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Tuesday, 10 December 1974
Page: 3271

Senator Wriedt (Tasmania) (Minister for Agriculture) ( 12.29)- I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

The DEPUTY PRESIDENT (Senator Webster)- Is leave granted? There being no objection, leave is granted. (The speech read as follows)-

This Bill seeks the approval of Parliament to borrowings overseas by the Australian Government, as required for the purpose of assisting the Australian Industry Development Corporation to carry out the functions prescribed in section 6 of the Australian Industry Development Corporation Act 1970-1973. The Bill will enable industry developments approved by the AIDC to be assisted with funds not ordinarily available except through borrowings by the Government itself. The structure of the Bill is similar to legislation approved by Parliament on numerous occasions for the raising of loans by Australia for the financing of capital expenditures by the Government owned airlines, Qantas Airways Ltd and Trans-Australia Airlines. The Australian Government will be the borrower and the proceeds of the loans will be made available to the AIDC on terms and conditions to be determined by the Treasurer pursuant to clause 7 of the Bill.

The terms and conditions to be determined by the Treasurer will ensure that there is no unfair advantage for the Corporation in the onlending arrangements, between the Government and the Corporation, in relation to the proceeds of loans raised under this legislation. As far as is reasonably practicable, the financial terms of the onlending arrangements will be no less favourable to the Government than the terms under which the loans are raised. The Australian Industry Development Corporation Act 1970-1973 limits the total amount of borrowings by the Corporation, other than borrowings for temporary purposes, to the equivalent of 5 times the sum of the paid in capital of the Corporation and the amount set aside by it as reserves. This legislation does not alter the total amount that the Corporation can borrow under this formula. The Act also requires that the Corporation, in exercising its powers to borrow moneys, seek to borrow moneys principally outside Australia.

The limitation in the AIDC Act on the amount the Corporation may borrow would not be affected in any way by the provisions in the present Bill. Insofar as the Government borrowed and on-lent the proceeds to the AIDC the latter transaction would be a borrowing by AIDC and would reduce the legal scope available to it for undertaking other borrowings. The Bill provides that loans made to AIDC from the proceeds of borrowings made in currencies other than Australian currency shall, for the purposes of sub-section 7 (4) of the Australian Industry Development Corporation Act 1970-1973, be deemed to be borrowings by the Corporation outside Australia. This is fully consistent with the intention of the 1970 Act that funds for the AiDC's operations should be obtained principally from abroad. If some of the funds available to AIDC are obtained by the Government borrowing these funds abroad and on-lending them to AIDC, this will not alter the proportion of its total borrowings that could be raised from local sources from what it would be if the Corporation itself directly borrowed those funds overseas.

Conditions now facing us in the international capital markets are in many ways very different from those that existed when the Australian Industry Development Corporation Act 1970 was enacted. In particular, while there are potentially large amounts of money that will be available for lending, there are not many lenders prepared to provide funds other than on a relatively short term basis and the ones who have the most substantial amounts of funds at their disposal have a definite preference for making loans to Governments or under government guarantee. There are advantages to be gained by having such overseas borrowings as it is appropriate to have undertaken on public account arranged and undertaken by the Australian Government itself. The Australian Government, with its high credit rating and prestige in international capital markets, is better placed to tap overseas sources of funds in a way most advantageous for Australia than is any other Australian borrower, be it a public authority or not. On the other hand it would be undesirable if AIDC, set up to operate independently of government direction, were to become dependent on borrowings undertaken by the Government and on-lent to the corporation.

There is no requirement or intention, however, that all overseas borrowings for the purposes of the AIDC should be undertaken by the Government. The AIDC was set up to be, and has become established as, a prime borrower in international capital markets for Australian industry. To illustrate, AIDC has just announced a United States dollar public issue of 7-year AIDC notes in the European capital market. The amount is US$25m- approximately A$ 19m- which makes it one of the largest United States dollar issues on the market in the conditions of today. The interest coupon of 10.25 per cent is equal to that of international issuers guaranteed by national governments. The AIDC notes are the first of any recent United States dollar issue in Europe to be priced at par rather than at a discount. It is not proposed that AIDC be relieved of the responsibility for arranging its own borrowings in those markets or from those sources that are open to it to approach direct in the ordinary course of its operations. However there are today major and growing sources of overseas funds, particularly sources of a governmental nature, where by reasons of law or established rules or policies it could be difficult if not impossible for AIDC, acting alone, to gain access.

Countries around the world are taking steps to tap these sources for their industries. It is important that Australian industry should also have access to them. The Bill will enable the Government to work with the AIDC by raising funds from such sources and making them available for industry development of importance to Australia. The proposed legislation includes a limit of $250m to the total amount of borrowings that might be undertaken by the Government under it. It will be noted that no time limit for the borrowings is specified. The timing and magnitude of particular borrowings will, of course, have to be related both to prospective requirements of AIDC in respect of planned programmes of investment by it and to the particular borrowing opportunities available from time to time. It is expected that the proposed total borrowing authority of $250m would be only partly utilised in the current financial year, but the existence of this authority will make it possible for the Government to act quickly to take advantage of emergent borrowing opportunities when it judges this appropriate, and will facilitate forward programming by AIDC for its investments.

With legislation for certain borrowings from the United States Export-Import Bank and with guarantees to the International Bank for Reconstruction and Development for borrowings by Papua New Guinea, it has been possible to schedule to the legislation the agreements for the loans. This is because these lending institutions have been prepared to approve the loans and sign the loan agreements prior to the legislation authorising them being introduced into the Parliament, with the loans being drawn when the necessary legislation is enacted. However, with loans in the international capital market, a loan must be drawn as soon as it is negotiated and the agreement signed, so legislation must be enacted prior to the negotiation of the loans, which means that it is not possible to present the text of the agreements to Parliament for approval. Any borrowings that are undertaken by the Government under the proposed legislation will, of course, require the prior approval of the Australian Loan Council. The Bill contains provisions which would allow the customary undertakings to be given to lenders that payments under the loans will be free from Australian taxation and from foreign exchange restrictions. I commend the Bill to honourable senators.

Debate (on motion by Senator Durack) adjourned.

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