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2019
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
EMERGENCY RESPONSE FUND BILL 2019
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Finance,
Senator the Hon Mathias Cormann)
Table of abbreviations and common terms
|Abbreviation or |Description |
|common term | |
|Acts Interpretation Act|means the Acts Interpretation Act 1901 |
|Agency |means the Future Fund Management Agency |
| |established by section 74 of the Future Fund |
| |Act 2006 |
|ATSILSFF |means the Aboriginal and Torres Strait Islander|
| |Land and Sea Future Fund established by section|
| |9 of the ATSILSFF Act |
|ATSILSFF Act |means the Aboriginal and Torres Strait Islander|
| |Land and Sea Future Fund Act 2018 |
|Commonwealth official |means an official of a Commonwealth entity, as |
| |defined in section 13 of the PGPA Act |
|Constitution |means the Commonwealth of Australia |
| |Constitution Act |
|Corporations Act |means the Corporations Act 2001 |
|CRF |means the Consolidated Revenue Fund |
| DCAF |means the DisabilityCare Australia Fund |
| |established by |
| |section 10 of the DCAF Act |
| DCAF Act |means the DisabilityCare Australia Fund Act |
| |2013 |
|EIF |means the Education Investment Fund established|
| |by |
| |section 131 of the NBF Act |
|EIF Special Account |means the Education Investment Fund Special |
| |Account established by section 132 of the NBF |
| |Act |
|Emergency Management |means: |
|Minister |if there is a Minister whose title includes |
| |"Emergency Management"-that Minister; or |
| |otherwise-the Minister declared by the Prime |
| |Minister, by notifiable instrument, to be the |
| |Emergency Management Minister for the purposes |
| |of this Act. |
|Finance Minister |has the same meaning as defined in section 8 of|
| |the PGPA Act |
|Emergency Response Fund|means the Emergency Response Fund established |
| |by clause 9 of this Bill |
|Emergency Response Fund|means the Emergency Response Fund Special |
|Special Account |Account established by clause 12 of this Bill |
|FDF |means the Future Drought Fund established by |
| |section 10 of the Future Drought Fund Act |
|FDF Act |means the Future Drought Fund Act 2019 |
|Future Fund |means the Future Fund established by section 11|
| |of the Future Fund Act |
|Future Fund Act |means the Future Fund Act 2006 |
|Future Fund Board |means the Future Fund Board of Guardians |
| |established by section 34 of the Future Fund |
| |Act |
|Future Fund Special |means the Future Fund Special Account |
|Account |established by section 12 of the Future Fund |
| |Act |
|Home Affairs Department|means the Department administered by the Home |
| |Affairs Minister |
|Home Affairs Emergency |means the Home Affairs Emergency Response Fund |
|Response Fund Special |Special Account established by clause 27 of |
|Account |this Bill |
|Home Affairs Minister |means the Minster administering the Australian |
| |Federal Police Act 1979 |
|ITAA |means the Income Tax Assessment Act 1997 |
|Legislation Act |means the Legislation Act 2003 |
|MRFF |means the Medical Research Future Fund |
| |established by section 11 of the MRFF Act |
|MRFF Act |means the Medical Research Future Fund Act 2015|
|NBF Act |means the Nation-building Funds Act 2008 |
|PGPA Act |means the Public Governance, Performance and |
| |Accountability Act 2013 |
|PGPA Rule |means the Public Governance, Performance and |
| |Accountability Rule 2014 |
|Responsible Ministers |means the following: |
| |(a) the Treasurer; and |
| |(b) the Finance Minister |
EMERGENCY RESPONSE FUND BILL 2019
OUTLINE
The Emergency Response Fund Bill 2019 (the Bill) gives effect to the
Government's decision to establish the Emergency Response Fund (the Fund)
to fund emergency response and recovery following natural disasters in
Australia that have a significant or catastrophic impact.
The Fund consists of the Emergency Response Fund Special Account and the
investments of the Fund. It is a dedicated investment vehicle to provide an
additional funding source for future emergency response and natural
disaster recovery.
Uncommitted funds currently in the EIF, approximately $4 billion, would be
transferred to the Fund on establishment. The Government is making
increased investments in the education sector and the EIF is not needed to
fund these initiatives. The last commitment from the EIF was announced in
2013 and all commitments have been paid.
The EIF will be closed, however the Government remains committed to a world
class higher education system and is investing a record $17.7 billion in
the university sector in 2019. This is projected to grow to more than
$19 billion by 2022. The Government has recently made significant
investments into education infrastructure projects including $150 million
to support the relocation and redevelopment of the University of Tasmania's
Launceston and Burnie campuses and a further $30 million earmarked for the
establishment of a new Central Queensland School of Mining and
Manufacturing.
The Government's fiscal management and record investment into the
university sector means the uncommitted funds currently in the EIF can be
used to fund emergency response and natural disaster recovery efforts
across Australia.
The Fund would only be accessed when the Government determines there is a
need for additional support following a natural disaster. Disbursements
from the Fund would be available from 2019-20. To protect the balance of
the Fund into the future, annual disbursements in any one financial year
would be restricted to $150 million. Within 10 years, the $150 million
amount would be reviewed to see if the Fund could support a higher maximum
annual disbursement.
Any disbursements from the Fund would require formal Government approval,
with the costs to be reflected in the forward estimates at the next Budget
update. The Bill also establishes the Home Affairs Emergency Response Fund
Special Account. When Government makes a decision to access the Fund
following a natural disaster that has a significant or catastrophic impact,
the Emergency Management Minister would request that the agreed amount be
debited from the Fund and credited to the Home Affairs Emergency Response
Fund Special Account for the purpose of funding emergency response and
natural disaster recovery. Grants to a State or Territory would be
channelled through the COAG Reform Fund.
The Future Fund Board would be responsible for deciding how to invest the
Fund to enhance the Commonwealth's ability to fund emergency response and
natural disaster recovery. The Future Fund Board is an experienced,
specialised and trusted sovereign investor currently responsible for
investing over $200 billion across six funds with different purposes and
investment mandates (the funds are the Future Fund, the DCAF, the MRFF, the
EIF, the FDF and the ATSILSFF).
Investment mandate
The Bill requires the responsible Ministers to issue an investment mandate
to the Future Fund Board regarding the investment of the Fund. The purpose
of the investment mandate is to provide a mechanism for the Government to
provide strategic guidance to the Future Fund Board on its expectations for
the investment of the Fund.
As with other funds managed by the Future Fund Board, the Emergency
Response Fund will benefit from sovereign immunity from taxation in
Australia and foreign jurisdictions on the bulk of investments.
Expenses
Expenses associated with investment and administration of the Fund incurred
by the Future Fund Board will be met from the Fund.
Reporting
The Bill requires the Future Fund Board to keep the responsible Ministers
informed. The Finance Minister may provide reports, documents and other
information to Ministers.
The Bill provides the Finance Minister with the power to require the Future
Fund Board to provide additional information about one or more specified
matters relating to the performance of the Board's functions under this
Bill.
The Finance Minister has the power to publish information received from the
Future Fund Board, as the Finance Minister deems appropriate and in the
public interest.
The Emergency Management Minister will be required to publish up-to-date
information about grants and arrangements on the Department of Home
Affairs' website.
Financial Impact Statement
The initial credit of the balance of the funds from the EIF to the
Emergency Response Fund will not have a direct impact on the underlying
cash and fiscal balances, as it will represent the transfer of financial
assets between funds.
