EFIC Amendment (Support for Commonwealth Entities) Bill 2016

Parliament of Australia
House of Representatives

This Bill proposes to do two things.

The first part of the Bill expands the Export Finance and Insurance Corporation, otherwise known as EFIC, functions so that it can provide specialist finance advice to Commonwealth entities and companies.

It is currently only allowed to provide these services to the Northern Australia Infrastructure Facility. Legislation to do that was passed last year.

The Opposition supports this amendment which will hopefully lower government service delivery costs and enable other Commonwealth entities to access EFIC’s financial expertise.

The second amendment in this bill will allow EFIC to provide loans to Australian companies to set up or expand operations overseas.

In practical terms, what it will do is allow a company to spend the loan overseas rather than here in Australia.

Currently EFIC is only able to provide guarantees to businesses that want to do this.

The Bill before us was examined by a Senate Committee earlier this year.  

The Committee received a number of submissions supporting this amendment.

It is supported by industry groups like the Australian Advanced Manufacturing Council, the Advanced Manufacturing Growth Centre, the Export Council of Australia and the Australian Grape and Wine Authority on the basis that it will help Australian small and medium sized businesses to break into new markets.

DFAT’s submission also makes the point that this change to EFIC’s rules has the potential to reduce the administrative costs of funding applications by up to $12,000.

The Senate Committee also received a number of submissions expressing some concern about the potential unintended consequences of this legislation – in particular the potential impact it could have on Australian jobs.

The Australia Institute and the Jubilee Australia Research Centre in their joint submission expressed concern that:

“While the change to specifically recognise service exports may be desirable, the current proposed amendment seems to remove any focus on products that are produced in Australia. The effect of this could be the further offshoring of Australian manufacturing.”  

Their submission concludes that this:

“… has the potential to reduce jobs that produce goods and services in Australia. In addition to potentially offshoring Australian production, this change could move production into jurisdictions with lower environmental and labour standards. This reduces transparency and standards in supply chains.”

The ACTU raised similar concerns in their submission to the inquiry. At page three of their submission they say:

“It is in the national interest that companies which receive government loans are required to use that money in a way which benefits Australian employment. The removal of these provisions will be yet another blow to the Australian manufacturing and services sectors. It could potentially lead to jobs being offshored.”

Mr Deputy Speaker

The Opposition supports what the Government is trying to do here with this Bill.

Australian businesses should be encouraged to become exporters and look for opportunities overseas. But we also agree that we should avoid doing anything in this legislation that will lead to job losses in Australia.

To make sure this doesn’t happen we are proposing to move three amendments to this Bill when it’s debated in the Senate.

The first of those amendments will be to introduce an Australian Jobs Test.

This test will require EFIC to be satisfied, before approval of a loan or a guarantee that would be spent overseas, that the investment will lead to jobs growth in Australia.

EFIC already has a test that it applies, it’s a test of no-net-job losses in Australia for all of the loans which are spent in Australia.

We believe that there should be a higher standard for loans to companies when they want to spend those funds overseas.

The second amendment we will move will prevent companies from using a loan or guarantee from EFIC to effectively offshore Australian jobs.

It will prevent a company from using a loan or a guarantee from EFIC to set up something overseas that would effectively replace what the company currently does in Australia or that they contract another company in Australia to do for them.

Let me give you a very practical example of what I mean and what this amendment is intended to ensure doesn’t occur. A company uses an EFIC loan to set up a call centre overseas and then shuts its’ call centre that does the same thing here in Australia. We don’t think taxpayers’ money should be used to facilitate that. 

All that would be doing would be providing taxpayers’ money to offshore what are currently Australian jobs.

I don’t think anyone in this Chamber or anyone listening to this debate would think that’s a good idea. I’m sure it’s not what the Government is intending would happen with this legislation. This amendment would help ensure this doesn’t happen.  

Companies can use their own funds or they can get a loan from the bank to offshore work that they currently do here in Australia – and they do do that – sometimes quite controversially.  But our point is taxpayers’ money should not be used to do that.

The third amendment that we will propose in the Senate deals with a situation that was highlighted in the media a few weeks ago.

On 20 May there was a story in the Guardian that said EFIC was considering a multi-million dollar loan to a company called Resource Generation Limited (Resgen) to develop a coal mine in South Africa.

The company is based in South Africa. It is listed on the Australian Stock Exchange but it has no mining activities in Australia.

The coal mine they are developing in South Africa is quite large. They have got approval to extract 32 million tonnes of coal a year.

It’s the sort of project which could have an impact on the Australian Coal industry.

We asked some questions about this in Estimates a couple of weeks ago and we were advised by EFIC that they were not currently considering providing finance for this project but that it could currently be financed under their Act.

It is correct to say that EFIC can fund overseas resource projects and they have done so in the past – both Coalition governments and Labor governments.

But it’s hard to see how this project could comply with the current Part 1(3) of EFIC’s Act.

This includes a requirement that loans can only be provided for companies for, and again I quote from the current Act: any services in or in connection with the supply, installation,      erection, operation, maintenance or repair of goods produced or manufactured wholly or substantially in Australia and exported from Australia.

The Bill that we are debating here today would remove that section of the Act and therefore allow the whole loan to be spent overseas.

Making the financing of a project like this easier.

In principle, we don’t think it’s a good use of taxpayers’ money to give a company a loan that is spent overseas to set up anything from a mine to a factory to any other business, if that is going to severely damage other businesses here in Australia and lead to the loss of jobs in Australia.

It’s not certain if a project like this would, but in principle we don’t think it’s a good idea to provide a loan to a company that’s spent overseas that would severely damage other businesses here in Australia and would lead to the loss of Australian jobs.

We are not opposed to what the Government is trying to do with this Bill, but when an EFIC loan is spent wholly overseas rather than here in Australia we think a higher standard needs to apply.

That’s why we have proposed the Australian Jobs Test, our first amendment – that says that when a company is getting a loan that is spent overseas, EFIC needs to be satisfied that it will also create jobs here in Australia.

That’s why we are also proposing a second amendment, to prevent a loan like this facilitating the offshoring of work that is currently done here in Australia.

And that’s why we will also propose a third amendment in the Senate that would require EFIC when it provides a loan to a company that is going to be spent overseas ,to be satisfied that that loan is not going to damage other businesses here in Australia and lead to job losses here at home.

Mr Speaker, the Opposition supports efforts for businesses to expand overseas and enter new markets. We believe that our amendments will help to strengthen this Bill and put Australian jobs first.

I have been consulting with the Minister about our amendments and my office has been working with the Minister’s office.

I think that consultation, that work has been very constructive to date and I thank him for his assistance with that consultation.

And let me state on the record I am very happy to work with him and with EFIC on our amendments over the Winter break before they are considered by the Senate.

The purpose of our proposed amendments is simple.

We want to avoid any unintended consequences that come with this change to EFIC’s rules.

We want to make sure that it creates more jobs here in Australia, not less.

It’s a very very simple principle that I hope that all members of the House and all members of the Senate can agree with.

I look forward to those negotiations with the Government in the coming weeks.