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Wednesday, 28 February 1973
Page: 52

Dr J F CAIRNS (Lalor) (Minister for Overseas Trade and Minister for Secondary Industry) - I move:

That the Bill be now read a second time.

This Bill proposes that the Export Payments Insurance Corporation Act 1956-1972 be amended to increase from S500m to $750m the maximum contingent liability which the Corporation may assume under contracts of insurance and under guarantees. The Export Payments Insurance Corporation was established in 1956 as a Commonwealth-backed, but independent, statutory authority to provide exporters with insurance facilities which were not normally obtainable from commercial insurers to cover risks of non-payment by overseas buyers. The Corporation's statutory powers have since been progressively extended, and now include the authority to provide guarantees to commercial lending institutions supplying finance for deferred payment export transactions.

When the Corporation enters into a contract of payments insurance with an exporter, and when the Corporation gives a repayment guarantee to a lending institution, it accepts a commitment that, if specified payment risks eventuate, it will pay the exporter or lending institution in accordance with the terms of the contract or guarantee. In other words, it accepts a contingent liability. It follows that the greater the amount of export business that the Corporation insures, and the more often it assists exporters to obtain finance by providing guarantees, the higher will its contingent liability become.

Since the Corporation was established, the statutory maximum contingent liability has been increased as follows: 1956 - $50m, 1959- $100m, 1964- $150m, 1965- $200m, 1970- $300m, and in May 1971- $500m. When the Corporation's maximum contingent liability was last increased in May 1971, from $300m to $500m it was expected that the Corporation could operate for about 2 years within the new ceiling. At the end of December 1972, actual contingent liabilities stood at $4 16m. Since then the Corporation has, of course, entered into additional business and has also given in principle approvals to prospective business amounting to approximately $100m.

An important element in the expansion of the Corporation's business is the world-wide trend towards increased and longer term credit trading of capital equipment and manufactured goods. This involves the Corporation in the maintenance of contingent liabilities on individual transactions for long periods. Since the Corporation's contingent liability is rapidly approaching the statutory maximum of S500m, it is necessary that action be taken during this session to increase the limit as provided for in this Bill so that the Corporation will not have to curtail cover for new export business. It is estimated that, on the basis of current and prospective growth rates of short term revolving business and of medium and long term transactions, the Corporation will be able to operate for about a further 2 years within the proposed new ceiling of $750m. 1 commend the Bill to honourable members.

Debate (on motion by Mr Anthony) adjourned.

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