Positive interest earnings of the Fund will have a positive impact on the
underlying cash and fiscal balances. Costs incurred by the Future Fund
Board have a negative impact on the underlying cash and fiscal balances.
Payments for the purposes of emergency response and natural disaster
recovery will have a negative impact on the underlying cash and fiscal
balances.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary
Scrutiny) Act 2011.
Emergency Response Fund Bill 2019
Overview of Bill
The Emergency Response Fund Bill 2019 would establish the Emergency
Response Fund, a Commonwealth investment fund designed to provide an
additional source of funding for emergency response and recovery following
natural disasters that have a significant or catastrophic impact in
Australia.
Human rights implications
The Bill is compatible with the human rights and freedoms recognised or
declared in the international instruments listed in subsection 3(1) of the
Human Rights (Parliamentary Scrutiny) Act 2011 (Cth).
The Bill engages the following rights:
. Article 11(1) of the International Covenant on Economic Social and
Cultural Rights (ICESCR) - right to an adequate standard of living,
including food, water and housing.
. Article 12 of the ICESCR - right of everyone to the enjoyment of the
highest attainable standard of physical and mental health.
Right to an adequate standard of living, including food, water and housing
Article 11(1) of the ICESCR recognises the right to an adequate standard of
living, including food, water and housing. The United Nations Committee on
Economic Social and Cultural Rights (the Committee) has noted that "States
have a joint and individual responsibility, in accordance with the Charter
of the United Nations, to cooperate in providing disaster relief and
humanitarian assistance in times of emergency"[1]. This Bill would enhance
the Commonwealth's ability to fulfil its responsibility to provide natural
disaster relief and humanitarian assistance.
The Committee has also noted that during emergency situations and natural
disasters, States are bound by international humanitarian law, which
includes the protection of objects indispensable for survival of the
civilian population and the protection of the natural environment against
widespread, long-term and severe damage. The Bill supports investment in
key infrastructure to protect individuals, communities and the natural
environment from the impacts of natural disasters.
Right of everyone to the enjoyment of the highest attainable standard of
physical and mental health
Article 12 of the ICESCR recognises the right of everyone to the enjoyment
of the highest attainable standard of physical and mental health. Article
12(2) refers more specifically to taking steps to control diseases and
create conditions to assure medical service and attention in the event of
sickness. It is generally accepted that natural disasters can increase the
risk of disease outbreak - for example, as a result of the breakdown of
sanitation systems. This Bill would support initiatives to treat and/or
control the outbreak of disease following a natural disaster, which may
include the provision of medical facilities and other health
infrastructure.
Conclusion
This Bill is compatible with human rights because it promotes:
. the right to an adequate standard of living, enshrined in Article
11(1) of the ICESCR; and
. the right of everyone to the enjoyment of the highest attainable
standard of physical and mental health, enshrined in Article 12(2) of
the ICESCR.
The Bill would help individuals and communities to recover from natural
disasters. This includes improving access to vital amenities, such as food,
water and housing, as well as funding initiatives to treat or control the
outbreak of disease in the aftermath of a natural disaster.
EMERGENCY RESPONSE FUND BILL 2019
NOTES ON CLAUSES
Part 1 - Preliminary
Clause 1 - Short title
1. Clause 1 is a formal provision specifying the short title of the Act.
Clause 2 - Commencement
2. This clause would provide for the commencement of the whole of the Act,
as set out in the table. Item 1 in the table provides that the whole of
this Act would commence on a single day to be fixed by Proclamation.
However, if the Bill does not commence within 6 months of the Royal
Assent, it will commence on the day after the end of that 6-month
period.
3. Subclause 2(2) would provide that any information in column 3 of the
table is not part of the Act. Information may be inserted in this
column, or information in it may be edited, in any published version of
the Act.
Clause 3 - Simplified outline of this Act
4. This clause would provide a high-level introduction to the provisions in
the Bill, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions in the Bill.
Clause 4- Definitions
5. This clause would provide definitions to support the operation of
provisions of the Bill. These definitions are discussed throughout the
Explanatory Memorandum where they are relevant to the operation of a
particular clause.
6. 'Natural disaster' would not be substantively defined in this Bill, so
would be given its ordinary meaning.
7. The definition of 'Emergency Management Minister' refers to a Minister
whose title includes the words "Emergency Management". When making this
assessment, a Minister's formal title on the Government's current
Ministry list would be used as the authoritative reference. If there is
no Minister whose title includes the words "Emergency Management", the
relevant responsibilities under the Emergency Response Fund legislation
would go to the Minister declared by the Prime Minister, by notifiable
instrument, to be the Emergency Management Minister.
Clause 5 - Crown to be bound
8. Clause 5 would provide that the Act binds the Crown in each of its
capacities but does not make the Crown liable to be prosecuted for an
offence.
Clause 6 - Extension to external Territories
9. Clause 6 would provide that the Act extends to every external Territory.
Clause 7 - Extra-territorial operation
10. Clause 7 would provide for the geographical reach of the Act to apply
outside of Australia. This would allow the Future Fund Board to invest
in financial assets outside of Australia and would also allow recipients
of grants or payments from the Emergency Response Fund to collaborate
with international partners.
11. The definition of 'natural disaster' in clause 4 would confine that
definition to 'natural disaster in Australia'. This has the effect that
even though the Act would have extra-territorial operation, grants or
payments could only be made in relation to emergency response and
recovery from natural disasters in Australia.
Part 2 - Emergency Response Fund
Division 1 - Introduction
Clause 8 - Simplified outline of this Part
12. This clause would provide a high-level introduction to the provisions
in this Part, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions of this Part.
Division 2 - Establishment of the Emergency Response Fund and the Emergency
Response Fund Special Account
Clause 9 - Establishment of the Emergency Response Fund
13. Clause 9 would establish a financial asset fund - the Emergency
Response Fund - consisting of amounts in the Emergency Response Fund
Special Account and the investments of the Emergency Response Fund.
Clause 10 - Transfer of balance of the Education Investment Fund Special
Account
14. The Emergency Response Fund (Consequential Amendments) Bill 2019 would
operate to close the EIF Special Account from the date of commencement
of the Emergency Response Fund Act 2019. Clause 10 would provide that,
as soon as practicable after the commencement of the provision, an
amount equal to the balance of the EIF Special Account immediately
before commencement of the provision (that is, immediately before that
special account is closed), is to be credited to the Emergency Response
Fund Special Account.
15. In effect, this would transfer the balance of the EIF Special Account
immediately prior to its closure, to the Emergency Response Fund Special
Account.
16. The note at the end of this clause would alert readers to the fact that
the balance of the EIF Special Account does not include the value of an
investment of the EIF (which would be provided for by clause 11).
Clause 11 - Transfer of investments of the Education Investment Fund
17. Clause 11 deals with the transfer of investments of the EIF to the
Emergency Response Fund.
18. Under subclause 11(1), section 11 would apply to financial assets,
which immediately prior to the commencement of this Bill, were
investments of the EIF. Subclause 11(2) provides for those assets to
become investments of the Emergency Response Fund immediately after
commencement of the section.
Clause 12 - Establishment of the Emergency Response Fund Special Account
19. Clause 12 would establish the Emergency Response Fund Special Account,
which would be a special account for the purposes of the PGPA Act.
