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Sovereign Risk

Andrea Dawkins

Andrea Dawkins  -  Thursday, 24 September 2015

Tags: Carbon Price, Government Procurement

That this House notes:

1.      The fact that not all risk is sovereign risk and that it is difficult to find a definition which supports its current use in the Tasmanian House of Assembly;

2.      That traditionally the term ‘sovereign risk’ has been used when the government of a less developed country has defaulted on foreign debt, as developing countries are often at a higher risk of catastrophic fluctuation in their exchange rates if their currency is dependent on a single resource export;

3.      That economies reliant on a single export are at a high risk of rapidly changing currency value and as such present a higher risk to any company wishing to undertake business in that country;

4.      That a possible change in government policy does not constitute a sovereign risk, that is in fact simply a business risk and does not constitute special recognition or quarantining from the normal business of government;

5.      That it is inappropriate to use the term sovereign risk every time a policy change affects, or potentially affects, a company’s bottom line;

6.      The federal Liberal government’s incessant overuse of the term when called upon to change policy in what they view as a potentially unfavourable manner;

7.      That as a result, State governments have begun to apply the term sovereign risk in a negative way to potential changes in policy, particularly with regard to resource management and taxation of resource extraction;

8.      That Trade Ministers use the term to insinuate the reluctance of foreign countries to undertake business in Australia as a result of, for example, renewable energy targets or carbon pricing;

9.      That whilst companies may threaten to leave the country and do business elsewhere, that they actually don’t and stay as they are often entrenched in a supply network and are unlikely to relocate simply because there has been a cultural shift within government policy; and

Further, that this House;

10.  Calls for all government tender processes to be open to review or competitive test.