FINANCIAL FRAMEWORK (SUPPLEMENTARY POWERS) AMENDMENT (AGRICULTURE AND WATER RESOURCES MEASURES NO. 4) REGULATIONS 2017 (F2017L00787) EXPLANATORY STATEMENT

Commonwealth Numbered Regulations - Explanatory Statements

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FINANCIAL FRAMEWORK (SUPPLEMENTARY POWERS) AMENDMENT (AGRICULTURE AND WATER RESOURCES MEASURES NO. 4) REGULATIONS 2017 (F2017L00787)

EXPLANATORY STATEMENT

 

Issued by the Authority of the Minister for Finance

 

Financial Framework (Supplementary Powers) Act 1997

 

Financial Framework (Supplementary Powers) Amendment

(Agriculture and Water Resources Measures No. 4) Regulations 2017

 

The Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) confers on the Commonwealth, in certain circumstances, powers to make arrangements under which money can be spent; or to make grants of financial assistance; and to form, or otherwise be involved in, companies.  The arrangements, grants, programs and companies (or classes of arrangements or grants in relation to which the powers are conferred) are specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the Principal Regulations).  The FF(SP) Act applies to Ministers and the accountable authorities of non-corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013

 

Section 65 of the FF(SP) Act provides that the Governor-General may make regulations prescribing matters required or permitted by that Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to that Act.

 

Section 32B of the FF(SP) Act authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Principal Regulations.  Section 32B also authorises the Commonwealth to make, vary and administer arrangements for the purposes of programs specified in the Principal Regulations.  Schedule 1AA and Schedule 1AB to the Principal Regulations specify the arrangements, grants and programs. 

 

The Regulations amend Schedule 1AB to the Principal Regulations to establish legislative authority for government spending on two initiatives in the Agriculture and Water Resources portfolio that arise from decisions in the 2017-18 Budget which was released on 9 May 2017 and the 2016-17 Mid-Year Economic and Fiscal Outlook which was released on 19 December 2016.  The initiatives will be administered by the Department of Agriculture and Water Resources.

 

Funding will be provided for:

*         concessional loans to former recipients of the Farm Household Allowance to assist them to continue to improve their farm business model and become financially self-reliant; and

*         a grant to Forest and Wood Products Australia to establish and administer the National Institute for Forest Products Innovation.

 

The National Institute for Forest Products Innovation is a 2016 election commitment.

 

Details of the Regulations are set out at Attachment A.  A Statement of Compatibility with Human Rights is at Attachment B

 

The Regulations are a legislative instrument for the purposes of the Legislation Act 2003.  The Regulations commence on the day after registration on the Federal Register of Legislation. 

 

Consultation

 

In accordance with section 17 of the Legislation Act 2003, consultation has taken place with the Department of Agriculture and Water Resources.

 

A regulation impact statement is not required as the Regulations only apply to non-corporate Commonwealth entities and do not adversely affect the private sector.

 

 

 


Details of the Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulations 2017

 

Section 1 - Name

 

This section provides that the title of the Regulations is the Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulations 2017.

 

Section 2 - Commencement

 

This section provides that the Regulations commence on the day after registration on the Federal Register of Legislation. 

 

Section 3 - Authority

 

This section provides that the Regulations are made under the Financial Framework (Supplementary Powers) Act 1997.

 

Section 4 - Schedules

 

This section provides that the Financial Framework (Supplementary Powers) Regulations 1997 are amended as set out in the Schedule to the Regulations.

 

Schedule 1 - Amendments

 

Item 1 - In the appropriate position in Part 2 of Schedule 1AB (table)

 

This item adds a new table item to Part 2 of Schedule 1AB to establish legislative authority for government spending on an initiative that will be administered by the Department of Agriculture and Water Resources.

 

New table item 8 establishes legislative authority for the Government to provide concessional loans to former recipients of the Farm Household Allowance (FHA).

 

The Government has extended the eligible cohort for the Farm Business Concessional Loans Scheme to include the FHA recipients who have exhausted their three cumulative years (1,095 days) of entitlement to income support under the FHA program on or before 30 June 2018.  Extending access to former FHA recipients will assist them to continue to improve their farm business model and become financially self-reliant.  This will in turn reduce the call on future government assistance.

 

The Farm Business Concessional Loans Scheme supports eligible farm businesses experiencing financial difficulty due to the effects of drought and the retrospective pricing decisions of Murray Goulburn, Fonterra and National Dairy Products to reduce farm milk gate prices in 2015-16.  There are two types of loans provided currently under the Scheme: the Drought Assistance Concessional Loans and the Dairy Recovery Concessional Loans.

 

The parameters and eligibility criteria for the concessional loans that will be available to former FHA recipients will be the same as for the Drought Assistance Concessional Loans except for the drought criteria.  These include the requirements of security and serviceability, and for the farm business to demonstrate sound prospects for a return to commercial viability in the long term.  The new loans will be available for debt refinancing purposes only.