20. A special account is an appropriation mechanism that sets aside an
amount within the CRF to be expended for specific purposes. Any amounts
credited to the Emergency Response Fund Special Account would be
quarantined from the rest of the CRF and could only be debited from the
Emergency Response Fund for the purposes set out in the Bill.
21. The note immediately following this clause would assist the reader by
clarifying that amounts could be credited to the Emergency Response Fund
Special Account by an Appropriation Act.
Division 3 - Credits of amounts to the Emergency Response Fund Special
Account
Clause 13 - Credits of amounts
22. This clause would establish a mechanism for specified amounts - other
than the initial balance from the EIF Special Account - to be credited
to the Emergency Response Fund Special Account. A specified amount would
also be able to be credited in specified instalments.
23. Amounts would be credited by a written determination of the responsible
Ministers or their delegates (refer to clauses 59 and 60 for delegation
powers of the Finance Minister and the Treasurer).
24. Note 1 immediately following subclause 13(1) would assist readers by
directing them to the subsection 33(3) of the Acts Interpretation Act,
which provides that a power to make a legislative instrument includes
the power to vary or revoke that instrument.
25. Note 2 would assist readers by directing them to other sections of the
Act requiring amounts to be credited to the Emergency Response Fund
Special Account.
26. Subclause 13(2) would provide that a determination to credit a
specified amount to the Emergency Response Fund Special Account is a
legislative instrument but is not subject to disallowance. Such
determinations could be regarded as administrative, rather than
legislative, in character. However, having the determination as a
legislative instrument ensures transparency of amounts credited as a
matter of public interest.
27. A determination under subsection 13(1) is expected to be made only in
exceptional circumstances following the initial credit provided for by
clause 10. Amounts credited under section 13 are expected to be provided
from other Appropriation Acts. In this respect, the determination would
be a tool for the Government to manage its financial arrangements.
Disallowance could also undermine commercial certainty, given that once
an amount is credited to the Emergency Response Fund Special Account,
the Future Fund Board would be able to invest the amount in any
financial assets under clause 37 of the Bill.
28. Providing for a determination under subsection 13(1) to be a
legislative instrument that is not disallowable would be consistent with
arrangements for other Funds invested by the Future Fund Board (see Item
3 of Schedule 1 of the Future Fund Act, section 15 of the MRFF Act and
section 14 of the FDF Act).
Division 4 - Debits of amounts from the Emergency Response Fund
Clause 14 - Main purposes of the Emergency Response Fund Special Account
29. Clause 14 would provide that the main purpose of the Emergency Response
Fund Special Account would be to transfer amounts to the Home Affairs
Emergency Response Fund Special Account (in accordance with the
mechanism for these transfers set out in clause 28) for the purposes of:
. paying amounts payable by the Commonwealth under an arrangement
made under section 20, and making grants under section 21; and
. transferring amounts to the COAG Reform Fund in accordance with
section 32 for the purposes of making grants to the States and
Territories under section 20.
30. Clause 20 would provide the matters in relation to which a grant may
be made or an arrangement entered into under this Bill.
Clause 15 - Purposes of the Emergency Response Fund Special Account -
purposes related exclusively to the investments etc. of the Emergency
Response Fund
31. Clause 15 relates to the payment of various expenses that may be
incurred by the Future Fund Board, which relate exclusively to the
investments of the Emergency Response Fund, and which do not relate to
the main purpose of the Fund. It sets out the additional purposes for
which the Emergency Response Fund may be debited.
32. The note at the end of this clause would direct readers to consider
section 80 of the PGPA Act, which relates to the establishment of,
crediting to and debiting against a special account established by an
Act.
Clause 16 - Purposes of the Emergency Response Fund Special Account -
purposes not related exclusively to the Emergency Response Fund
33. Clause 16 relates to the payment of various expenses that may be
incurred by the Future Fund Board in respect of its broader functions
under this Bill, as well as the Future Fund Act, the FDF Act, the MRFF
Act, the DCAF Act or the ATSILSFF Act.
34. Clause 16 sets out the range of additional purposes for which the
Emergency Response Fund Special Account may be debited in respect of
costs that are common to the funds for which the Future Fund Board has
responsibility.
35. The note at the end of this clause would direct readers to consider
section 80 of the PGPA Act, which relates to the establishment of,
crediting to and debiting against a special account established by an
Act.
Clause 17 - Future Fund Board must ensure that the balance of the Emergency
Response Fund Special Account is sufficient to cover authorised debits etc.
36. Clause 17 would require the Future Fund Board to take all reasonable
steps to ensure that the balance of the Emergency Response Fund Special
Account is sufficient to cover the debits of amounts from the Emergency
Response Fund Special Account. Clause 34 specifies that the total amount
debited from the Emergency Response Fund Special Account in a financial
year must not exceed $150 million.
37. The note immediately below this clause would assist readers to
understand the obligations of the Future Fund Board in respect of this
requirement.
Clause 18 - Transfers from the Emergency Response Fund to the Future Fund
38. Clause 18 would allow for transfers from the Emergency Response Fund
Special Account to the Future Fund Special Account.
39. This clause would allow for amounts to be transferred between the
Emergency Response Fund and the Future Fund. The purpose of this is to
enable reimbursement to the Future Fund Special Account of expenses
incurred in relation to the Emergency Response Fund that have been
debited from the Future Fund Special Account.
40. The clause would allow the Finance Minister to direct, in writing, that
one Fund is to be debited and the other Fund credited by a specified
amount.
41. Subclause 18(3) would be included to assist readers, as a direction
under subclause 18(1) would not be a legislative instrument within the
meaning of subsection 8(1) of the Legislation Act. Directions of this
type are administrative in character because they are merely the
application of a legal power in a particular case (i.e. they do not
determine or alter the content of the law itself).
Part 3 - Arrangements and grants relating to emergency response
Division 1 - Introduction
Clause 19 - Simplified outline of this Part
42. This clause would provide a high-level introduction to the provisions
in this Part, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions of this Part.
Division 2 - Arrangements and grants
Clause 20 - Arrangements and grants
43. This clause would provide a broad legislative spending power that is to
be read subject to the constitutional limits in clause 24.
44. Subclause 20(1) would allow the Emergency Management Minister to make
arrangements with or grants of financial assistance to a person or body
for certain matters.
45. 'Emergency Management Minister' would be defined in clause 4 as a
Minister whose title includes "Emergency Management", or if no such
Minister exists, the Minister declared by the Prime Minister to be the
Emergency Management Minister for the purposes of the Act.
46. '[A]rrangement' would be defined in clause 4 to include a contract,
agreement or deed. It would exclude a securities lending arrangement or
securities lending arrangements (refer to clause 49).
47. Subclause 20(5) would expressly exclude the acquisition of shares in a
company or the making of a loan from the arrangements that could be made
under this clause.
48. '[P]erson' would be defined in clause 4 to include a partnership.
Subsection 2C(1) of the Acts Interpretation Act further provides that
'person' includes a body politic or body corporate, as well as an
individual.
49. Under this clause arrangements could therefore be made with, and grants
provided to, individuals, incorporated or unincorporated bodies, not-for-
profit organisations, educational institutions (such as a university),
State and Territory governments, and local government bodies. This list
should not be considered exhaustive.
