Commonwealth of Australia Explanatory Memoranda Commonwealth of Australia Explanatory Memoranda[Index] [Search] [Download] [Bill] [Help]
2013-2014
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EXPORT FINANCE AND INSURANCE CORPORATION AMENDMENT (DIRECT
LENDING AND OTHER MEASURES) BILL 2014
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Trade and Investment, the Honourable
Andrew Robb AO MP)
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Export Finance and Insurance Corporation Amendment (Direct Lending and
Other Measures) Bill 2014
OUTLINE
Purpose/Objective
The Export Finance and Insurance Corporation Amendment (Direct Lending and
Other Measures) Bill 2014 ("the Bill") expands EFIC's powers to allow direct lending
for export transactions involving all goods, not just capital goods, and provides for
competitive neutrality principles to apply to EFIC's operations.
Why the Bill is required
This Bill would give EFIC the ability to lend in all goods export transactions, not only
capital goods transactions. As the vast majority of Australian exports are not capital
goods, this will expand EFIC's capacity to support Australian business, particularly
Small and Medium sized Enterprises ("SMEs"). This Bill would also expand
competitive neutrality to all EFIC's operations.
This Bill is required to give legislative effect to these elements of the Government
Decision that require legislative amendments. The Bill will create amendments to the
Export Finance and Insurance Corporation Act 1991 ("the Act").
To give effect to the Government's decision in relation to direct lending by EFIC the
Act will be amended to allow EFIC to support exporters of goods, not just capital
goods, increasing the number of exporters eligible for EFIC assistance. This should
also reduce the time and paperwork required for many transactions EFIC conducts
with SMEs. The amendment to the Act removes the word "capital" from "capital
goods" in the definition of an eligible export transaction and includes any
consequential amendments.
Consistent with the Productivity Commission's recommendation in the 2012 Review
of Australia's Export Credit Arrangements, the Government also decided that
Competitive Neutrality principles should apply to EFIC to ensure it does not have a
net competitive advantage over other business (or potential competitors) simply by
virtue of its Government ownership. To achieve this outcome the Bill is required to
provide for EFIC to pay a debt neutrality charge or guarantee fee, and a tax equivalent
payment. The Minister would determine the appropriate arrangements that are to
apply in respect of those payments.
FINANCIAL IMPACT STATEMENT
The Bill will have no direct financial impact.
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ABBREVIATIONS
The following abbreviations are used in this explanatory memorandum:
The Bill means the Export Finance and Insurance Corporation Amendment (Direct
Lending and Other Measures) Bill 2014;
The Act, unless the context indicates otherwise, means the Export Finance and
Insurance Corporation Act 1991;
EFIC means the Export Finance and Insurance Corporation;
SMEs means Small and Medium sized Enterprises; and
ABS means Australian Bureau of Statistics.
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NOTES ON CLAUSES
Clause 1Short title
Clause 1 is a formal provision specifying the short title.
Clause 2Commencement
Clause 2 provides that the Bill will commence on the day after the Bill receives Royal
Assent.
Clause 3Schedule(s)
Clause 3 provides that legislation that is specified in a Schedule to this Bill is
amended or repealed as set out in the applicable items in the Schedule concerned, and
any other item in the Schedule to this Bill has effect according to its terms.
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Schedule 1Direct Lending Amendment
Export Finance and Insurance Corporation Act 1991
Item 1 - Before subsection 3(2) Insert: Loans and lending of money
This item provides a heading describing the content of the section below.
Item 2 - Before subsection 3(3) Insert: Eligible export transactions
This item provides a heading describing the content of the section below.
Item 3 - Paragraphs 3(3)(a), (b), (c) and (d)
The word "capital" has been removed to expand EFICs power such that it is no
longer restricted to lending directly only in relation to export transactions for capital
goods.
Item 4 - Subsection 3(4)
This subsection is being repealed as a definition of "capital goods" is no longer
required as EFIC is to no longer be restricted to lending only for eligible export
transactions involving capital goods.
Item 5 - Before subsection 3(5) Insert: Australian export trade
This item provides a heading describing the content of the section below.
Item 6 - Application provision
The application provision describes how the amendment will apply to EFIC.
Item 7 - Transitional provision
The amendments made by this Schedule do not affect the continuity of any of the
following that were in force immediately before the commencement of this Schedule:
(a) directions given under subsection 9(2), 26(1), or section 29, of the Export
Finance and Insurance Corporation Act 1991;
(b) approvals (with or without conditions) given under section 27 of that Act;
(c) principles determined under subsection 67(1) of that Act.
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Schedule 2 - Competitive Neutrality Amendment
Export Finance and Insurance Corporation Act 1991
Item 1 - Subsections 61A(1) and 62A(1)
This item omits the reference in the Act "in respect of short-term insurance contracts
entered into by EFIC". The reference is being removed so that the Minister may
inform EFIC in writing of arrangements that are to apply to EFIC in relation to a debt
neutrality charge or guarantee fees to be paid by EFIC to the Commonwealth in all
EFICs operations, not just short term insurance contracts.
Item 2 - Subsection 63A(2)
This item omits the reference in the Act to "over other insurers because of the
operation of section 63 in relation to its short term insurance contracts" and
substitutes with "because of the operation of section 63, over other persons or bodies
who provide insurance or financial services or products that EFIC may provide." As
in item 1 this amendment reflects the application of competitive neutrality to all of
EFICs operations, not just short term insurance contracts.
Item 3 - Subsection 63A(3)
This item omits the reference in the Act "in relation to its short term insurance
contracts". As in item 1 this amendment reflects the application of competitive
neutrality to all of EFICs operations, not just short term insurance contracts.
Item 4 - Application provision
The application provision states that the amendments made in items 2 and 3 in respect
of the tax equivalent payment will apply from the first full financial year after the
commencement of the Bill. The intention of this application provision is to ensure that
competitive neutrality is aligned with the financial year period over which EFIC
measures its financial performance.
Item 5 - Transitional provision
The amendments made by this Schedule do not affect the continuity of any of the following
that were in force immediately before the commencement of this Schedule:
(a) arrangements under section 61A or 62A of the Export Finance and Insurance
Corporation Act 1991;
(b) determinations under subsection 63A(2) of that Act.
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Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny)
Act 2011
Export Finance and Insurance Corporation Amendment (Direct Lending and
Other Measures) Bill 2014
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 Export Finance and Insurance Corporation Amendment (Direct Lending and
Other Measures) Bill 2014 (referred to in this Explanatory Memorandum as ,,Bill)
gives legislative effect to the Governments decision to expand EFICs direct lending
powers and to apply competitive neutrality across all of EFICs operations.
Human rights implications
This Bill does not engage any of the applicable rights or freedoms, as it relates to
changes in the mandate of EFIC (the Governments export credit agency). The Bill
gives EFIC the ability to lend directly in relation to all transactions not just
transactions involving capital goods.
Conclusion
This Bill is compatible with human rights as it does not raise any human rights issues.
Circulated by authority of the Minister for Trade and Investment,
the Honourable Andrew Robb AO MP