 

Loans will be provided up to a maximum of $1 million.  The maximum loan term will be ten years.  A concessional variable interest rate will apply for the ten-year loan term, with the first five years as interest repayments only.  At any time during the loan term, loan recipients may prepay the whole or any part of their loan, without incurring any additional fees.

 

Applicants must have existing eligible debt to be eligible for a loan.  Eligible debt includes debt that has been established under commercial interest rates, terms and conditions.  It also includes existing debt that has been restructured under a Farm Finance Concessional Loan, a Drought Recovery Concessional Loan, a Drought Concessional Loan, a Drought Assistance Concessional Loan or a Dairy Recovery Concessional Loan.

 

The combined total amount of the Commonwealth-funded concessional loans, including a loan to a former FHA recipient, must not represent more than 50 per cent of the farm business's debt.  Under these terms, the farm business's commercial lender will maintain at least 50 per cent of the farm business's debt.

 

Funding for the extension of eligibility will be provided from the existing $250 million allocated for the Farm Business Concessional Loans Scheme in 2017-18.  Details are set out under the measure 'Farm Business Concessional Loans Scheme - extension of eligibility' in Budget 2017-18, Budget Measures, Budget Paper No. 2 2017-18 at page 61. 

 

The loans under the Farm Business Concessional Loans Scheme 2017-18 are to be delivered through the state and Northern Territory governments.  The Government provides funding to the state and territory delivery agencies to deliver and administer concessional loans on behalf of the Government.  These are well-established governance, delivery and administrative arrangements for the Scheme. 

 

Funding to contribute to the jurisdictions' administrative costs will be provided through a direct grant process on a non-competitive basis.  The service level agreements set out the obligations and responsibilities of the Government and the delivery agencies, including reporting requirements and the contribution by the Government to the delivery agencies' reasonable administrative costs related to the Scheme.  Amendments to the existing administrative arrangements will be agreed with the jurisdictions to enable delivery of the new loans. 

 

The loans to former FHA recipients will be demand-driven, with capped funding.  Eligibility will be subject to applicants meeting the loan requirements as specified in the guidelines, with the loans only available to those farm businesses who have exhausted their three cumulative years of FHA entitlement.  The delivery agencies will be responsible for assessing and making decisions in relation to individual loan applications on a case-by-case basis, in accordance with the guidelines and the underpinning legal agreements.  The guidelines will outline an applicant's rights of appeal, which include an internal review of the decision within the state or territory delivery agency and an option to engage the respective state or territory Ombudsman.

 

The guidelines will be available on the delivery agencies' websites to assist farm businesses with the application process.  Individual loan details will not be published.  Information on funding amounts provided to the jurisdictions will be publicly available via the delivery agencies' websites, AusTender and media releases.  

 

Funding for this item will come from Program 1.11: Drought Programs, which is part of Outcome 1.  Details are set out in the Portfolio Budget Statements 2017-18, Budget Related Paper No. 1.1, Agriculture and Water Resources Portfolio at page 21.

 

Noting that it is not a comprehensive statement of relevant constitutional considerations, the purpose of the item references the following powers of the Constitution:

*         the grants to states power (section 96); and

*         the territories power (section 122).

 

The provision of funding for activities in or in relation to states is supported by section 96 of the Constitution.  With respect to section 96 of the Constitution, the program, to be delivered by the governments of Queensland, Victoria, Tasmania, South Australia, New South Wales, and Western Australia, will extend the availability of the Farm Business Concessional Loans Scheme to include the FHA recipients in those states who have exhausted their entitlement to access financial support under the FHA program.

 

The provision of funding for activities in or in relation to a territory is supported by section 122 of the Constitution.  With respect to section 122 of the Constitution, the program will extend the availability of the Farm Business Concessional Loans Scheme to include the FHA recipients in the Northern Territory who have exhausted their entitlement to access financial support under the FHA program.  The program is to be delivered by the government of the Northern Territory.

 

Item 2 - In the appropriate position in Part 3 of Schedule 1AB (table)

 

This item adds a new table item to Part 3 of Schedule 1AB to establish legislative authority for government spending on an initiative that will be administered by the Department of Agriculture and Water Resources.

 

New table item 19 establishes legislative authority for the Government to provide a grant to Forest and Wood Products Australia (FWPA).

 

FWPA is a not-for-profit, industry-owned research and development company.  It is a declared industry services body under the Forestry Marketing and Research and Development Services Act 2007.  The grant of $4 million to FWPA will support the establishment and administration of the National Institute for Forest Products Innovation.

 

The Institute will consist of a national centre and two hubs operating as a dispersed network model.  The two hubs will be located in Launceston, Tasmania and Mount Gambier, South Australia.  Each hub will be allocated $2 million.  In addition, the Tasmanian and South Australian Governments have each committed $2 million in matching funding.  Processes are also in place for the industry to provide contributions if they choose to do so.


