Details of the Financial Framework (Supplementary Powers) Amendment (Prime Minister and Cabinet Measures No. 1) Regulations 2019

 

Section 1 - Name

 

This section provides that the title of the Regulations is the Financial Framework (Supplementary Powers) Amendment (Prime Minister and Cabinet Measures No. 1) Regulations 2019.

 

Section 2 - Commencement

 

This section provides that the Regulations commence on the day after the instrument is registered 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 4 of Schedule 1AB (table)

 

Item 1 adds a new table item to Part 4 of Schedule 1AB to establish legislative authority for government spending.

 

New table item 346 establishes legislative authority for government spending to provide urgent assistance for eligible primary producers.

 

The Government will support eligible primary producers by establishing and administering a loan scheme to provide assistance to eligible primary producers negatively affected by the 2019 floods in Northern Queensland by way of loans to Authorised Deposit-taking Institutions (ADIs) at the Government's cost of borrowing. The objective of this loan scheme is to provide participating ADIs with a reduced cost of funding that would be passed through to eligible primary producers.

 

Assistance will be provided through loans to ADIs at the Government's cost of borrowing, which is the weighted average issuance yield of the Government's debt portfolio; currently 2.44 per cent as of the 2018-19 Mid-Year Economic and Fiscal Outlook. ADIs will individually set the interest rate they charge eligible primary producers, provided that the banks' reduced cost of funding is passed through to eligible primary producers.

 

 

The loan scheme will be available to all ADIs and will have the following features:

 

*              loans would be available to all ADIs from 1 July 2019;

*              loans to participating ADIs would be provided at the Government's cost of borrowing (the weighted average issuance yield of the Government's debt portfolio; currently 2.44 per cent as of the Mid-Year Economic and Fiscal Outlook);

*              loans to ADIs will mature on 1 July 2022;

 

*              ADIs will pay interest to the Commonwealth every six months, with the principal to be repaid by 1 July 2022; and

*              customer eligibility for the concessional rate will be assessed on a case-by-case basis by ADIs, having regard to eligibility criteria set by the Government, which will be publicly available, as well as their internal assessment processes and legal obligations.

 

The loan scheme will be administered by the North Queensland Livestock Industry Recovery Agency (the Agency). ADIs will make applications to the Agency based on the value of their business loans to eligible primary producers. Once the loan between the Commonwealth and an ADI has matured, the ADI will have full discretion over the loan terms with the customer. 

 

Participating ADIs will be responsible for assessing loan applications against eligibility criteria and periodically reporting to the Agency on the process and outcomes.

 

All ADIs will be able to access lower interest rate loans up to the value of loans that they provide to eligible primary producers. Merits review is therefore not required as no ADIs will not have the ability to access the Commonwealth loan scheme. Should any issues arise in regards to the contractual relationship between the Government and an ADI, this will be a matter of contract law.

 

In the event that a primary producer seeks a loan with an ADI in accordance with the loan scheme and they are found by the ADI to be not eligible in accordance with the Government's eligibility criteria, the primary producer can make an application to the Agency for a review of their eligibility against the eligibility criteria.

 

The Agency will not be responsible for other matters relating to loan products with ADIs. Should a primary producer have any concerns regarding its interaction with the ADI, these should be pursued through existing complaints handling processes.

 

Funding was announced by the Prime Minister, the Hon Scott Morrison MP, on
1 March 2019: https://www.pm.gov.au/media/rebuilding-north-queenslands-livestock-industry.

 

 

 

Details of the funding will be included in the 2019-20 Budget, titled 'North Queensland Flood Recovery Package'. Funding of up to $1.75 billion in loans will be made available to ADIs via the loan scheme.

 

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

*              the Commonwealth executive power and the express incidental power (sections 61 and 51(xxxix)), including the nationhood aspect;

*              the banking power (section 51(xiii));

*              the bankruptcy and insolvency power (section 51(xvii)); and

*              the trade and commerce power (section 51(i)).

Commonwealth executive power and the express incidental power, including the nationhood aspect

 

The express incidental power (section 51(xxxix) of the Constitution) empowers the Parliament to make laws with respect to matters incidental to the execution of any power vested in it by the Constitution. Together with the executive power (section 61 of the Constitution), section 51(xxxix) supports activities that are peculiarly adapted to the government of a nation and cannot be carried out for the benefit of the nation otherwise than by the Commonwealth.

 

The Government has determined that the recent flooding in Northern Queensland is a disaster of national significance, requiring urgent and extraordinary measures in response to assist the primary producers who have been affected. The Commonwealth is uniquely placed to provide this assistance, by using its lower cost of borrowing to make loans to ADIs, on the condition that they charge eligible primary producer customers a rate that reflects the ADI's reduced cost of funding.

 

Banking power

 

Section 51(xiii) of the Constitution relevantly empowers the Parliament to make laws with respect to 'banking, other than State banking; ... '.

 

The program/arrangements will support banks in engaging in banking business with primary producers.

 

Bankruptcy and insolvency power

 

Section 51(xvii) of the Constitution relevantly empowers the Parliament to make laws with respect to 'bankruptcy and insolvency'.

 

The program/arrangements will support primary producers at imminent risk of bankruptcy or insolvency so as to prevent or reduce the risk of them becoming bankrupt or insolvent. 

 

Trade and commerce power

 

Section 51(i) of the Constitution empowers the Parliament to make laws with respect to 'trade and commerce with other countries, and among the states'.

 

The program/arrangements will support primary producers in their exporting business.

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 (Prime Minister and Cabinet Measures No. 1) Regulations 2019.

 

This disallowable legislative instrument is 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 FF(SP) 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 Financial Framework (Supplementary Powers) Amendment (Prime Minister and Cabinet Measures No. 1) Regulations 2019 amend Schedule 1AB to the FF(SP) Regulations to add new table item 346 to establish legislative authority for government spending on urgent relief for eligible primary producers in areas affected by the North and Far North Queensland Monsoonal Trough (25 January - 14 February 2019).

 

The Government will support eligible primary producers by establishing and administering a loan scheme to provide assistance to eligible primary producers negatively affected by the 2019 floods in Northern Queensland by way of loans to Authorised Deposit-taking Institutions (ADIs) at the Government's cost of borrowing. The objective of this loan scheme is to provide participating ADIs with a reduced cost of funding that would be passed through to eligible primary producers.

 

Human rights implications

 

This instrument does not engage human rights as it does not relate to any of the rights contained in the relevant human rights treaties to which Australia is a party.

 

Conclusion

 

This instrument is compatible with human rights as it does not raise any human rights issues.

 

 

Senator the Hon Mathias Cormann

Minister for Finance and the Public Service