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Friday, 6 December 1985
Page: 3149


Senator MICHAEL BAUME(12.30) —The Opposition supports the Commonwealth Banks Amendment Bill 1985. Its purpose is to broaden the charter of the Commonwealth Development Bank to provide finance for all general business purposes and to provide equity financing and packages of equity and debt. Currently the charter is restricted to the establishment of businesses and for the purpose of primary production. This measure represents one of a number of measures designed to improve the access of small businesses to bank finance, including equity funding and packages of equity and debt.

The Commonwealth Development Bank has traditionally been a lender of last recourse. However, it is expected that in the light of the removal of interest rate controls, banks generally will be prepared to increase the finance and services available to small business. Subsequently, a higher proportion of the demand for Commonwealth Development Bank finance should be in higher risk areas and for longer terms, sought on the basis of projected income flows rather than on the traditional banking basis of security.

There is no doubt that the proposed changes should benefit the small business sector generally. There are no significant costs or savings arising from the Bill. However, it is worth noting that this Bill has had very little parliamentary scrutiny and has received very little parliamentary debate because it was guillotined through the House of Representatives, along with a large number of other Bills, on 23 May this year. But it is not until now that it has come into the Senate. There is a real sense of urgency by the Government to get this Bill through. It was so urgent in May that it had to be guillotined through the House of Representatives, which meant that members of that House were not given an opportunity to discuss it to any extent. Now, six months later, we have it brought into this chamber on the last day of sitting, once again so that honourable senators are under immense pressure not to discuss the significance of legislation on which many people do have views. This certainly underlines the impropriety of the way the Government has gone about its legislative program this year.

There is a problem which is of concern to some Opposition members, and I stress that it is not an insignificant problem. There is certainly concern with the broadening of the Commonwealth Development Bank's capacity to enter into these quite proper arrangements for small business. There is concern that it may reduce the availability of finance in the areas which the Bank has traditionally serviced; namely, the rural sector and some specific business sectors. We hope that there will be no reduction in the availability of finance for those areas. I stress that there is no way that those areas will not proportionately suffer, as they must if in fact new areas of finance are to be involved. But the fact remains that it is a quite proper concern that the Commonwealth Development Bank should maintain the volume and certainly the availability of finance to those traditional areas of rural and business sectors.

Even though the Bill is not of a controversial nature, it should have been accorded time for sufficient debate in both Houses of the Parliament. In view of the pressure of time, I simply add a couple more points. One is that the activities of the Commonwealth Banking Corporation as a whole, including the Commonwealth Development Bank, have been subject to a great deal of comment both in the Senate and outside it. For example, there was a recent study by a Melbourne graduate school business management group which reported that the Bank had in fact served the taxpayer particularly poorly over the years and had been surpassed by its competitors in terms of growth and on three separate measures of profitability. It then recommended that the Bank be sold. Of course, that prompted a quite proper reply from Mr Vern Christie, the Bank's Managing Director. It is interesting to note that, following this, at the annual meeting of the Bank the Managing Director quite clearly asserted that there were problems for the Bank as a result of it being owned by the Government. I quote what Mr Vern Christie is reported as saying:

`We would agree that we're less profitable than the private banks, but if you look at the reasons for that it's a lack of capital', . . .

`We restructured the bank last year admittedly, but all that came out of that was that the Government put its first-ever capital subscription since we were established and agreed that they'd give us dividend relief over two years'.

`It would take a capital injection of about $600 million or $700 million to make the corporation comparable with major competitors', he said. Given the budgetary restraints being exercised by its shareholder-the Commonwealth Government-he thought it unlikely such a large capital subscription would be forthcoming.

`We think that given the limitations that we have had, our performance is remarkable', Mr Christie said.

I totally agree with him. In fact, the Bank has performed exceptionally well, given the limitations imposed on it by its inappropriate ownership by the Commonwealth Government. It is interesting to see that the man who runs this operation is, in effect, giving de facto support to the proposition that the capital base of the Bank is inadequate and it is inadequate because it is owned by the Government. If ever there was a sound case for the participation of the public in this Bank in order to expand, for example, its capital base, it comes from inside the Bank itself.

I just make the point that the Bank has had special tax arrangements. Because of the Bank's ownership by the Commonwealth, it also raises problems for this Government, for example, when the Bank criticises the Government's own economic policies. The Bank was quite critical of the Government's refusal to remove the ceiling on interest rates for home loans under $100,000. Whatever one's feelings about the rights and wrongs of that, the fact is that the Commonwealth Bank has criticised the Government on that score and it has said that `the ceiling on home interest rates should have been removed some time ago. Inevitably the ceiling will limit the amount of funds available for housing in the market as a whole'. When the Commonwealth Bank says that it adds an additional impetus-if you like an additional pressure-to the debate. The Commonwealth Government may find some merit in removing that kind of embarrassment or perhaps that kind of inhibition on the Bank from not only doing what is in its best interests but also, in many instances, saying what is in its best interests. The Opposition supports the Bill.