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Friday, 5 December 1986
Page: 3540


Senator HAINES (Leader of the Australian Democrats)(4.54) —The Banking Legislation Amendment Bill 1986, which seeks to close the Rural Credits Department of the Reserve Bank of Australia, follows the decreased role of the RCD in rural financing and also follows the recommendations of the Campbell Committee of Inquiry into the Australian Financial System and the Martin Review of the Australian Financial System. Essentially what seems to have happened is that the role of the RCD has been rather overtaken by events. By 1986 outstanding Rural Credits Department loans had fallen to about $18m. The Department's major borrower, the Australian Wheat Board, has for the last five years relied not on the RCD but on normal commercial banking channels for its funding. At the same time the relationship between the Rural Credits Department and its remaining borrowers has assumed a more normal commercial banking character in its own right. In these circumstances it seems to most people in this chamber that there is very little justification for the continuation of that Department.

However, having said that, I want to make it quite clear that I do not wish those remarks to be taken as an indication that I am or want to be aligned with those people who support the demise of the RCD because they espouse a zealous commitment to financial deregulation. Certainly the Campbell and Martin committees have been influential in restructuring the Australian financial system. Nobody would deny that; in many ways it was long overdue. I think we would all agree that, on balance, the results of that restructuring have been generally beneficial. But there are too many people in the community who seem to believe that financial deregulation is a panacea for all the problems that we face, either nationally or internationally, and that is simply not the case. It is worth reminding people that nor does a deregulated financial market mean an absolutely unregulated financial market. That would simply produce chaos. The two things ought not to be confused, as they are sometimes in the minds of some people.

What deregulation signifies, or ought to signify, is a change in the extent and manner of government management of the financial system. I hope that nobody would suggest that there is not a place for governments in the management of the financial system in a country such as ours. For example, it is relatively common knowledge, although I have to acknowledge that one vocal economic reformer of my acquaintance seems to be unaware of the fact, that the Reserve Bank has for some time been supporting the Australian dollar through trading in the money market. The Australian Democrats certainly support that intervention. Of course, the Government also manages interest rates through a variety of mechanisms, including putting a ceiling on home loan interest rates-although from time to time it has been known to buy off the private banking sector in order to achieve that, or at least to avoid a blowout in home loan interest rates. Judicious intervention is obviously necessary and will remain necessary if the financial system is to serve the range of social goals that are a necessary element of the sort of society in which we live. Some of those goals are clearly not achievable simply through the operation of free market forces where the major criterion seems to be the survival of the fittest and too bad for everyone else.

One spin-off from the RCD operation was the support of rural research which stemmed from the fact that about one half of the Department's profits was applied to this purpose. The Minister for Community Services (Senator Grimes), in the second reading speech, announced that consideration will be given to supplementing funds available for rural research in the future as the funds available from the RCD phase out. During Question Time earlier today, the Minister for Industry, Technology and Commerce, Senator Button, acknowledged that it is necessary to provide funding for rural research, and funding in different areas from the direction in which it has been applied in the past. More than simple consideration needs to be given to this if we are to apply rural research funding in the best possible way and get our rural sector out of the problem situation that it is currently in-not necessarily totally as a result of the behaviour of this Government, but because of actions and decisions made by previous administrations and, of course, because of recent actions undertaken by administrations in other countries. For example, the Government could use part of the $140m capital and reserves of the RCD, which it intends to distribute to the Reserve Bank, to establish a rural research foundation. I suggest that $20m invested at present rates would provide roughly the research income provided by the RCD in 1985-86.

I repeat that the Democrats hope that the Government will do more than simply give consideration to maintaining the rural research funds. We trust that, by supporting this legislation, we and the Opposition parties, who, quite appropriately, will not oppose it, will not be seen in the future to have unwittingly abetted simply a reduction in rural research. Unfortunately, of course, governments have a habit of not following their consideration of an issue with action on that issue. Certainly, details have not been recently given, announced or even leaked which would indicate what alternative arrangements are being considered, contemplated or made to replace research funding lost through this legislation as a result of the phasing out of RCD. It is for that reason that the Australian Democrats will be supporting Senator Watson's amendment to the second reading motion which does not, of course, interfere in any way with the effect of the legislation but which gives the Senate the opportunity-rather appropriately, I think-to express its concern that the Government has not made alternative arrangements for replacing the funds normally generated for rural research from the activities, now to be phased out, of the Rural Credits Department of the Reserve Bank.