50. The matters for which the Emergency Management Minister may make
arrangements or grants would be the carrying out of a project, the
provision of a service or the adoption of technology, so long as that
activity is directed towards achieving recovery from a natural disaster
or post-disaster resilience in relation to an area that has been
affected (whether directly or indirectly) by a natural disaster.
Arrangements and grants in relation to post-disaster resilience are
subject to the limitations in subclause 20(6), which limits post-
disaster resilience to circumstances where at least one arrangement or
grant has been made in relation to recovery from the same natural
disaster.
51. The Emergency Management Minister would also be able to make
arrangements or grants for a matter that is incidental or ancillary to
any of the above matters.
52. The types of things that could be funded under subclause 20(1) may
include:
. tailored financial assistance to help persons or bodies recover
from, and build economic sustainability and resilience to
withstand, the impacts from a catastrophic natural disaster;
. additional recovery grants to help primary producers or small
business owners re-establish their enterprises/businesses;
. economic aid packages to help areas affected, either directly or
indirectly, to recover and transition from a natural disaster;
. training and information for individuals, primary producers, small
businesses or non-government organisations on strategies to help
with long-term recovery, including post-disaster mitigation;
. tools to better understand local climate variability and advice on
climate risk applied to specific locations for future land-use
planning;
. financial management advice for persons or bodies to improve their
ability to manage through lower income periods caused by a natural
disaster;
. improving data on the effects and consequences of natural
disasters;
. supporting industry to recover and develop post-disaster future
risk mitigation measures;
. support and development of alternative solutions for supply chain
operations; and
. infrastructure built to withstand future natural disasters.
53. The above list should not be considered to be exhaustive or conclusive
regarding the types of projects that could receive funding. It would be
a matter for the Emergency Management Minister to decide whether or not
to make a particular arrangement or grant (following a decision of
Government to access the Emergency Response Fund). This list merely
provides examples of possible projects.
54. Subclauses 20(2) to (4) would clarify that, without limiting anything
in subclause 20(1), in making an arrangement or grant under this clause,
the Commonwealth may reimburse, or partly reimburse, costs or expenses
that the other party has incurred or expended prior to the making of the
arrangement or grant.
55. The notes at the end of subclause 20(1) would assist readers by
directing them to subsection 20(6) (which relates to post-disaster
resilience) and section 24 (which places constitutional limits on the
exercise of the spending powers provided for by this clause).
56. Subclause 20(6) would define "post-disaster resilience" for the
purposes of section 20. Post-disaster resilience, for the purposes of
section 20, would be limited to an area that has been affected (whether
directly or indirectly) by a natural disaster. Paragraph (b) would
further limit post-disaster resilience to circumstances where at least
one arrangement or grant has been made under subsection 20(1) in
relation to recovery from the natural disaster.
57. Paragraphs 20(6)(c) to (f) provide that where the above conditions are
met, the following activities would constitute post-disaster resilience
in relation to an area, for the purposes of making arrangements and
grants under subsection (20)(1):
. resilience to a future natural disaster of that kind that could
affect that area (whether directly or indirectly);
. preparedness for a future natural disaster of that kind that could
affect that area (whether directly or indirectly);
. reduction of the risk of a future natural disaster of that kind
that could affect that area (whether directly or indirectly); and
. the long-term sustainability of a community or communities in that
area.
58. The effect of subclause 20(6) is that the Emergency Management Minister
cannot make an arrangement or grant under subsection 20(1) that is
directed towards post-disaster resilience in relation to an area that
has been affected (whether directly or indirectly) by a natural
disaster, unless there has been an arrangement or grant made under
subsection 20(1) that is directed towards recovery from the natural
disaster.
59. Subclause 20(7) would provide that section 20 does not apply to a
natural disaster that occurs before the commencement of the section. In
other words, grants and arrangements could only be made in relation to
natural disasters that occur after the commencement of section 20 of the
Act.
Clause 21 - Terms and conditions of grants
60. This clause would require the terms and conditions for a grant of
financial assistance under clause 21 to be set out in a written
agreement between the Commonwealth and the grant recipient, and that the
Emergency Management Minister would enter into such an agreement on
behalf of the Commonwealth. That agreement would be required to provide
the circumstances in which the grant recipient must repay amounts to the
Commonwealth - this would not limit the terms and conditions that can be
provided in an agreement, but would set out a minimum requirement.
61. Subclause 21(3) would require a recipient of a grant under clause 21 to
comply with the terms and conditions set out in the agreement made under
this clause.
62. The note at the end of subclause 21(2) would assist readers by
directing them to section 24, which places constitutional limits on the
exercise of the spending powers provided in this clause.
63. The note at the end of subclause 21(4) would assist readers by alerting
them to the fact that an amount repayable to the Commonwealth would be a
debt to the Commonwealth.
Clause 22 - Emergency Management Minister has powers etc. of the
Commonwealth
64. This clause would specify that the Emergency Management Minister would
hold and exercise all the rights, responsibilities, duties and powers of
the Commonwealth as a party to an arrangement or the grantor of a grant
under clause 20. This would include, but is not limited to:
. paying amounts payable by the Commonwealth under a section 20
arrangement;
. receiving amounts payable to the Commonwealth under a section 20
arrangement;
. paying section 20 grants to grant recipients;
. receiving amounts payable to the Commonwealth by way of the
repayment of the whole or a part of a section 20 grant; and
. instituting actions or proceedings on behalf of the Commonwealth in
relation to a matter that concerns either an arrangement or a grant
made under section 20.
Clause 23 - Conferral of powers on the Emergency Management Minister
65. This clause would provide a legislative basis for the Emergency
Management Minister to exercise a power conferred on him or her by an
arrangement under section 20 or an agreement under section 21 in
relation to a grant.
Clause 24 - Constitutional limits
66. This clause would set out the Constitutional powers under which the Act
would operate. It would provide that the Emergency Management Minister
may only exercise a power under sections 20 and 21 where one of the
enumerated Constitutional powers is enlivened. In other words, the
Minister could generally only make an arrangement or grant where one or
more of the powers listed in clause 24 were available.
67. Clause 24 would act as a limitation on the broad spending power
provided for by sections 20 and 21. The Emergency Management Minister
may need to assess, where relevant and on a case-by-case basis, whether
the making of a grant or arrangement is supported by a source of
Constitutional power in clause 24.
68. Clause 24 would inform a court how the Act is capable of operating
within the Commonwealth's legislative powers. It would not apply to
every provision of the Bill; instead, it confines only the principal
spending powers in clauses 20 and 21.
69. The other clauses of this Bill (other than clauses 20 and 21) would be
incidental in character. That is, they would be incidental to the
purpose of providing funding in relation to emergency response and
natural disaster recovery, in that they establish the mechanism for
investment of funds in order to ensure there is sufficient amounts
available to make relevant payments under the powers in clause 20.
70. Nothing in this clause is intended to narrow the scope of the
enumerated Constitutional powers, but rather to clarify the powers
relied upon to support the Parliament enacting this legislation.
