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representatives vote 2012-05-30#6
Edited by
mackay staff
on
2014-01-24 12:18:16
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<p class="speaker">Steven Ciobo</p><p>I am mindful of the time of night, so I will keep my remarks fairly succinct. What we know is that it is forecast that as a direct result of the operation of the Clean Energy Finance Corporation taxpayers have a default rate of 7½ per cent of the forecast expenditure by CEFC. Seven-and-a-half per cent of the forecast expenditure equates to $150 million a year of losses. Two billion dollars has been allocated to CEFC each year over five years—that is a $10 billion investment. Of that $10 billion it is predicted that at least $750 million of taxpayers' money will be lost as a result of defaults. That is the starting point—$750 million of taxpayer losses. I would say that if you go into a deal where the government says right up front, 'We're going to lose $750 million of taxpayers' funds and that's our starting point', then it gives some indication of this government's cavalier approach to the industry. But the way they try to defend it is to say, 'Yes, but we're probably going to seek to have a bond rate return on the total pool of investments'.</p><p>We had the opportunity as part of the committee inquiry to test the basis on which the government makes its forecast. We looked at two crucial elements. The first question was: where does the 7½ per cent default target rate come from? The answer: 'We do not know; it is effectively a direction from the government'. I would love to hear the minister account for this because the 7½ per cent default rate is not based on best practice, it is not based on international benchmarks and it is not based on prior experience. It is only based on a direction from the government to the departments of Treasury and climate change. The second question was: on what basis is the benchmark made of a bond rate return, of three or four per cent return on the total amount of pooled funds? Where does that come from? Lo and behold, it comes from the same source. It is not based on international benchmarks, it is not based on global experience, and it is not based on any kind of analysis or modelling. Rather, it is a consequence of direction again from the executive arm of the parliament down to the departments that that will be the forecast rate. So the reality of the operation of the CEFC is that there actually could be substantially higher losses. Instead of being a starting point of $750 million of lost taxpayers' funds, it could amount to being billions of dollars of lost taxpayers' funds. Instead of the return being a three or four per cent return it could in reality be a return of negative three or four per cent, because the only people who have made this decision thus far are the minister and I guess a coterie of people around him. And that is it!</p>- <p class="speaker">Anna Burke</p>
- <p>The question is that this bill be now read a second time. Just for the information of the House, there will be a series of one-minute divisions after this, so I suggest nobody gets up and runs away.</p>
- <p>Bill read a second time.</p>
- <p>Message from the Governor-General recommending appropriation announced.</p>
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<p>Australian taxpayers need to understand that the Australian Labor Party is committing them to a $10 billion level of expenditure for the government to pick winners when it comes to clean energy technology. That should ring alarm bells. It rings alarm bells with the opposition. It rings alarm bells with the Liberal members of the House of Representatives Standing Committee on Economics who participated in the inquiry, but it does not ring alarm bells on the opposite side because it is just business as usual. It is just standard, typical practice from a government that has become fat and lazy when it comes to dealing with taxpayers' funds. That is the concern that I and others have.</p><p>But more than that, make no mistake, the whole basis on which CEFC will operate is fundamentally flawed because, again from the evidence before the inquiry, it is clear that the sole purpose of the operation of the CEFC is to provide a taxpayer subsidy for clean tech that otherwise will not be commercially funded. They are called barriers to entry or barriers to investment. The Labor Party cannot have its cake and eat it too. You cannot say, 'Well, there is a market failure here, there is a reason why these start-ups, these commercialised entities, cannot receive private sector finance and that is because it is too risky and too pricey for these ventures to be funded. That is why we are going to suddenly come in like the cavalry with a $10 billion fund,' but then at the same time say, 'No, there's not a heightened level of risk, it's okay'. The reality is this is a risky venture right from day one, which is why the Labor Party says, 'We expect a 7½ per cent default—that is, we expect taxpayers to lose $750 million, which could actually be substantially higher'.</p><p>This is a government with a bad track record. It is a government that now thinks it knows better than the private sector when it comes to investing in clean tech. It is a government which, as the very basic starting point for CEFC, acknowledges that these institutions, companies, or whatever they might actually be, cannot secure private sector funding at the level required to make a go of it. That is the whole rationale for this $10 billion fund and that is the reason why the coalition will rip it apart, because it is bad policy, it is bad use of taxpayers' money and it is Australian taxpayers that wear the risk of this investment, not the private sector. I am very pleased to say that we do not support this jaunt. We do not support risking $10 billion of taxpayers' money and we do not support a starting point that says we are going to lose $750 million—a figure that has just materialised out of thin air and is not actually based on international benchmarks.