Pacific Banking Guarantee Bill 2025 - Initial Scrutiny [2025] AUSStaCSBSD 30 (27 March 2025)

1.1 The committee comments on the following bills and, in some instances, seeks a response or further information from the relevant minister.

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Pacific Banking Guarantee Bill 2025^[1]

Purpose	The bill seeks to appropriate the Consolidated Revenue Fund for the purposes of meeting any liabilities that the Commonwealth incurs under a Pacific banking guarantee, which refers to any guarantee entered into with an Australian headquartered authorised deposit-taking institution that operates in the Pacific region.
Portfolio	Treasury
Introduced	House of Representatives on 12 February 2025
Bill status	Before the House of Representatives

Standing appropriations^[2]

1.2 Clause 5 of the bill seeks to appropriate the Consolidated Revenue Fund for the purposes of meeting any liabilities that the Commonwealth incurs under a Pacific banking guarantee. These are guarantees entered into with an Australian-headquartered authorised deposit-taking institution (ADI) operating in the Pacific region.

1.3 This therefore establishes a standing appropriation. Standing appropriations enable entities to spend money from the Consolidated Revenue Fund on an ongoing basis, usually for indefinite amounts and duration. Unlike annual appropriations which require the executive to periodically request the Parliament to appropriate money for a particular purpose, once a standing appropriation is enacted any expenditure under it does not require regular parliamentary approval and therefore escapes direct parliamentary control. The amount of expenditure authorised by a standing appropriation may grow significantly over time, but without any mechanism for review included in the bill alongside the appropriation it is difficult for the Parliament to assess whether a standing appropriation remains appropriate.

1.4 Given the difficulty of ongoing parliamentary oversight over enacted standing appropriations, the committee expects a robust justification for why a standing appropriation should be established or expanded in the first place. To this end, the committee expects the explanatory memorandum to a bill that establishes or expands a standing appropriation to explain why it is appropriate to include a standing appropriation (rather than providing for the relevant appropriations in the annual appropriation bills) and whether the bill places a limitation on the amount of funds that may be appropriated or duration in which the standing appropriation will exist. The committee also expects the explanatory memorandum to address whether the standing appropriation is subject to a sunset clause and, if not, why such a clause has not been included in the bill.

The special appropriation is unlimited. This is appropriate as the Commonwealth has not yet entered into a Pacific banking guarantee and requires flexibility to negotiate with ADIs on the amount of guarantee.

The total maximum amount that could be appropriated will be equal to the sum of the amounts that the Commonwealth could be required to pay out under all Pacific banking guarantees made by the Commonwealth. A Pacific banking guarantee must be approved by the Commonwealth and will be considered on its merits, including whether the potential cost is outweighed by achievement of policy outcomes.

The appropriation is not time-limited as the duration of the guarantees entered into under the Bill may vary, and the Commonwealth needs to be in a position to pay its guarantee obligations in a timely manner, should it be required to do so. However, any Pacific banking guarantee entered into will be limited by the time specified in the guarantee. It is expected this will be for a 10-year period.

1.6 The committee notes that the explanatory memorandum has provided some explanation as to what the standing appropriation is for. However, no explanation has been provided as to why such an appropriation should not be included in the annual appropriation bills and whether any mechanisms have been considered to provide parliamentary oversight.

1.7 In this instance, the committee’s concerns are heightened as the appropriation is not limited by monetary value or time. The committee notes the justification provided in the explanatory memorandum for not having a maximum amount in the appropriation is that it is necessary for flexibility to negotiate with ADIs on the amount of guarantee. The explanatory memorandum also provides that the Commonwealth will consider any particular Pacific banking guarantee on its merits, including assessing whether the potential cost outweighs achievement of its policy outcomes. However, it is unclear if any other mechanisms have been considered to provide parliamentary oversight of the amount of money expended under this standing appropriation. The committee appreciates the importance of ensuring ongoing funding for potential Pacific banking guarantees that the Commonwealth enters into, but notes that once established as a standing appropriation, Parliament retains limited oversight of this expenditure.

1.8 Further, the explanatory memorandum also provides that the appropriation is not time-limited because the duration of the guarantee entered into may vary, and to allow flexibility to pay any guarantee obligations in a timely manner, but that it is expected that this will be for a 10-year period. It is unclear to the committee why this expected time-limit cannot be included in the bill itself. The committee remains concerned that there currently does not appear to be any mechanisms in the bill to provide parliamentary oversight.

1.9 In light of the above, the committee requests that the explanatory memorandum to the bill be amended to provide a justification for why this standing appropriation should not be included in the annual appropriation bills and whether any mechanisms have been considered to provide parliamentary oversight.

1.10 The committee otherwise draws this matter to the attention of senators and leaves to the Senate as a whole the appropriateness of this standing appropriation, noting the lack of mechanisms provided for parliamentary oversight.

^[1] This entry can be cited as: Senate Standing Committee for the Scrutiny of Bills, Pacific Banking Guarantee Bill 2025, Scrutiny Digest 3 of 2025; [2025] AUSStaCSBSD 30.

^[2] Clause 5. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(v).

Australian Senate Standing Committee for the Scrutiny of Bills - Scrutiny Digests