71. Some examples of potential measures could include, but are not limited
to:
. tailored financial assistance to help persons and bodies recover
from the impacts from a catastrophic natural disaster;
. financial assistance grants to a State or Territory to fund
community recovery packages, which may include post disaster
resilience (for example, the development of a flood levee to reduce
the impact of future significant flooding events);
. recovery activities within a Territory to build sustainability and
resilience to assist with the long-term recovery of a community and
help it to withstand significant future natural disasters;
. recovery activities implementing Australia's international
obligations under the Covenant of Economic, Social and Cultural
Rights, which may include assisting affected communities recovering
from a natural disaster that are at risk of future natural hazards,
by funding measures to assist in natural disaster preparedness;
. grants of financial assistance to a constitutional corporation for
the purposes of carrying out the corporation's activities
including, for example, providing income support grants to
employees of a factory affected by a natural disaster to help with
the long-term recovery of the local community;
. activities at Commonwealth places to restore Government decision
making infrastructure or restore national parks;
. funding for bodies engaged in trade and commerce between Australia
and other countries, among the States or within a Territory,
between a State and a Territory or between two Territories, to
undertake natural disaster post-disaster mitigation activities;
. funding for grants to use the postal, telegraphic telephonic or
like services to improve emergency warnings communications;
. funding the research and development of new patentable invention
which would improve natural disaster resilience;
. support grants and arrangements for research into natural disasters
that involves statistical collection and analysis;
. grants of financial assistance for meteorological observations to
enhance climate observation and forecasting data to provide better
information to individuals or bodies;
. arrangements to assist insurers and insurance customers to improve
their long-term resilience to hazard impacts through post-disaster
mitigation activities, thereby lowering the cost of insurance
products; and
. grants of financial assistance that are for purposes incidental to
the execution of any of the legislative powers of the Parliament or
the executive power of the Commonwealth.
Clause 25 - Executive power of the Commonwealth
72. This clause would clarify that this Division does not impliedly limit
the executive power of the Commonwealth contained in section 61 of the
Constitution.
Clause 26 - Publication of information relating to arrangements and grants
73. This clause would require the Emergency Management Minister to publish
detailed and up-to-date information about grants and arrangements on the
Home Affairs Department's website. The information to be published would
include, but is not limited to, amounts paid and payable under grants
and arrangements as well as the names of recipients of grants and
arrangements.
74. Where the recipient is an individual, there would be no requirement to
publish the name of that individual online, nor the purpose of the grant
to, or arrangement with, that individual. This will ensure that the
personal privacy of individual recipients is protected.
75. The names of individual recipients are not disclosed under other
emergency management relief programs, such as the Australian Government
Disaster Recovery Payments.
76. The Emergency Management Minister will still be required to publish
detailed information relating to arrangements and grants, including each
amount paid under an arrangement or grant, the total amounts paid and
payable and the date on which the most recent payment was made. For all
recipients that are not individuals, the name of the recipient as well
as the purpose of the arrangement or grant will also need to be
published.
77. The information required to be published under this clause would be
additional to the information that must be published in accordance with
the Commonwealth Grants Rules and Guidelines and the Commonwealth
Procurement Rules.
78. Subclauses 26(2) and 27(3) would require that the information is kept
up-to-date and published as soon as practicable.
Division 3 - Home Affairs Emergency Response Fund Special Account
Clause 27 - Home Affairs Emergency Response Fund Special Account
79. Clause 27 would establish the Home Affairs Emergency Response Fund
Special Account, which would be a special account for the purposes of
the PGPA Act. The Secretary of the Home Affairs Department would be
responsible for the special account. 'Home Affairs Department' would be
defined in clause 4 to mean the Department administered by the Home
Affairs Minister.
80. The note immediately following subclause 27(2) would assist the reader
by clarifying that amounts could be credited to the Home Affairs
Emergency Response Fund Special Account by an Appropriation Act.
81. A special account is an appropriation mechanism that sets aside an
amount within the CRF to be expended for specific purposes. Any amounts
credited to the Home Affairs Emergency Response Fund Special Account
would be quarantined from the rest of the CRF and could only be debited
from the Home Affairs Emergency Response Fund Special Account for the
purposes set out in the Bill.
Clause 28 - Transfers from the Emergency Response Fund Special Account to
the Home Affairs Emergency Response Fund Special Account
82. This clause would provide the mechanism by which amounts could be
transferred from the Emergency Response Fund Special Account to the Home
Affairs Emergency Response Fund Special Account, where it can then be
used to make grants or payments under arrangements provided for by
clause 20.
83. For certainty, amounts would only be transferred under this clause
following a decision by the Government to use the Emergency Response
Fund to make grants or arrangements following a natural disaster.
84. Subclause 28(1) would allow the Emergency Management Minister to
request transfers of specified amounts with respect to payments that
will be payable during a financial year under arrangements that have
been, or will be, entered into under section 20.
85. Subclause 28(2) would specify that the Emergency Management Minister
could not make more than one request under subsection 28(1) in relation
to a particular amount that will be payable under an arrangement. This
would prohibit the Minister from accessing the fund more than once in
relation to a particular arrangement; in effect, limiting the total
value of requests under subsection 28(1) to the amount that will be
payable under section 20 arrangements.
86. Subclause 28(3) would provide that the Emergency Management Minister
could make more than one request under subsection 28(1) in a given
financial year, despite the limitation in subclause 28(2). This would
provide flexibility for the Minister to request more than one transfer
in a financial year. This could be in relation to different programs of
arrangements or different arrangements under the same program of
arrangements agreed by the Government in the same financial year, and
could relate to the same natural disaster or separate natural disasters.
87. Subclauses 28(4) to (6) would mimic subclauses 28(1) to (3) in respect
of grants to be paid to persons other than a State or Territory. The
note immediately following subclause 28(4) would direct readers to
section 32, which relates to grants to a State or Territory.
88. Subclause 28(7) would require the Finance Minister to direct, in
writing, that a transfer be made from the Emergency Response Fund
Special Account to the Home Affairs Emergency Response Fund Special
Account in instances where a request has been made by the Emergency
Management Minister under subsection 28(1) or (4) and the Finance
Minister is satisfied that the transfer will not result in a breach of
the annual limit as provided for by clause 34.
89. Subclauses 28(8) would provide that a direction by the Finance Minister
under subsection 28(7) is not a legislative instrument within the
meaning of subsection 8(1) of the Legislation Act. Directions of this
type are administrative in character because they are merely the
application of a legal power in a particular case (i.e. they do not
determine or alter the content of the law itself).
90. Subclause 28(9) would specify that the Finance Minister must provide
the Emergency Management Minister and the Treasurer with a copy of any
directions made under subsection 28(7).
91. It is expected that Emergency Management Minister and the Finance
Minister would consult each other in exercising their powers under
section 28, to ensure that transfers can accommodate any agreed payment
schedules as provided for by clause 20 arrangements or grants or clause
21 agreements.
Clause 29 - Other credits to the Home Affairs Emergency Response Fund
Special Account
92. This clause would require amounts to be credited to the Home Affairs
Emergency Response Fund Special Account that are equal to amounts paid
to the Commonwealth:
. under an arrangement made under section 20;
. by way of damages or compensation for breach of an arrangement
under section 20; and
. by way of the repayment of the whole or part of a grant made under
section 20.
93. This would ensure that any amounts payable to the Commonwealth arising
out of an arrangement or grant made under section 20 would be credited
to the Home Affairs Emergency Response Fund Special Account to be used
for the purposes of that special account and would not return to the
Emergency Response Fund Special Account.
Clause 30 - Purposes of the Home Affairs Emergency Response Fund Special
Account
94. This clause would set out the purposes of the Home Affairs Emergency
Response Fund Special Account, which would be to:
. pay amounts payable by the Commonwealth under an arrangement made
under section 20; and
. to make grants under section 20.
