Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Guarantee of State and Territory borrowing appropriation bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 1
General outline and financial impact 3
Chapter 1 Guarantee of State and Territory Borrowing 5
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The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|Central Financing |Means any of the following: |
|Authority |the New South Wales Treasury |
| |Corporation, constituted |
| |under the Treasury |
| |Corporation Act 1983 (NSW); |
| |the Treasury Corporation of |
| |Victoria established under |
| |the Treasury Corporation of |
| |Victoria Act 1992 (Vic); |
| |the Queensland Treasury |
| |Corporation originally |
| |constituted under the |
| |Statutory Bodies Financial |
| |Arrangements Act 1982 (QLD) |
| |and continued and preserved |
| |in existence under the |
| |Queensland Treasury |
| |Corporation Act 1988 (QLD) |
| |under the name and style |
| |"Queensland Treasury |
| |Corporation"; |
| |the Western Australian |
| |Treasury Corporation |
| |established under the Western|
| |Australian Treasury |
| |Corporation Act 1986 (WA); |
| |the South Australian |
| |Government Financing |
| |Authority, a corporation |
| |established under the |
| |Government Financing |
| |Authority Act 1982 (SA); |
| |the Tasmanian Public Finance |
| |Corporation, established |
| |under the Tasmanian Public |
| |Finance Corporation Act 1985 |
| |(Tas); |
| |the Northern Territory |
| |Treasury Corporation, |
| |established under the |
| |Northern Territory Treasury |
| |Corporation Act 1994 (NT); |
| |the Australian Capital |
| |Territory |
|Deed of Guarantee |The deed of guarantee |
| |executed on behalf of the |
| |Commonwealth entitled 'Deed |
| |of Guarantee in respect of |
| |the Australian Government |
| |Guarantee of State and |
| |Territory Borrowing', which |
| |is published on |
| |www.stateguarantee.gov.au. |
|Scheme Rules |The Scheme Rules identified |
| |in the Deed of Guarantee, |
| |which are published on |
| |www.stateguarantee.gov.au. |
|State(s) |The States and Territories |
| |covered by the Guarantee of |
| |State and Territory Borrowing|
| |either individually or |
| |collectively. |
General outline and financial impact
Guarantee of State and Territory Borrowing
The Guarantee of State and Territory Borrowing is established in
the Deed of Guarantee and the Scheme Rules.
This Bill appropriates funds to enable claims to be paid under the
Deed of Guarantee in accordance with the Scheme Rules. The Bill
also provides a borrowing power, should there be insufficient funds
in the Consolidated Revenue Fund at the time claims are to be paid.
Date of effect: The Guarantee of State and Territory Borrowing
will come into effect on the date specified in the Deed of
Guarantee.
Proposal announced: 25 March 2009.
Financial impact: The expected financial impact of the Guarantee
of State and Territory Borrowing is remote and unquantifiable.
Expenditure would arise under the Deed of Guarantee only in the
unlikely event that a State fails to meet its obligations with
respect to a commitment that is subject to the Deed of Guarantee
and the Deed of Guarantee is called upon. In this case, the
Government is likely to be able to recover any such expenditure
through a claim on the relevant State. The impact on the
Government's budget would depend on the extent of the State's
default and its ability to meet the Government's claim.
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Outline of chapter
1. The Bill provides an appropriation to enable claims to be paid
under the Guarantee of State and Territory Borrowing. The Bill
also provides a borrowing power, enabling money to be borrowed to
pay those claims, should there be insufficient funds in the
Consolidated Revenue Fund at the time claims are to be paid.
Context of amendments
2. On 25 March 2009, the Australian Government announced a temporary
guarantee over borrowing by the States (the Guarantee of State and
Territory Borrowing).
3. The Guarantee of State and Territory Borrowing covers securities
issued by Central Financing Authorities but does not include:
. securities with a maturity length of greater than 15
years;
. securities denominated in a foreign currency;
. securities which are 'complex'; or
. borrowings for non-government owned entities.
4. Guidance as to what is considered 'complex' can be found on the
website www.stateguarantee.gov.au.
Summary of new law
5. The Bill provides for an appropriation enabling claims to be paid
under the Deed of Guarantee in accordance with the Scheme Rules,
and a borrowing power, enabling money to be borrowed to pay those
claims should there be insufficient funds in the Consolidated
Revenue Fund at the time claims are to be paid.
Detailed explanation of new law
Appropriation
6. The Consolidated Revenue Fund is appropriated for two purposes.
First, to pay claims under the Deed of Guarantee in accordance with
the Scheme Rules. Second, to repay a borrowing, and to pay
interest on a borrowing, made on behalf of the Commonwealth for the
purpose of paying claims under the Deed of Guarantee in accordance
with the Scheme Rules. [Sections 3 and 5]
Borrowing
7. The Minister may, on behalf of the Commonwealth, borrow money for
the purpose of paying claims under the Deed of Guarantee in
accordance with the Scheme Rules [Subsection 6(1)]. This power is
provided because money may need to be borrowed if there are
insufficient funds in the Consolidated Revenue Fund to pay claims
at the time those claims are to be paid. Borrowed money is paid
into the Consolidated Revenue Fund.
8. The borrowing must not be for a period exceeding 24 months.
Borrowing includes raising money or obtaining credit, whether by
dealing in securities or otherwise. [Subsections 6(2) and (3)]
Other provisions
9. The Act may be cited as the Guarantee of State and Territory
Borrowing Appropriation Act 2009. [Section 1]
10. The Act will commence on the day on which it receives Royal Assent.
[Section 2]
11. Payments may be made under the Deed of Guarantee in accordance with
the Scheme Rules either inside or outside Australia [Sections 4 and
5]. Money may be borrowed, for the purpose of paying claims under
the Deed of Guarantee in accordance with the Scheme Rules, and
those borrowings repaid, either inside or outside Australia.
[Sections 4 and 6]
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