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Wednesday, 22 August 2012
Page: 9638


Mr TONY SMITH (Casey) (17:36): I rise to speak on behalf of the coalition and the shadow Treasurer, the member for North Sydney, in support of the government's International Monetary Agreements Amendment (Loans) Bill 2012. This bill makes three amendments to Australia's credit arrangements with the IMF. First, it reduces Australia's contingent liability under the New Arrangements to Borrow line of credit. Second, it increases the maximum maturity of the IMF's drawings under the New Arrangements to Borrow from five to 10 years. Third, it renews the New Arrangements to Borrow for a period of five years commencing 17 November 2012.

Australia has had a long association with the IMF, having been a member since 1947, two years after the organisation came into formal existence. The IMF was originally established to provide a mechanism for resolving short-term economic difficulties of members so as to reduce shocks to the global economy. This of course followed the calamitous events of the Great Depression and the disruption of the Second World War.

Article 1 of the articles of agreement which created the IMF outlines the key mandate of the IMF. Chief amongst them is for the IMF to facilitate the expansion and balanced growth of international trade and to contribute to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy. It is also tasked with promoting exchange rate stability by maintaining orderly exchange arrangements among members and avoiding competitive exchange rate depreciation. It assists in the establishment of a multilateral system of payments in respect of current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade. It provides confidence to members by making the general resources of the IMF temporarily available to them under adequate safeguards, thus providing them with the opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity. And it aims to shorten the duration and to lessen the degree of disequilibrium in the international balances of payments of members.

The IMF's role and mandate have broadened following the global financial crisis, which is widely regarded as the biggest crisis to hit the global economy since the Great Depression. As outlined in the IMF's response to the global economic crisis, it has increased its crisis lending whilst overhauling its general lending framework; reformed policies towards low-income countries and quadrupled its concessional lending; improved policy analysis and advice whilst contributing to the ongoing effort to draw lessons from the crisis of policy regulation and reform of global financial architecture, including through its work with the Group of Twenty industrialised and emerging market economies; and it has undergone wide-ranging governance reforms to reflect the increasing importance of emerging market countries and to ensure that smaller developing countries will retain their influence in the IMF.

Australia has three lines of credit with the IMF. The first is its usual quota contribution. This was doubled following a decision by IMF governors in December 2010. The quota is shown on the government's balance sheet as a loan. The quota commitment increased from just over A$4 billion to just over A$8 billion in the 2011-12 financial year, as outlined in the 2012-13 budget.

The second is the New Arrangements to Borrow. This is a contingent liability of the government to be drawn down on request of the IMF. This is the line of credit which is addressed by this bill. The bill seeks to implement reforms to the IMF's crisis lending arrangements by enforcing the changes outlined in the 14th General Review of Quotas in December 2010. The rollback of the New Arrangements to Borrow line of credit is worth $3.2 billion; however, the reduction is conditional on the doubling of Australia's primary quota from A$4.l billion to $8.8 billion. As I have noted, this doubling in the quota is already provided for in the budget. This bill also seeks to lengthen the maturity of the New Arrangements to Borrow line of credit from five years to 10 years, on the basis of assisting the IMF with funding issues as a result of rolling over the maturity on this line of credit.

The third line of credit is a US$7 billion contingent bilateral loan which was agreed on 20 April 2012. This is noted in Budget Paper No. 1, between pages 8 and 11, I am advised. Of key importance, this loan has not yet been legislated by the parliament. We will have more to say on this third line of credit when the enabling legislation comes before this House.

Australia sits within the top 20 member country contributions to the IMF, as a percentage of total Special Drawing Right Holdings. Our contribution to the IMF is based on the assigned quota, broadly in line with our economy's size relative to the world economy. Australia has always been a relatively generous country, helping our neighbours in our regions in times of need. Not only do we meet what is required of us in terms of our international obligations; we also go above and beyond in helping our regional neighbours—something which we should all be proud of. Examples of this include the assistance we provided back in 2005, when Prime Minister John Howard pledged $1 billion to Indonesia in aid, in the wake of the Indian Ocean tsunami, to help restore and rebuild their nation after the devastating consequences of that natural disaster.

In conclusion—

Ms Bird interjecting

Mr TONY SMITH: Yes, I am speaking on behalf of Joe Hockey here; I said that at the start.

In conclusion, as I stated at the outset, the coalition will support the passage of this bill through both houses. There is an element of quid pro quo in the structuring of Australia's finances with the IMF given the changes put forward within this bill. The doubling of Australia's existing quotas with the IMF is partially offset by the reduction in the New Arrangements to Borrow line of credit. The coalition will continue to monitor Australia's support to the IMF and the IMF's focus and priorities going forward as the global economy continues to evolve in the wake of the GFC. As I said at the outset, the coalition is supporting this bill and I commend it to the House on behalf of the shadow Treasurer, the member for North Sydney.