</p><p>The final point lies with why this is actually taking place. I said I would be relatively brief, so I will finalise on this point. It is the opportunity cost associated with the operation of the CEFC. We already know the government is taking it off budget. We know the government has used tricky legislative implementation to ensure that they make it as difficult as possible for a subsequent government that would seek to repeal this particular agency. It is Australians who will have to finance this through borrowed funds. So this little jaunt down the road of being venture capitalists, which is effectively what the CEFC will be, this little jaunt at the direction of the minister at the table, the Minister for Climate Change and Energy Efficiency, will see Aussie kids for the next 20 years having even more debt to pay off to pay for this little venture capital expedition that the minister and others want to go on. They are the ones in whose apparent cause we are trying to do our little bit to clean the environment, even though the rest of the world is continuing to pollute. It is in their interests, apparently, that all this is taking place, yet they always seem to avoid the little asterisk at the end of that sentence, which is that the next generation of Australians will be paying all the debt and interest associated with this $10 billion junket.</p><p>I am pleased to stand opposed to the CEFC. It is a bad decision. The government should not be in the business of thinking that it is smarter than the private sector because, if there is one thing that we have learned time and time again, it is that governments are not. I have absolute knowledge about one thing, and that is that this government certainly is not.</p> <p class="speaker">Greg Combet</p><p>The House has been debating the Clean Energy Finance Corporation Bill 2012, the Clean Energy Legislation Amendment Bill 2012, the Clean Energy (Customs Tariff Amendment) Bill 2012 and the Clean Energy (Excise Tariff Legislation Amendment) Bill 2012. This is a very important package of legislation, and it continues to implement the Gillard government's historic reforms to build a clean energy future.</p><p>I thank all members for their contribution to the second reading debate on each of these bills and the associated legislation, although I should observe that some of the contributions really have been quite misleading and misrepresentative of the purposes of the legislation. One only has to consider the accusation of governments picking winners to recognise what nonsense has really been spoken by some of those on the other side of the House. In fact, the opposition has a policy called Direct Action, which is picking winners. What we are doing here with the Clean Energy Finance Corporation Bill is establishing a corporation, vesting it with funds that will operate independent of government according to an investment mandate and make investments on a commercial basis. To suggest otherwise just completely misrepresents the legislation.</p><p>I would also like to thank members of the House Standing Committee on Economics, particularly the chair, the member for Parramatta, for the inquiry that has been conducted into the legislation which built on the extensive consultation that the expert review panel, chaired by Jillian Broadbent, a Reserve Bank of Australia board member, undertook from October last year to March this year.</p><p>The Clean Energy Finance Corporation is a very important part of the government's clean energy future plan. It will encourage private investment and help overcome financial barriers that were clearly articulated in the review report that was chaired by Jillian Broadbent to commercialising and deploying cleaner energy technologies. The fact of the matter, as was identified in the review report, is that investment in clean energy technologies often faces a range of obstacles in attracting financing. I outlined those obstacles in my second reading speech.</p><p>The corporation will capitalise private finance into Australia's clean energy sector, renewable energy and low emissions technology using financial products and structures that address those financial barriers. They could include the provision of loans, loan guarantees or equity investments, but the corporation will operate on a commercial basis. The corporation, as I indicated earlier, will operate independently from government also, and it will focus on bringing private finance into the financing of renewable energy and low emissions technology investments. It is not expected to be the sole financier. In this way, it will build investor confidence in the clean energy sector.</p><p>It is also important to note just in summary that the Clean Energy Finance Corporation, the carbon price mechanism and the renewable energy target have all been designed to complement each other and, in order to facilitate the investments that need to be made in renewable energy, in low emissions technologies, in clean energy and in energy efficiency, to work together so that we achieve the goal of reducing our emissions, meeting our international obligations and achieving a 20 per cent renewable energy target by the year 2020 at lowest cost to the economy. These components of policy will work effectively together.</p><p>Finally, in relation to the Clean Energy Legislation Amendment Bill and the two other associated bills, it is important to note that the amendment bill will provide for something that the gaseous fuels industry has been asking for and consulting with the government for quite a period of time. It is something that came out of the inquiry into the clean energy bills last year—that is, to facilitate the opportunity for LPG, LNG and CNG to come underneath the carbon price mechanism rather than fuel excise arrangements. CNG, according to this bill and consequent upon its passage through parliament, will come under the carbon price mechanism from 1 July this year, and LPG and LNG will come under the carbon price mechanism from 1 July 2013. The amendments in the amendment bill and the associated bills principally deal with that issue.</p><p>With those remarks in summary, I commend the bills to the House.</p> <p class="speaker">Anna Burke</p><p>The question is that this bill be now read a second time. Just for the information of the House, there will be a series of one-minute divisions after this, so I suggest nobody gets up and runs away.</p>
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