95. The note at the end of this clause would direct readers to consider
section 80 of the PGPA Act, which relates to the establishment of,
crediting to and debiting against a special account established by an
Act.
Clause 31 - Excess balance of the Home Affairs Emergency Response Fund
Special Account must be transferred to the Emergency Response Fund Special
Account
96. Subclause 31(1) would require the Emergency Management Minister to make
a half-yearly assessment of whether the balance of the Home Affairs
Emergency Response Fund Special Account exceeds what is sufficient to
cover payments related to arrangements and grants in the upcoming 12-
month period. If the Emergency Management Minister determines that the
balance exceeds what is sufficient to cover the required payments, the
Emergency Management Minister must also make an assessment of the excess
amount.
97. The Emergency Management Minister must make this assessment during the
first 15 days of each half-year. Clause 4 would define 'half-year' to
mean a period of 6 months starting on 1 January or 1 July.
98. Subclause 31(2) would specify that where the Emergency Management
Minister makes an assessment under subsection 31(1) that an excess
amount exists, the Emergency Management Minister must direct, in
writing, that the excess amount be transferred from the Home Affairs
Emergency Response Fund Special Account to the Emergency Response Fund
Special Account.
99. The direction must be made as soon as practicable after the assessment
is made under subsection 31(1), and the direction must direct that the
excess amount be transferred as soon as practicable after the direction
is given. This will ensure that excess amounts that are not required for
funding natural disaster recovery can be returned to the Emergency
Response Fund, where they can be invested to grow the Fund.
100. Subclause 31(3) would make the readers aware that a direction by the
Emergency Management Minster under subsection 31(2) is a notifiable
instrument, to provide increased transparency of transfers between
special accounts.
101. Subclause 31(4) would require the Emergency Management Minister to
provide the Treasurer and Finance Minister with a copy of a direction
under subsection 31(2).
Division 4-Channelling State/Territory grants through the COAG Reform Fund
Clause 32 - Channelling State/Territory grants through the COAG Reform Fund
102. This clause would enable the channelling of grants of financial
assistance, as provided for by clause 20 of this Bill, to a State or
Territory through the COAG Reform Fund.
103. Subclause 32(1) would specify that in order to make a grant of
financial assistance to a State or Territory, the Emergency Management
Minister must, by writing, direct that the amount of the grant be
debited from the Home Affairs Emergency Response Fund Special Account
and credited to the COAG Reform Fund on a specified day.
104. Subclause 32(2) would require that the direction must be expressed to
be given in order to enable the amount to be debited form the COAG
Reform Fund for the purposes of making the grant.
105. Subclause 32(3) would ensure that the Emergency Management Minister
would not be permitted to give a direction under subsection 32(1) if it
would breach the annual limit on debits from the Emergency Response Fund
Special Account as provided for by clause 34.
106. Subclause 32(4) would clarify that one document can be used to make
two or more directions provided for by subclause 32(1).
107. Subclause 32(5) would clarify that a direction under subsection (1) is
not a legislative instrument. Directions of this type are administrative
in character because they are merely the application of a legal power in
a particular case (i.e. they do not determine or alter the content of
the law itself).
108. Subclause 32(6) would require the Emergency Management Minister to
give a copy of a direction provided for by subclause 32(1) to the
Treasurer and the Finance Minister.
Clause 33 - Debits from the COAG Reform Fund
109. Clause 33 would provide that when a transfer has been made to the COAG
Reform Fund under paragraph 32(1)(b), the Treasurer must ensure that the
COAG Reform Fund is debited, for the same amount, for the purposes of
making the grant of financial assistance to a State or Territory. The
Treasurer must do this as soon as practicable after the amount has been
credited into the COAG Reform Fund.
Division 5-Annual limit on amounts debited from the Emergency Response Fund
Special Account
Clause 34 - Annual limit on amounts debited from the Emergency Response
Fund Special Account
110. Clause 38 would limit the total amount debited from the Emergency
Response Fund Special Account during a financial year, for the purposes
of transfers under sections 28 and 32, to $150 million. Transfers under
section 28 relate to arrangements and grants, except for grants made to
a State or Territory, made under section 20. Transfers under section 32
relate to grants of financial assistance to a State or Territory under
section 20.
Part 4 - Investment of the Emergency Response Fund
Clause 35 - Simplified outline of this Part
111. This clause would provide a high-level introduction to the provisions
in this Part, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions of this Part.
Clause 36 - Objects of investment of the Emergency Response Fund
112. Subclause 36(1) would reinforce that amounts would be invested by the
Future Fund Board for the main objects of enhancing the Commonwealth's
ability to transfer amounts for the purposes of making grants and
arrangements in relation to emergency response and recovery from a
natural disaster.
113. Subclause 36(2) would provide that the ancillary objects of the
investment of the Emergency Response Fund are for enhancing the ability
of the Commonwealth and the Future Fund Board to discharge costs,
expenses, obligations and liabilities set out in clauses 15 and 16.
Clause 37 - Investment of the Emergency Response Fund
114. Clause 37 would take account of the investment powers provided for
under section 58 of the PGPA Act. However, subclause 37(1) expands on
those powers to provide for the investment of the Emergency Response
Fund in a broad range of financial assets. Specific conditions on the
acquisition of derivatives are separately covered in clause 47. This
approach to the investment of the Emergency Response Fund is consistent
with investment arrangements for other Commonwealth investment funds,
including the Future Fund and the Future Drought Fund.
115. Investments of the Emergency Response Fund would be made in the name
of the Future Fund Board (rather than the Commonwealth) to make clear
that the Future Fund Board would manage the Emergency Response Fund at
arm's length from the Government. However, beneficial ownership of the
Emergency Response Fund assets would remain with the Commonwealth at all
times.
Clause 38 - Management of investments of the Emergency Response Fund
116. Subclauses 38(1) and 38(2) would provide that income derived from an
investment of the Emergency Response Fund, including a return of capital
or another form of financial distribution, must be credited to the
Emergency Response Fund Special Account. This is consistent with the
requirements under sections 81 and 83 of the Constitution (which, in
effect, provide that public money forms part of the CRF and can only be
spent if authorised by an appropriation made by law). In practice, any
amount that has not been invested must be held in the Emergency Response
Fund Special Account.
117. Subclauses 38(3) to (5) would relate to the arrangements that would
apply in relation to the realisation of assets, and allow the Future
Fund Board to authorise, prior to an investment maturing, that the
proceeds of this investment be automatically reinvested with the same
entity. This would avoid the need for the proceeds of realisation of the
investment to be treated as public money and credited to the CRF, only
to be then reappropriated and reinvested. Any reinvestment would be an
investment of the Emergency Response Fund.
118. Subclause 38(6) would provide that section 58 of the PGPA Act does not
apply to an investment of the Emergency Response Fund. Section 58 of the
PGPA Act authorises the Finance Minister or the Treasurer to invest
public money in only a limited range of investments, such as government
bonds and bank deposits. However, subclause 37(1) would provide for the
investment of the Emergency Response Fund in a broader range of
financial assets.
