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Wednesday, 22 August 2012
Page: 9644

Mr STEPHEN JONES (Throsby) (18:04): I have just had the great benefit of listening to the contribution to this debate from my friend the member for Blair. I find myself in complete union with both the sentiment and the wise words expressed by the member for Blair in his contribution. We are here this evening to discuss an important piece of legislation about an important institution, the International Monetary Fund. As you know, Deputy Speaker, the IMF was established as a critical part of the postwar international architecture—architecture that was established to bring political and economic security to the globe after the ravages of that terrible world war. It has an important function. Its function is to foster cooperation and exchange rate stability, to facilitate the growth in international trade and to assist countries who are undergoing balance of payments difficulties. Importantly, and this is something we know well in this region, it also assists countries to alleviate and lift themselves out of poverty.

The purpose of the bill is to amend the International Monetary Agreements Act 1947. The date of that act is an indication that our membership of this important institution, an institution constituted by 188 member countries, has been one of long standing. We joined it in the aftermath of the Second World War. Of course, the Australian Labor Party was at the forefront of ensuring that we had the appropriate international architecture in place and led the nation through that immediate postwar period. There has been a bipartisan approach to international arrangements ever since.

The purpose of the bill, as I say, is to amend the act to accept changes to the IMF executive board decision which established new arrangements to borrow. It will reduce Australia's credit arrangement under the NAB once Australia's agreed IMF quota increase has come into effect. It will renew the NAB for a further five years commencing on 17 November 2012. It will also make other technical changes to facilitate the roll-back of credit arrangements and to protect the fund from associated potential liquidity risks.

I am very interested in the detail of these arrangements. As you would know, Deputy Speaker, the NAB is a voluntary set of credit arrangements between the IMF and a number of its member countries. It allows the IMF to borrow when supplementary resources are needed to forestall or cope with impairment of international monetary system, and it acts as a backstop where the IMF's usual quota resources are insufficient to meet the needs of borrowing member countries.

Australia has been a member of the NAB since it came into effect in 1998. Many might wonder what the NAB is being used for. Since being activated on 21 March 2011, the NAB has been used in conjunction with quota resources on all newly approved IMF programs. Up until August 2012 this included the programs for seven countries, including two programs for euro area countries.

The IMF draws against Australia's quota resources and NAB credit line on an equitable basis with other IMF creditor countries, and only as needed to help meet drawings under other IMF programs with borrowing countries. The IMF borrows from its creditor members with the full backing of its balance sheet and, ultimately, the resources of its global membership. Drawings on Australia—and this is an important point, not always understood—have always been repaid in full and with interest. They are not, as some have sought to characterise them in the past, some form of foreign aid. They are a commercial arrangement, if you like, with a very important purpose in assisting the IMF to fulfil its charter responsibilities. They are a loan which is repaid—to the benefit of Australia and Australian taxpayers—with interest and in full.

I would like to say a little on the background to the changes. The decision made by the G20 leaders in 2009 to increase the size of the NAB was both timely and appropriate. Mr Deputy Speaker, you would recall this was a time of global financial turmoil. It was a necessary step to ensure the confidence that the IMF was fully resourced to play its role in crisis prevention and resolution.

Australia has always been a participant in the NAB. Our commitment under the NAB increase when the expanded NAB came into effect in 2011 is complete. However, the expansion of the NAB raised the fund's reliance on voluntary borrowed resources to an unprecedented high level.

You would also recall, Mr Deputy Speaker, that the IMF—and the NAB—is a quota-based institution—that is to say, the resources of the IMF are levied upon each of the constituent member countries based on the size of those economies. The quotas are reviewed regularly, every five years in fact, and they are increased when it is deemed appropriate to ensure that there is the appropriate proportionality between member countries, and to ensure the monies paid in and lent to the IMF reflect the size and appropriate contribution of each of the constituent country members.

The doubling of IMF quotas and the corresponding rollback in the NAB credit commitments, which were agreed to in December 2010, maintained the expanded level of IMF resources while reinforcing that the IMF is a quota-based institution. The 2010 quota increase will also enhance the legitimacy and representativeness of the IMF by enabling a shift in quota share and voting power within the IMF to recognise the rapid growth of dynamic and emerging market and developing countries, many of them within our region.

Australia's quota increase was included in the 2011-12 budget. It will take effect when the necessary threshold of consents is received by the IMF, which is not expected until November 2012 at the earliest. Australia, I should say, was one of the first IMF members to consent to the quota increase.

The bill, as previous speakers have noted, needs to be passed swiftly because it is critical that we amend our act to reflect changes in the NAB decision and to ensure that Australia's ability to continue meeting its obligations under the NAB is not put at risk. The amendment to the NAB decision renewing the NAB for a further five years is proposed to take effect from November this year, and the definition of the NAB currently provided in the IMA Act is restricted to the current version of the NAB decision. Consequently, earlier passage will ensure that the standing appropriation that the act provides for in relation to Australia's obligations under the NAB continues to be applicable once the amendments to the NAB decision take effect.

I am pleased to see that this bill will have bipartisan support. As the member for Blair pointed out, it is unfortunate that some have attempted to make some political mileage out of this particular issue over the course of the last 18 months. The member for North Sydney, for example, in a doorstop interview he gave in November last year, attempted to characterise the change in quota arrangeĀ­ments as either some form of irresponsible aid or in some way an irresponsible act by the Australian government to bail out euro zone countries from the unprecedented economic circumstances that they are facing. This is irresponsible in the extreme.

As I have said, our commitments to the IMF have been bipartisan since 1947. There is nothing extraordinary in what we are doing here. The only purposes that were served by the comments of the member for North Sydney in that doorstop interview in November last year were to put a big cloud over the financial credibility of those opposite and to put in some doubt the longstanding bipartisan nature of these bills. So I was very pleased to hear the member for Wentworth, who was in the chamber during part of this debate, affirm his commitment to these arrangements both publicly and in this place. I am pleased to see that perhaps, in the cold light of day, the sorts of comments that were made by the member for North Sydney and shadow Treasurer were nothing more than another one of his intemperate thought bubbles, and we can now move to ensure that this legislation enjoys bipartisan support and swift passage through both houses of parliament. I commend the bill to the House.