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Tuesday, 22 June 2010
Page: 6134

Mr HOCKEY (5:23 PM) —As the Minister for Competition Policy and Consumer Affairs identified in his second reading speech when introducing the International Monetary Agreements Amendment Bill (No. 1) 2010, this bill amends the International Monetary Agreements Act 1947 to allow Australia to accept the changes to the New Arrangements to Borrow of the International Monetary Fund adopted by the executive board of the IMF on 12 April. The recent global economic turmoil has had a dramatic effect on numerous countries, obviously. On 2 April 2009, the G20 countries agreed to increase the level of finance available to and the number of members involved in the IMF’s New Arrangements to Borrow. The New Arrangements to Borrow is a credit arrangement between the IMF and 26 members and institutions to provide supplementary resources to the IMF in times of economic turmoil. The former Treasurer, Peter Costello, worked to establish this mechanism, which came into effect on 17 November 1998 and has been renewed twice, most recently in November 2007. Australia has supported these arrangements since that time, and that support is not wavering today at all. On 12 April this year, the executive board of the IMF approved changes to the new arrangements to increase the finances available and make the system more flexible. This decision resulted in a tenfold expansion of the resources available from SDR34 billion to SDR367 billion. These rates are approximately, in Australian dollar terms, $51 billion to $617 billion at today’s exchange rate.

This bill will increase Australia’s credit line in the IMF’s currency of special drawing rights from SDR801.29 million to SDR4,370 million, so Australia’s potential exposure is approximately $7.3 billion at today’s exchange rate. Should the IMF access this credit—and we hope it will not have to—the loan would have to be repaid in full with interest in five years. The changes to the new arrangements also increase the number of participants in the mechanism. China, Russia, India, Brazil and nine other countries will now be involved in the new arrangements. In terms of flexibility, the changes require a large majority of participating members to agree before the New Arrangements to Borrow can be activated.

This bill obviously would have no direct impact on the budget, which is a relief for many and is unlike so much of what the government does. Any loans, if they are to be made, would represent monetary assets. The successful passage of this bill would mean that Australia will be supporting the New Arrangements to Borrow and therefore would provide the consent required by the executive board of the IMF to activate the changes to the terms and conditions. This bill will also confirm Australia’s commitment to that G20 agreement, as well as its strong and ongoing support for the IMF. Having been involved in the architecture of the framework, the coalition supports the bill.