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Thursday, 25 June 2009
Page: 4361

Senator SHERRY (Assistant Treasurer) (4:12 PM) —The Car Dealership Financing Guarantee Appropriation Bill 2009 is an important component of the government’s response to the fallout from the global financial crisis. The bill is essential to support the operations of the special purpose vehicle, the SPV, that has been established to facilitate liquidity for commercially viable car dealerships and it will in turn provide support for hundreds of small businesses and thousands upon thousands of jobs in this sector.

On 5 December last year, the Prime Minister and the Treasurer announced that the SPV would be established, with the support of Australia’s leading banks, to provide liquidity to car dealer financiers who have encountered financing difficulties as a result of the global financial crisis. The SPV, otherwise known as OzCar, was to provide critical wholesale floor plan financing to commercially viable car dealerships that were financed by GE Money Motor Solutions or GMAC, both of whom at that point had announced their intention to exit the Australian dealer floor plan financing market.

As flagged in December, the Treasurer announced on 13 May 2009 that the OzCar facility will provide for the rolling of Ford Credit into the facility in light of the serious funding pressures confronting Ford Credit. This will support the availability of critical wholesale floor plan finance to car dealerships, helping them to stay in business over the next 12 months.

The government has taken the action, and I might indicate that it is being supported by the Liberal-National Party, to ensure that commercially viable car dealerships will have continuing access to finance. In the absence of the finance, the car dealers may be forced to close. If the car dealers cannot obtain finance they may be forced to close. That would put at risk thousands of jobs in the Australian car industry. According to the Motor Trades Association of Australia, the MTAA, which is the representative organisation for car dealerships, there would be up to 75,000 jobs at risk. This government believes in being prepared. It believes in decisive action in the face of the global financial and economic crisis. It believes it is appropriate to be prepared for eventualities that may occur as a fallout from the world financial crisis. The government is simply not prepared to allow tens of thousands of jobs to be lost in the car dealership sector of the motor industry.

At this stage it would be useful to briefly describe how OzCar will actually operate and, subsequently, the importance of this appropriation bill that has been the subject of debate today. In order to provide liquidity to commercially viable car dealerships, the OzCar SPV will raise funds by selling securities to the four major banks: ANZ, Commonwealth, NAB and Westpac. The SPV will finance eligible financiers who on-lend the funds for wholesale floor plan finance to car dealerships. Given the very difficult and tight global capital markets, the support of the four banks is essential to secure buyers of OzCar securities and hence facilitate liquidity.

Ozcar can raise funds only if it is able to sell securities. The government is supporting the OzCar SPV by putting in place a Commonwealth guarantee on various securities issued by the SPV. This guarantee is required because the participating banks have agreed to provide liquidity to the OzCar SPV only through the purchase of securities on the basis that non-AAA rated securities will be Commonwealth guaranteed. This legislation provides for an appropriation to support this guarantee. Whilst the government guarantee was executed on behalf of the Commonwealth on 23 December last year, an appropriation is required to provide comfort to the purchasers of OzCar securities that the Commonwealth will meet any payments required under the guarantee.

The SPV does not require any capital contribution by the Commonwealth and will not have a direct impact on the budget bottom line—other than in the very unlikely event that the guarantee is called upon. The SPV will be open for 12 months and there will be an orderly six-month wind-down after that. So there is a sunset provision. It is expected that, once OzCar facilities wind down, those dealers who relied on the SPV for financing would be able to secure alternative finance in improved global and domestic capital markets. This situation will need to be reviewed if there is no marked improvement or if the market further deteriorates.

The contributions from Liberal-National Party senators opposite covered a wide range of issues other than the actual guaranteed appropriation which we are dealing with, and I respect their right to range far and wide about a whole range of issues that they claim are relevant. I am not going to take the time of the Senate to respond, but I will make a couple of points about some of the claims that have been made by Liberal-National Party senators. With respect to the last contribution, from Senator Macdonald, Senator Macdonald rose to speak without observing the due courtesies of the chamber, which are to notify, on a list that is provided, that you intend to speak on a piece of legislation. He has breached the conventions and the courtesies that this chamber operates on. I make that observation.

