years to make its support packages more transparent and tailored to a country’s specific needs. The greater flexibility in loan conditions for both inflation and fiscal policy are further evidence of this reform process. I also welcomed the IMF’s plan, advocated at the G20 by the Prime Minister, to reform its quota system of governance in 2011. This will see nations such as China play a much more significant role in the fund’s direction and administration, and address the criticisms in the past that the fund is not sufficiently representative of the developing world. The renewed focus of both the IMF and World Bank on reducing poverty and combating climate change demonstrates that, despite past criticisms, both organisations are now focused on achieving the stated target of the United Nations Millennium Development Goals.

Although this bill relates to funding for people outside of Australia, there is a deep passion for this issue within Australia and certainly within my own electorate of Makin. Since being elected, I have been lobbied on numerous occasions by people within my electorate about Australia increasing its aid to Third World countries, but I want to share one particular experience. On 30 March this year I attended a special assembly at King’s Baptist Grammar School in Wynn Vale. The purpose of the assembly was to present me with hundreds of cards the schoolchildren had made relating to global poverty and to ask me to present them to the Prime Minister. The cards were the culmination of projects aimed at raising awareness among the children of King’s Baptist Grammar School of the plight of their counterparts in developing nations. I was pleased to attend the assembly and to speak about world aid with students. And it was my pleasure to be able to pass the cards on to the Prime Minister’s office.

This bill continues Australia’s role as a leader in supporting developing nations worldwide, particularly in Africa and our own Asia-Pacific region. The bill allows the Australian government to fulfil our international obligations in this time of crisis, and I commend the bill to the House.