Clause 39 - Emergency Response Fund Investment Mandate
119. This clause would provide the Government, as owner of the Emergency
Response Fund, with a mechanism for articulating its expectations for
how the Emergency Response Fund will be invested and managed by the
Future Fund Board. Clause 39 establishes a framework that enables the
Government to give strategic guidance to the Future Fund Board while
preserving the Board's role in managing the investments of the Emergency
Response Fund at arm's length from the Government. This approach is
consistent with the arrangements in place for the other Funds invested
by the Future Fund Board.
120. Subclause 39(1) would provide the responsible Ministers with the power
to give the Future Fund Board written directions in relation to the
performance of its investment functions and the exercise of its powers.
This clause would be subject to the limitations in section 41. The
responsible Ministers must issue at least one such direction, and these
directions will be collectively known as the Emergency Response Fund
Investment Mandate (subclause 39(3) refers). Note that the Emergency
Response Fund investment function would be defined in clause 4.
121. While the responsible Ministers can issue new directions at any time,
the intention is that the Investment Mandate will reflect the
Government's policy intent with regard to the investments of the
Emergency Response Fund. Any new directions would therefore be expected
to take account of significant policy changes or material changes in the
investment environment faced by the Emergency Response Fund.
122. These requirements will give the Future Fund Board and Parliament
assurance that the responsible Ministers must make appropriately
considered directions in regard to investment targets, while providing
flexibility to take account of broader policy issues and national
interest considerations.
123. Subclause 39(2) would provide that in setting an Investment Mandate
the responsible Ministers must have regard to maximising the return on
the Emergency Response Fund over the long term consistent with
international best practice for institutional investment, and of the
need to enhance the Commonwealth's ability to provide grants for or pay
amounts under arrangements in relation to emergency response and
recovery from natural disasters, and any other matters the responsible
Ministers consider to be relevant.
124. Subclause 39(4) would provide that the Investment Mandate may include,
but is not limited to, statements about policies the Future Fund Board
must pursue in relation to risk and return and the allocation of the
Emergency Response Fund to particular financial assets. This may include
restrictions or thresholds for investing the Emergency Response Fund in
certain jurisdictions or asset classes and statements of the
Government's appetite for risk.
125. Subclause 39(5) would make it clear that a Ministerial direction under
subsection 39(1) prevails over section 40 to the extent of any
inconsistency, and places limitations on responsible Ministers in
issuing the Investment Mandate. This means that the Investment Mandate
could not have the effect of requiring the Future Fund Board to do
anything inconsistent with this Bill, including the aim of enhancing the
Commonwealth's ability to provide grants for or pay amounts under
arrangements in relation to emergency response and recovery from natural
disasters.
126. Subclause 39(6) would provide that the Investment Mandate would not
formally commence until at least 15 calendar days after it is issued.
This would allow the Future Fund Board time to adjust to any revised
directions issued by the responsible Ministers. Importantly, this would
allow the Future Fund Board to know with certainty when the new
direction would come into force.
127. Subclause 39(7) would provide that a direction under subsection 39(1)
is a legislative instrument, and as such must be tabled in Parliament
and registered on the Federal Register of Legislation. Note 1 would
alert the reader that a direction is not subject to disallowance, in
accordance with regulations made for the purposes of paragraph 44(2)(b)
of the Legislation Act. Note 2 alerts the reader that a direction is not
subject to sunsetting, in accordance with regulations made for the
purposes of paragraph 54(2)(b) of the Legislation Act.
128. The Government considers it is appropriate that a direction under
subclause 39(1) of the Bill is not subject to disallowance. The Bill
would provide adequate scrutiny of directions comprising the Emergency
Response Fund Investment Mandate through mandated consultation with the
Future Fund Board (clause 42). Exemption from disallowance together with
consultation would give the Future Fund Board necessary certainty when
investing through the Emergency Response Fund. While it would be
possible to provide that a direction under subsection 39(1) does not
come into effect until disallowance periods have expired, this approach
would significantly impede the ability of Government to make urgent
changes to the Emergency Response Fund Investment Mandate in the
national interest.
129. The Government also considers it is appropriate that a direction under
subclause 39(1) of the Bill is not subject to sunsetting. The process
for setting the Emergency Response Fund Investment Mandate has been
designed to ensure the mandate remains relevant over the long term,
subject to appropriate revisions to take into account changing
circumstances. This process means the Emergency Response Fund Investment
Mandate may comprise of multiple directions issued at different times.
Not being subject to sunsetting would ensure that directions comprising
the Emergency Response Fund Investment Mandate remain coherent,
regardless of when specific directions were issued.
130. This approach enables the public and the Parliament to hold the
Government accountable for the directions it issues to the Future Fund
Board without impeding the Government's ability to manage its finances.
The approach is consistent with other investment mandates in respect of
the other investment funds managed by the Future Fund Board.
Clause 40 - Obligation on Future Fund Board in performing investment
functions
131. This clause would require the Future Fund Board, in exercising its
Emergency Response Fund investment function, to seek to maximise the
return on the Emergency Response Fund over the long term, consistent
with international best practice for institutional investment. It is
expected that international best practice will be reflected in the
investment policies of the Emergency Response Fund.
Clause 41 - Limitation on Emergency Response Fund Investment Mandate
132. Clause 41 would provide that the responsible Ministers must not direct
the Future Fund Board to use the assets of the Emergency Response Fund
to invest in a particular financial asset, for example shares in a
particular company. It would also prevent the responsible Ministers from
issuing a direction that has the effect of requiring the Future Fund
Board to use the assets of the Emergency Response Fund to support a
particular business entity, activity or business.
Clause 42 - Future Fund Board to be consulted on Emergency Response Fund
Investment Mandate
133. Consistent with arrangements for the other Funds invested by the
Future Fund Board, the responsible Ministers would be required to
consult the Future Fund Board before issuing an Emergency Response Fund
Investment Mandate direction under subsection 39(1).
134. Subclause 42(1) would require the responsible Ministers to send a
draft of a direction under subsection 39(1) to the Future Fund Board and
invite the Board to make a submission within a specified time limit. The
specified time limit would be determined on a case by case basis with
regard to relevant circumstances and priorities at the time. It may be
the case that urgent changes are required in the national interest. In
this situation it would be reasonable for the Future Fund Board to be
asked to consider a draft direction quickly. However, where there is
less urgency, or the change in the Emergency Response Fund Investment
Mandate is substantial, it would be reasonable to provide the Future
Fund Board with a longer period of time to consider a draft direction.
Any submission that is received within the specified time limit would
need to be considered by the responsible Ministers.
135. Subclause 42(2) would require any submission received from the Future
Fund Board on a draft direction to be tabled in the Parliament along
with the direction. This would ensure that the Parliament is kept
informed of any concerns raised by the Future Fund Board about the
impact of the direction on the Emergency Response Fund.
Clause 43 - Compliance with Emergency Response Fund Investment Mandate
136. This clause would deal with compliance of the Future Fund Board with
the Emergency Response Fund Investment Mandate.
137. Subclause 43(1) would require the Future Fund Board to take all
reasonable steps to ensure that all policies and decisions regarding the
operation and investment of the Emergency Response Fund are in
accordance with the Emergency Response Fund Investment Mandate issued by
the responsible Ministers. Since the Emergency Response Fund Investment
Mandate is intended to provide broad guidance to the Future Fund Board,
it may contain directions that require the Board to apply its judgment
on whether or not Emergency Response Fund investments comply with the
Emergency Response Fund Investment Mandate.