But I think it is a little worse than that in terms of Senator Macdonald’s contribution, because we have had extensive discussion and debate on motions today and finally reached agreement on how the chamber would proceed in terms of the legislation before us. No less than the Leader of the Opposition in the Senate, Senator Minchin, indicated that certain pieces of legislation would be dealt with, and there was a commitment to that. I respect Senator Minchin; I have always believed that he is someone who, when he gives his word, keeps it—on behalf of the opposition. And what do we have? We have Senator Macdonald getting up here to speak in contravention of the normal courtesies in the chamber—on top of Senator Minchin having given assurances that the legislation would be dealt with in a considered and orderly fashion. That is the way Senator Macdonald wants to behave; that is a reflection on him.

Senator Abetz made a wide-ranging contribution, and there are two particular sets of issues I want to go to. Senator Abetz’s basic argument on this appropriation bill—and firstly he was supporting it—was that this appropriation was necessary because ‘the world financial crisis has been exacerbated by various acts of economic stupidity and economically irresponsible decisions of this government’. I strongly refute that. I strongly reject that argument. It is amazing that there is almost no-one in Australia, or indeed the world, who believes that the issues that we are dealing with here—including this guarantee appropriation in the case of car dealer finance—has been brought on by the actions of this Labor government, other than some members of the Liberal-National Party opposition.

The fact that we are dealing with extraordinary pieces of legislation for extraordinary times is a consequence of the world financial crisis, which had its genesis in the United States. Unfortunately, that financial crisis led last year to the almost total seizing up—to use a car term, I suppose—or collapse of world financial markets. Confidence in banks was collapsing, particularly in Europe, the UK and the US, and interbank lending was grinding to a halt. In that context, a range of governments were placing guarantees on bank deposits, bank transactions and interbank lending, and the Rudd Labor government acted decisively to provide a guarantee. As I say, they are extraordinary circumstances.

Senator Williams —You should have put it on GMAC and GE Finance as well.

Senator SHERRY —The reason that we are considering this legislation is to provide a level of certainty in another form. If Senator Williams had cared to carry out even some modest examination of the guarantees put in place around the world—

Senator Williams —I spoke to you about it.

Senator SHERRY —The guarantees around the world have largely—if not exclusively—been confined to banks, credit unions and building societies. There is an extensive range of other types of financial instruments—property trusts, margin lending, superannuation funds or pension funds and, in this case, commercial financing arrangements for car dealers—and, overwhelmingly, they were not the subject of a guarantee in other countries.

I accept that Senator Fifield has a considerably greater understanding of current economic circumstances and a considerably greater degree of financial literacy than Senator Abetz. But for Senator Abetz to come in here and assert that we are dealing with these sorts of consequences of the world financial crisis because the Labor government has carried out ‘acts of economic stupidity’, ‘economically irresponsible decisions’ and has exacerbated this is just patent nonsense. I referred in question time today to the observations of the OECD and the IMF, leading world economic institutions, who have pointed out that the Australian economy is doing very well. In fact, it is the best-performing economy in the world compared to the 29 other countries in the OECD. Of comparable economies, the Australian economy is the only economy that is not in recession. And whatever people might think about the actions of this Labor government or the former Liberal government, I think the observations of the IMF and the OECD in terms of the government’s interventions—in supporting those interventions and drawing a reasonable conclusion that the Australian economy is stronger as a consequence—are correct. So the broad thesis and theme of the critique from Senator Abetz is just totally wrong.

