Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2016-2017-2018
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
SENATE
Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018
EXPLANATORY MEMORANDUM
(Circulated by authority of Senator Hanson)
Commonwealth Inscribed Stock Amendment (Restoring the Debt
Ceiling) Bill 2018
OUTLINE
The purpose of the Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling)
Bill 2018 is to limit the amount the government can borrow to 35% of gross domestic
product.
The Bill is needed because there is no limit on government borrowing and the government
debt has grown significantly since the debt ceiling was repealed in 2013. It is too easy for a
government to see the present day advantages of borrowing when other generations are left to
repay the debt, a debt which now stands at over $530 billion. When governments borrow
heavily in good economic times the capacity to borrow in bad economic times is reduced.
Australians expect their government to support the economy in bad economic times and to
spend when others have stopped spending but this capacity is much reduced when the
government already has a heavy debt.
The Australian Office of Financial Management's mission is to arrange debt financing for the
government. The passage of Schedule 1 would ensure that the Office cannot issue further
stock if this would result in the value of stock and securities on issue to be an amount greater
than 35% of Australia's gross domestic product.
The Bill places boundaries on government spending and requires any government to be
careful when borrowing. It acts to encourage effective and efficient spending of taxpayer's
money and recognises that no government can predict the arrival of financial shocks and that
prudent and responsible government should balance their budgets so that debt is used as a last
resort in bad economic times.
NOTES ON CLAUSES
Clause 1: Short Title
1. Clause 1 is a formal provision specifying the short title of the Bill.
Clause 2: Commencement
2. This clause provides for the provisions of the Bill to commence on the day after this Bill
receives the Royal Assent.
Clause 3: Schedules
3. This clause provides that each Act specified in a schedule to this Act is amended or
repealed as is set out in the applicable items in the schedule, and that any other item in
has effect according to its terms.
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Schedule 1--Amendments
Commonwealth Inscribed Stock Act 1911
4. This Schedule sets a debt ceiling at 35% of gross domestic product.
Item 1 - After section 4
5. This item adds new section 5 to the Commonwealth Inscribed Stock Act 1911, which
provides that new stock must not be issued or sold if the total face value of stocks and
securities on issue under that Act or the Loans Securities Act 1919 would at any time
exceed 35% of gross domestic product.
6. New subsections 5(2) and 5(3) provide guidance for working out the total face value of
stock and securities for the purposes of subsection 5(1), and relevant definitions.
Item 2 - Application provision
7. This item applies the changes made by item 1 to stock and securities on issue on or after
the commencement of the item. The debt ceiling will apply to stock and securities that
were issued before or after the commencement of item 1.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018
This Bill 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 Bill
The purpose of the Commonwealth Inscribed Stock Amendment (Restoring the Debt ceiling)
Bill 2018 is to reinstate an upper limit on the amount of debt a government can incur without
returning to the Parliament to get approval to increase the debt.
The Bill will establish a maximum total face value of stock and securities on issue under the
Commonwealth Inscribed Stock Act 1911 and the Loans Securities Act 1919 of 35% of gross
domestic product.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Senator Hanson
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