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Monday, 23 March 1987
Page: 1178

Senator MICHAEL BAUME(10.28) —When speaking to the Commonwealth Guarantees (Charges) Bill 1986 and the Australian Industry Development Corporation Amendment Bill 1986, Senator Vigor said that he wanted a real solution to this problem whereby, in effect, Commonwealth semi-government authorities have some kind of interest rate beat on their private sector competitors. There is a real solution to this and that is to stop having so many government authorities which are involved in competing with the private sector. The simplest and most efficient way to go about this would be to return to the private sector those ventures which receive the benefit of a Commonwealth guarantee in their borrowings, for which benefit they now have to pay. Those ventures should return to where they belong as commercial enterprises-the private sector rather than the government sector. We all know perfectly well that it is unfair and unreasonable for a body such as the Commonwealth Banking Corporation, for example, to borrow overseas with a government guarantee and therefore at a better rate than any other Australian bank overseas because of the existence of that guarantee. What will happen now? The Commonwealth Bank will be obliged to pay the Government a fee on its overseas borrowings when it uses that Commonwealth guarantee. The same applies in borrowings in the local private sector. As the Government quite rightly says in this instance, the favourable interest rates paid by Commonwealth authorities are due to the fact that their borrowings are guaranteed by the Commonwealth and that gives them an advantage. The main consequence of the charge proposed in this legislation will ensure that the effective cost to authorities of borrowing is more directly comparable with that faced by private sector borrowers, thus ensuring that authorities take full account of the cost to the community of their investment decisions.

Debate interrupted.