I would just make a couple of points about Senator Abetz’s comments—which were, I think, partly in defence of himself and partly a continued and unjustified attack on the Treasurer. In terms of the Treasurer’s comments to parliament on the Hansard of 4 June—and all of the debate, questions et cetera that have been posed over the last week—the Treasurer has done nothing that contradicted what he said in parliament on 4 June and he stands by those statements. On 4 June the Treasurer, Mr Swan, said:

… there have been numerous representations made to members of parliament from car dealers right around the country—numerous representations which have been forwarded on to my office and in turn forwarded on to the responsible officials in the Treasury for consideration. There is nothing abnormal about that.

        …         …         …

It is the case that Mr Grant made representations to my office, and he was referred on to the SPV, just like everybody else. I have no idea what the outcome of that was.

And, of course, there were others who were referred on to the SPV and the staff in Treasury—it was not just Mr Grant. There were inquiries from Mrs Kay Hull, National Party member for Riverina; Mr Bruce Billson, Liberal Party member for Dunkley; Mr James Bidgood, Labor member for Dawson; Mr Bernie Ripoll, Labor member for Oxley; Mr Rowan Ramsey, Liberal member for Grey; the Hon. Sharman Stone, Liberal Party member for Murray; and obviously some other Liberal and National party members. The Treasurer has said:

… I have had no discussions with the Prime Minister about this matter whatsoever—none whatsoever.

        …         …         …

… in the case of the Prime Minister and me, there were none.

On the Hansard of 15 June, the Treasurer said:

Mr Grant would have received the same assistance as any other car dealer who was referred through that process received.

The second fact is that Mr Grant received no special benefit from OzCar and no outcome whatsoever from Ford Credit. Fact 3: there were steps taken to help other dealers, and that has been borne out in the course of investigations. The Treasurer did this because there were jobs at stake in the community, as I have outlined in this legislation, and because it was his view in his office that the Treasury should do whatever they could to help dealers who approached the Treasurer’s office. The Executive Director of the Motor Trades Association of Australia, Mr Michael Delaney, said:

The treatment that Mr Grant, a member of mine, got was no different from the treatment all of my other members got on my intervention on their behalf to Mr Grech. They were all treated in the same way, and for the same good reason: there was no other way to do these things. In fact I think Mr Grant has been treated less well because he went to the Treasurer.

Over the last week in the middle of a world financial and economic crisis, we have seen a Liberal opposition that could make only one firm decision in the Senate. The one firm decision they could make was to defer the emissions trading scheme. They decided to put it off because they are so divided. Other areas in which they have decided to make decisions where they are clearly divided are the migration regulations and the alcopops tax. We have heard a lot about smoke from Senator Abetz. Whatever the smoke, I suggest that the fire has well and truly burnt the case that the opposition were trying to advance against the Prime Minister and the Treasurer, for the obvious reason they were relying on a fake email. I am sure a lot more will come out as a consequence of that.

This legislation is important. When I referred earlier to it being very unlikely the guarantee will be called upon and, hence, impact on the government’s bottom line, it is possible that the guarantee will be called upon but we think that is unlikely. Obviously, it is more likely that the special purpose vehicle will be called upon to provide financing in the case of car dealerships. This is an important part of the government’s response to the consequences of the global financial crisis. Any forced closure of otherwise viable car dealerships would have a direct and adverse impact on the Australian automotive industry, including component suppliers, at a time of significant economic challenges. This had potentially grave consequences for the Australian economy, hundreds of small businesses and thousands upon thousands of jobs. The passage of this bill is crucial to the successful operations of the OzCar SPV, and failure to pass this bill would risk the loss of thousands of Australian jobs in the automotive industry.

I am pleased to see the Liberal-National Party are supporting the legislation. They have spent the week scouring second-hand car yards. I suggest they refocus their attention on the issues of the day which will undoubtedly be issues for the next number of years: how to protect and cushion jobs in Australia in the face of this world economic and financial crisis. Nevertheless, I thank them for supporting this legislation. At least they have finally decided to do something positive in the face of this world financial and economic crisis.

Question agreed to.

Bill read a second time.