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Friday, 12 June 2020
Page: 4071

Mr JOYCE (New England) (10:20): I rise to speak on the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 and related bills. There are many people who at times find it very difficult to get to sleep at night. I believe that a replay of this debate that we are having should put them to sleep in a jiffy! In fact, I'm thinking about recording it and playing it to my boys at night when they're having trouble passing out.

The Australian Prudential Regulation Authority was brought about by the Wallis inquiry. The Wallis inquiry was referred to at the time of the HIH collapse and is used in National Australia Bank foreign-investment lending. APRA itself was a child of three other organisations, if my memory serves me correctly: the Insurance and Superannuation Commission; the Reserve Bank of Australia, which played a part in that commission; and the Australian Financial Institutions Commission, I believe. Why do I know this? It was almost cognate with myself being an accountant at the time.

APRA's role is to oversight financial institutions, superannuation funds and life insurance companies so that they have the capacity to pay out facilities and that the Australian people have a sense of confidence in what they do. In Australian history it's had its challenges from time to time. We have seen internationally what happens if financial institutions collapse or are even deemed to be at risk of collapsing; it can have devastating effects throughout an economy. APRA's role is absolutely essential in that space, and it really mimics the roles of other institutions throughout the globe.

The government is now doing a cost recovery process. A cost recovery process has to have capacity from time to time to amend and change fees so that we get a better reflection of what the costs are for the process that APRA has. It needs a determination in respect of each class of levy for that financial year, specifying the amount of levy money payable to the Commonwealth in respect of that class of levy for that financial year to cover the following cost to the Commonwealth: supporting the integrity efficiency of markets, which are leviable by the bodies that operate.

I suppose everyone is aware that last night the American market took a bit of a dip. The ramifications of COVID-19 have breathed some real uncertainty into the markets. For a while there, we heard people using the D-word—depression. Thank God that doesn't seem to be what is coming our way, but Australia is most certainly going to be affected by a recession after record years of growth—a record held throughout the globe. APRA's role going forward, especially with these markets, is going to be one that we have to be very aware of.

We are also going to have to look forward to what the money market will do in the future. I believe that at the time we had a tightening of the short-term money market, which probably doesn't work in direct correlation with Reserve Bank rates; people should be very aware there is a difference between them. For Australia itself, this is going to be a big issue. The other day the Australian Office of Financial Management announced—and I was watching—that Australian government securities outstanding had reached $666.3 billion. That is a record—two-thirds of a trillion dollars. If you look back at your interest rates, maybe if you go back to 1982, you'll find that most of them come with two digits, not one.

What this means for the future is that we're going to have to make substantial payments just to reach our interest. To use an example: I envisage we'll end up about a trillion dollars in debt. I hope that will not be the case, but I believe it is where we're going. Of course, when you get there, why will things turn around? Why will things head back in the other direction? What are you proposing to do? The immigration rates after this will probably fall, and one of the big drivers of our economic growth has been immigration. As that falls, it's going to make things more difficult no matter what government is in place to try to manage this.

If we were to assume a seven or eight per cent interest rate—and I think that would be a fair call, noting that now we have record low interest rates, but a money market by its very nature is a fluctuating thing, otherwise it wouldn't be called a market. As circumstances inevitably change, you will find interest rates going back to probably more of a median of its historical position. I think seven or eight per cent would not be an unreasonable assessment of that. As I said, you have to say to yourself: at $1 trillion, that is $80 billion a year in interest.

Recently we invested half a billion dollars into the construction of Dungowan Dam, as one. To put this in terms that people can understand, that is 160 Dungowan Dams a year. That is the opportunity cost of the interest we paid. One hundred and sixty extra Dungowan Dams in Australia would have an immense economic stimulus on this nation. But if you are taking $80 billion out of our economy and sending it overseas, the opportunity cost of that will also be immense.

I think this is something that both sides of the political fence have to really concentrate on. It is unreasonable and unfair and without foresight to think that, at some stage in the future, the Labor Party will not be the government. This problem may become theirs. Therefore, there has to be a concerted effort on both sides to work on how we are going to bring this debt back under control.