 

The Institute's scope of activities will cover the whole forest and wood products industry.  It will also benefit the industry and geographical centres by:

*         investigating innovative practices beneficial to the industry; and

*         developing links with other disciplines that use or can potentially use forest and wood products, increasing the demand for such products. 

The Institute will investigate innovation in forestry in areas such as forest management, timber processing, wood fibre recovery, advanced manufacturing, and the bio-economy.  It will also have a strong focus on industry liaison and research commercialisation.

The overall strategic direction of research and innovation will be provided by a national committee which will:

*         determine national research priorities;

*         help build links, including outside the forest and wood products industry;

*         promote the Institute; and

*         guide forestry and wood products research across the different regional hubs to deliver efficiency and consistency in research delivery.

 

The national committee will be advised by regional committees in the hubs comprised predominantly of industry representatives.  The regional committees will:

*         identify regional research priorities;

*         call for research project proposals; and

*         assess and select the successful proposals to fund.

 

FWPA will undertake the following activities:

*         research and development relating to the forest and wood products industry, which includes identifying national research priorities and funding research and development projects;

*         financial and administrative management relating to the Institute; and

*         industry liaison and promotional activities.

 

Funding of $4 million was included in the 2016-17 Mid-Year Economic and Fiscal Outlook under the measure 'National Institute for Forest Products Innovation - establishment' for a period of five years commencing in 2016-17.  Details are set out in the Mid-Year Economic and Fiscal Outlook 2016-17, Appendix A: Policy decisions taken since the 2016 PEFO at page 132.

 

Funding for the Institute was announced on 31 May 2016 as an election commitment by the Assistant Minister for Agriculture and Water Resources, Senator the Hon Anne Ruston, and the then Member for Bass, Mr Andrew Nikolic MP.  A subsequent announcement was made on 1 June 2016 by the Assistant Minister for Agriculture and Water Resources, Senator the Hon Anne Ruston, and the Member for Barker, Mr Tony Pasin MP.  

 

Funding to FWPA will be provided as a targeted, non-competitive grant in accordance with the Commonwealth Grants Rules and Guidelines.  The grant will be approved by the Assistant Minister for Agriculture and Water Resources.  The grant recipient will be required to enter into a grant agreement with the Department of Agriculture and Water Resources.  Grant payments will be made subject to achievement of the milestones as set out in the grant agreement.  The grant guidelines will be published at www.agriculture.gov.au/about/reporting/obligations/contracts.  The details of the grant will be published at www.agriculture.gov.au/about/reporting/obligations/grants-reporting-requirements.

 

The provision of a grant to FWPA is not considered suitable for merits review due to the non-competitive and targeted nature of the grant.

 

Funding for this item will come from Program 1.3: Forestry Industry, which is part of Outcome 1.  Details are set out in the Portfolio Budget Statements 2017-18, Budget Related Paper No. 1.1, Agriculture and Water Resources Portfolio at page 31.

 

Noting that it is not a comprehensive statement of relevant constitutional considerations, the purpose of the item references the Commonwealth executive power and the express incidental power (sections 61 and 51(xxxix)) of the Constitution.

 

Section 61 of the Constitution, together with section 51(xxxix), supports activities and enterprises that are peculiarly adapted to the government of the nation and cannot otherwise be carried out for the benefit of the nation.  The forest and wood products industry is a national industry which is significant to the national economy and Australia's export markets.  Funding of the Institute will contribute to research and development within the forest and wood products industry for the benefit of the nation.

 

 

 

 


Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulations 2017

 

These Regulations are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the Legislative Instrument

 

Section 32B of the Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the FF(SP) Regulations) and to make, vary and administer arrangements and grants for the purposes of programs specified in the Regulations.  Schedule 1AA and Schedule 1AB to the FF(SP) Regulations specify the arrangements, grants and programs.  The FF(SP) Act applies to Ministers and the accountable authorities of non-corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013

 

The Regulations amend Schedule 1AB to the FF(SP) Regulations to establish legislative authority for government spending on two initiatives in the Agriculture and Water Resources portfolio that arise from decisions in the 2017-18 Budget which was released on 9 May 2017 and the 2016-17 Mid-Year Economic and Fiscal Outlook which was released on 19 December 2016.  The initiatives will be administered by the Department of Agriculture and Water Resources.

 

Funding will be provided for:

*         concessional loans to former recipients of the Farm Household Allowance to assist them to continue to improve their farm business model and become financially self-reliant; and

*         a grant to Forest and Wood Products Australia to establish and administer the National Institute for Forest Products Innovation.

 

The National Institute for Forest Products Innovation is a 2016 election commitment.

 

The Deputy Prime Minister and Minister for Agriculture and Water Resources has portfolio responsibility for these matters. 

 

Human rights implications

 

The Regulations do not engage any of the applicable rights or freedoms.


 

Conclusion

These Regulations are compatible with human rights as they do not raise any human rights issues.

 

Senator the Hon Mathias Cormann

Minister for Finance


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