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2008-2009
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
commonwealth inscribed stock amendment bill 2009
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon. Wayne Swan MP)
Table of contents
General outline and financial impact 1
Details of provisions 3
Do not remove section break.
Outline
The Commonwealth Inscribed Stock Act 1911 (the CIS Act) provides a
standing borrowing authority to the Treasurer of $75 billion. The
Commonwealth Inscribed Stock Amendment Bill 2009 (the Bill) inserts
a new section 5A in the CIS Act to enable an increase in the cap on
the face value of Commonwealth Government Securities on issue by
$125 billion in special circumstances.
Date of effect: These amendments commence on Royal Assent.
Proposal announced: This measure was announced by the Government
in the February 2009 Updated Economic and Fiscal Outlook.
Financial impact: Interest paid on any securities issued will have
a negative impact on the fiscal and underlying cash balances.
Compliance cost impact: Nil. There are no compliance costs on
business flowing from these measures.
Summary of regulation impact statement
Regulation impact on business
Impact: Nil. The measure relates solely to the Government's own
borrowing. No regulations are imposed on business.
Do not remove section break.
Outline of chapter
1. The Bill amends the Commonwealth Inscribed Stock Act 1911 (the CIS
Act) by inserting a new section 5A which allows the Treasurer to
declare that a special circumstance exists which justifies an
increase in the cap of Commonwealth Government Securities on issue.
Context of amendments
2. These amendments relate to the Government's announcement of the
Updated Economic and Fiscal Outlook on 3 February 2009.
Comparison of key features of new law and current law
|New law |Current law |
|Maximum face value of |Maximum face value of |
|Commonwealth Government |Commonwealth Government |
|Securities on issue is |Securities on issue is |
|$75 billion with $125 |$75 billion. |
|billion increase in the | |
|cap being available in | |
|special circumstances. | |
Detailed explanation of new law
3. The Government can borrow money by issuing Commonwealth Government
Securities (CGS) such as Treasury Bonds. The CIS Act provides a
standing borrowing authority to the Treasurer to borrow in
Australian currency. The CIS Act currently provides that the
maximum face value of CGS on issue is $75 billion.
4. This amendment allows the Treasurer to declare that special
circumstances exist which justify an increase in the limit on the
face value of securities on issue by $125 billion. A special
circumstance could include, but is not limited to a deterioration
in global or domestic economic conditions or a deterioration in
revenues.
5. Once this declaration is published in the Gazette, the face value
of the stocks on issue will have increased by $125 billion.
6. At any one point in time there can only be one declaration that
there are special circumstances (subsection 5A(4)). In other
words, the Treasurer can not make another declaration until the
previous declaration is revoked.
7. Under subsection 5A(6), a declaration is not a legislative
instrument, this represents an exemption from the Legislative
Instruments Act 2003.
8. Under subsection 5A(7), if the Treasurer make declares that special
circumstances exist, this decision is not reviewable under the
Administrative Decision (Judicial Review) Act 1977.
9. The Treasurer will still be required to issue a direction under the
CIS Act specifying the total amount of CGS that can be on issue
within the cap (section 51JA).
Application and transitional provisions
10. This Act commences on the day it receives Royal Assent.
11. The amendment made by item 1 of Schedule 1 applies at the time of
commencement on the day after the declaration is published in the
Gazette. All stock on issue will continue to be counted towards
the new cap, apart from stock specifically excluded by paragraphs
5(2)(a)-(d) of the CIS Act.
Consequential amendments
12. There are no consequential amendments.