When there is a discussion about further expenditure, that only comes from one spot: borrowed money. It's from that borrowed money. If you look at the final residing place of the bonds—noting we usually have an intermediary, UBS being a classic one—from what we can discern, it is only a broad aspect: Asian markets. I suggest that the biggest one of those is the communist People's Republic of China. So what you now have is a large section of the Australian bond market whose final residence is with a country that was probably the source of the problem in the first instance.

I've heard other people start with 'Foreign investment in Australia' and then quote the most recent figures, but they don't actually go to where our bonds are, because it's very hard to ascertain the final residence of our bonds. I was very much applied to this back in 2009 in the Senate, when I was trying to devise with my colleagues on both sides of the political house how to come up with a process of discerning this. If a nation has an inordinate amount of our bonds, whether we're aware of it or not, and they decide to play the market with them, that can have an immense effect on our nation, so it's something that we have to be cautious about. The first act of caution would be to make sure we haven't got so many of them outstanding. This is not what's happening at the moment.

I've had concerns, to be quite frank. When the GFC was on, I did not vote for one of the so-called GFC stimulus packages. I made a point of not voting for them, because I believed that spending on immediate consumables was secondary to our investment in capital infrastructure that could build the economy over the longer term. I believe that, if you invest in a dam, you have the capacity to repay your debts. If you invest in things such as ceiling insulation, it's gone. It's an important product, predominantly, in any case. Investments in things which will be consumables, whether in the construction of a house or what you furnish it with, I don't see will have the same stimulus effect as the construction of a railway line or the upgrade of a dam or the construction of a new airport. Obviously it's an iconic utilisation of capital expenditure—dams, as far as I'm concerned, is at the top of the tree.

APRA has to work in the foreseeable future and in an uncertain world, therefore it has to be able to finance the job it does. That uncertainty has been brought on by the COVID-19 pandemic. Even as we speak, there are people who are taking actions that exacerbate that risk. I commend the member for Maribyrnong for noting the other day that those who participate in the protests are actually causing a problem that will exacerbate the issue they are protesting against. If you have an issue about Black Lives Matter, then you'd better consider those in remote Indigenous communities. The remote Indigenous communities are the ones who are probably at the pinnacle of risk. If this disease were to get into remote communities, people would die. We don't want to be party to being responsible for that. As part and parcel of the uncertainties that are in the financial markets, the seed of which is the coronavirus, you would think that people would use a mechanism of public discourse, whether it be online or letters to the editor or waiting for a time where we have better control over our issues, and not completely flout every health regulation and, in many instances, every law, because they so choose on that day. In noting a lot of the demonstrators, I don't think their actual attachment to the issue was as pertinent as they would put forward. Many of the demonstrators were merely 'look at me' demonstrators. It was their big day out. It was a day at the tracks for them. If you actually sat down with them and drilled down and asked them to name some of the black deaths in custody, I think they would really struggle to name one of them.

APRA is going to have a full book as it goes forward. It's going to have a full book making sure that people are able to claim on their superannuation and that those funds are available. It's going to have a full book making sure life policies can be paid out. It's going to have a full book making sure that one of the great strengths of the Australian economy, which is the strength of our banking sector, remains, while, in the same breath, making sure that they don't rule out the competition in the banking sector so that banks, such as the Regional Australia Bank, are able to grow in the book they hold and offer alternatives to the four major banks.

Most of what I see in the Australian Prudential Regulation Authority Amendment (APRA Industry Funding) Bill 2020 is perfunctory. I believe that most of it should not cause much disquiet. It is merely a bill that allows us to cover costs, but it is also a great avenue to allow people to talk on a range of things that they believe to be pertinent today.

I look forward to the next speech. It looks like it's going to come from the member for Maribyrnong. I would suggest that, out of his 20 minutes, he will talk for approximately two minutes on the bill and will use the other 80 to 90 per cent of the time to talk on other issues.