26 August, 2021
I rise today to speak on the Export Finance and Insurance Corporation Amendment (Equity Investments and Other Measures) Bill 2021. This bill will make changes that affect Export Finance Australia, known in short as EFA, and the provision of financial assistance it is tasked with undertaking.
The role EFA plays in supporting Australia's exports industries is probably not well enough known by Australians. Formed in 1991, EFA, previously known as the Export Finance and Insurance Corporation, is Australia's primary overseas export credit agency—and keep in mind that these are Australian public funds that are being lent. Export credit agencies like EFA are common in other jurisdictions, and they act as an intermediary between national governments and exporters to issue export insurance solutions, guarantees for financing and loans. Export credit agencies often lend far more money than commercial banks and offer long-term, low-interest debt that makes a project much more bankable. According to EFA, it offers loans, bonds, guarantees, project and structured finance and information for exporters. EFA works with governments, small and medium enterprises and larger corporations to take on export opportunities and develop infrastructure in the Indo-Pacific. EFA provides, on average, $572 million a year in financial assistance for Australian exporting companies and has up to $1.2 billion in capital at any one time. This is a significant sum for a government agency.
The changes included in this bill will allow EFA to make equity investments to support infrastructure investments in the Indo-Pacific or export linked projects in Australia. The bill will also give power to Export Finance Australia to offer guarantees for overseas infrastructure transactions without needing to provide a loan with the same transaction. These changes come just after the government made similar changes to the governance structure and functions of the Northern Australia Infrastructure Facility, the NAIF—a similar agency that gives financial assistance to organisations with the aim of facilitating economic development in northern Australia. Call me slightly cautious, maybe, but I think there are similarities in these changes.
I don't dispute the efficacy and necessity of export credit agencies like the EFA; however, we need to be very cautious about whether these changes will increase the risk exposure of EFA through making equity investments. If investments do go badly, then it's the Australian taxpayer that could be left with the losses of an investment. An independent review by reviewer Stephen Sedgwick AO of the financial powers of the EFA is actually currently underway. I would suggest that it would be prudent for the government to consider the final recommendations of that review before it pushed ahead with the proposed changes. Those recommendations would limit poor outcomes and bad policies with, ultimately, public funds. We're already $1 trillion in debt, so we must be prudent in managing our finances if we're to recover, and we have to be especially watchful so that taxpayer money does not go to stranded assets or failing industries or to worsen what we know are the costs coming from climate change.
According to the Global Energy Monitor, over $100 billion of shareholder value could be lost in stranded assets just for gas. That doesn't include other fossil fuel assets like coal. I support the role of the export credit agencies in principle. However, EFA, like many other export credit agencies, has a very troubled history with fossil fuels. Australia and the world are at a crossroads. Only a fortnight ago, the Intergovernmental Panel on Climate Change released a summary report on the latest climate science and projections. The International Energy Agency and the United Nations have said that getting to net zero emissions as fast as possible and before 2050 will require wrapping up any subsidies or supports offered with fossil fuel developments. Unfortunately, export credit agencies have been providing large amounts to fossil fuel developments. Some estimates are that, between 2016 and 2018, G20 countries provided some $32 billion in support for fossil fuels through export credit agencies, and Australia is no exception.
In Australia, you may be aware, finance in general is drying up for fossil fuels. This trend has even been the subject of committee inquiry in this parliament. Investors don't want to touch carbon assets in a carbon constrained world. You only have to look in the media in any given week and you will see super funds, asset management businesses, institutional investors and the like all announcing net zero policies and divestment from any funding of fossil fuels. As a result, it is now public finance—public funds from export credit agencies like EFA—that is stepping into the gap to prop up these projects. Where private money doesn't want to go, we are risking public money. Within Australia, three of the top seven lenders to LNG projects between 2008 and 2019 were overseas export credit agencies. So, when we talk about subsidies, let's be very clear that it is fossil fuels that are getting government subsidies.
Australia's own EFA is currently giving fossil fuel developments their last line of help and lease on life—but I don't hear that coming from any speeches made in the chamber today. Between July 2009 and June 2020, EFA provided over $1.5 billion in financing for fossil fuel projects. Renewables received only $20 million. So, $1.5 billion for $20 million in the same period—that is, 80 times more being funded for fossil fuel projects. Projects like the Gladstone LNG plant received a $254 million loan, the Ichthys LNG project was refinanced with $164 million in support, and the Wiggins Island coal export terminal received a loan of $124 million. The Wiggins Island coal export terminal, in particular, has been a diabolical investment. Three project partners have gone bankrupt, costs have blown out and investors lost billions in shareholder value. Yet EFA is lending.
Transparency is a major issue. This may be only the tip of the iceberg, but we will never know. There is a real lack of transparency around the EFA's operations, especially with regard to environmental and social matters. Jubilee Australia has identified over 100 transactions between 2009 and 2020 with companies involved in fossil fuels, but the projects and the purpose of the funding is unclear. EFA has an exemption under the Freedom of Information Act for its commercial and national interest accounts. That means that large transactions of public funds cannot be evaluated by the taxpayer. In 2011, the UN Independent Expert on Foreign Debt and Human Rights, Dr Cephas Lumina, was concerned about this practice and said that he 'fully supports the view that the absence of transparency requirements raises serious questions about the agency's accountability to taxpayers and to citizens of the developing countries where EFIC supported projects'. Dr Lumina was ultimately of the view that 'EFIC should be required to publicly disclose information concerning its activities,' and I absolutely agree.
The Productivity Commission in 2012—some nine years ago—recommended that freedom of information exemptions should be revoked, stating at the time:
… the FOI Act exemptions reduce the ability of the public and the Australian Parliament to examine facilities for their environmental, social and human rights impacts.
EFA being exempted is also completely out of step with other jurisdictions in Australia. For example, both the United States and the United Kingdom do not provide blanket exemptions to their export credit agencies. Australia must follow suit. The taxpayer has a right to know about where and when money is being spent.
For this reason, I will be proposing amendments during the consideration in detail phase of this bill to, firstly, prohibit the EFA further financing of fossil fuels projects; and, secondly, remove the exemption from Freedom of Information for EFA's commercial accounts. This is public money and should be open to scrutiny. I very much call on the members of parliament, the government and the opposition, Labor, to support those amendments because they are vital to ensure proper scrutiny over those funds. If the coalition and Labor have the temerity to tell the Australian people that they are committed to climate action, then they must walk the talk and end EFA's fossil fuel spending spree. It is time for decisive action. We deserve accountability and transparency on where public funds are going.
The latest IPCC report was a red alert for all of us. It would be simply hubris for both the government and Labor not to listen. We all need to ensure that EFA's actions are actually able to be seen by Australians. We need those FOI exemptions to be revoked and we need to ensure this public money that is lent via EFA is actually to the benefit of Australians and future generations. There must be sound investments, and that cannot be to continue lending and supporting extending the life of fossil fuel projects.