138. Subclause 43(2) would provide that if the Future Fund Board becomes
aware of a breach of the Emergency Response Fund Investment Mandate, the
Board must inform the responsible Ministers in writing as soon as is
practicable, and set out a proposed strategy to bring the operations of
the Emergency Response Fund into compliance with the Emergency Response
Fund Investment Mandate.
139. Similarly, subclauses 43(3) and 43(4) would provide that if the
Government identifies areas where the Future Fund Board is not complying
with the Emergency Response Fund Investment Mandate, the responsible
Ministers can issue written directions to the Future Fund Board to
provide an explanation and to take action to remedy the situation. The
Future Fund Board would be required to comply with any such directions,
noting that the responsible Ministers would be the final arbiters on
what is intended by the Emergency Response Fund Investment Mandate.
140. A direction from the responsible Ministers to the Future Fund Board
under subsection 43(3) should only require the Board to take actions in
order to comply with an Investment Mandate. A direction is not intended
to determine or alter the content of the law with which the Board must
comply.
141. Subclause 43(5) would provide that any transactions undertaken by the
Future Fund Board and subsequently deemed not to have complied with the
Emergency Response Fund Investment Mandate remain valid, and the Future
Fund Board is required to honour any commitments made. This would
protect third parties who enter into transactions with the Future Fund
Board or its agents in good faith.
142. Subclause 43(6) is included to assist readers, as a direction under
subsection 45(3) is not a legislative instrument within the meaning of
subsection 8(1) of the Legislation Act. Directions of this type are
administrative in character because they are merely the application of a
legal power in a particular case (i.e. they do not determine or alter
the content of the law itself).
Clause 44 - Future Fund Board must not trigger the takeover provisions of
the Corporations Act 2001
143. Clause 44 aims to minimise market distortion and eliminate the
potential for conflicts of interest for the Government as a market
regulator. It would provide that the Future Fund Board is prohibited
from triggering the takeover provisions under section 606 of the
Corporations Act.
144. Section 606 of the Corporations Act essentially prohibits acquisitions
of relevant interests in the voting shares of a listed company, or
unlisted company with more than 50 shareholders, if a person's voting
power increases from a figure at or below 20 per cent to a figure above
20 per cent (or from a figure above 20 per cent but below 90 per cent to
a higher figure) - unless the shares are acquired in one of the
circumstances set out at section 611 of that Act.
145. It is the Government's intention that the takeover threshold be
adhered to quite strictly in relation to listed companies and unlisted
companies with more than 50 shareholders. Therefore, subclause 44(1)
would provide that the exceptions under section 611 of the Corporations
Act (that is, exceptions to the prohibition in section 606) do not apply
in relation to acquisitions by the Future Fund Board if the acquisition
is the result of the performance by the Future Fund Board of its
Emergency Response Fund investment functions.
146. Subclause 44(2) would provide that if for some reason the Future Fund
Board has not complied with section 606 of the Corporations Act (as it
is applied to the Future Fund Board under subclause 46(1)) the relevant
transactions would still be valid. The aim of this provision is to
ensure third parties are not affected adversely by any non-compliance of
the Future Fund Board.
147. The note at the end of this clause would assist the reader by
referring to section 39 of the Future Fund Act, which sets out the
application of the Corporations Act to the Future Fund Board.
Clause 45 - Borrowing
148. Clause 45 would prohibit the Future Fund Board from borrowing money,
except for short-term borrowing associated with the settlement of
transactions, or in other circumstances prescribed in the rules.
149. The overall aim of this provision is to ensure that the Future Fund
Board is able to operate efficiently without exposing the Budget to
undue risk.
150. Subclause 45(3) would provide that the rules may specify circumstances
in which it is appropriate for the Future Fund Board to be able to
borrow. The rules could also be used to clarify any uncertainty on
whether a particular activity constitutes borrowing. While it is not
anticipated that the Future Fund Board will have a need to borrow, this
provision allows for unforeseen events or changes in the investment
environment without the need to amend the primary legislation. The power
to make rules would be provided for in clause 84 of the Bill.
Clause 46 - Emergency Response Fund investment policies
151. Clause 46 would require the Future Fund Board to formulate, publish
and comply with a number of policies on its investment activities. The
aim of this provision is to ensure rigour and transparency around how
the Future Fund Board performs its investment function in relation to
the Emergency Response Fund, including risk management, performance
assessment and benchmarks.
152. Subclauses 46(1) and 46(7) require the Future Fund Board to formulate
and comply with policies and any additional matters specified in the
rules. For certainty, these clauses do not prescribe a substantive
exemption from the requirements of the Legislation Act. A note at the
end of subclause 46(1) would remind the reader that, under subsection
33(3) of the Acts Interpretation Act, the Future Fund Board is able to
repeal, rescind, revoke, amend, or vary any such policies.
153. Subclause 46(2) would provide that the policies that the Future Fund
Board develops must be consistent with the Emergency Response Fund
Investment Mandate.
154. Subclauses 46(3) and 46(4) would require the Future Fund Board to
publish such policies on the internet.
155. Subclauses 46(5) and 46(6) would require the Future Fund Board to
conduct reviews of these policies periodically, and when the responsible
Ministers change the Emergency Response Fund Investment Mandate. It is
not expected that the results of the reviews would be published.
However, if a review resulted in any changes to policies, it is intended
that the updated policies would be published on the internet.
156. Subclause 46(8) would provide that if the Future Fund Board enters
into a transaction which is not consistent with a policy that it has
published under this section, the transaction would still be valid. This
would ensure that third parties would not be affected by a failure of
the Future Fund Board to comply with policies formulated under
subclause 46(1). However, subclause 46(7) would require the Future Fund
Board to take all reasonable steps to comply with the policies it
develops under subsection 46(1).
157. Subclause 46(9) would be included to assist readers, as a policy
formulated under subsection 46(1) would not be a legislative instrument
within the meaning of subsection 8(1) of the Legislation Act. Such
policies would be administrative in character, and would not determine
or alter the content of the law. Rather they would be administrative
policies that the Future Fund Board would be required to formulate and
comply with, to ensure rigour and transparency around how the Board
performs its investment function.
Clause 47 - Derivatives
158. Derivatives are widely used by financial market participants as a tool
for risk management.
159. Clause 47 would provide for the Future Fund Board to make use of
derivatives for certain purposes. This includes as a risk management
tool and to achieve indirect exposure to assets that it could not
otherwise achieve. The Future Fund Board could also use derivatives to
reduce the transaction cost of achieving required exposures.
160. Subclause 47(1) would enable the Future Fund Board to acquire a
derivative for specified purposes, but would make it clear that the
Board cannot acquire or use derivatives for the purposes of speculation
or leverage.
161. Subclause 47(2) would provide that the acquisition of derivatives
under this clause cannot be inconsistent with the requirement under
subsection 46(1) of the Act for the Future Fund Board to formulate a
policy on its investment strategy and take all reasonable steps to
comply with that policy.
162. Subclauses 47(3) and 47(4) would provide that derivatives would be
held in the name of the Future Fund Board and be taken to be an
investment of the Emergency Response Fund.
163. Similar to other investments, derivatives could be realised by the
Future Fund Board under subsection 38(3) of the Bill.
Clause 48 - Additional financial assets
164. Clause 48 would provide that if the Future Fund Board becomes a holder
of another financial asset (for example through a capital distribution)
that asset would become an investment of the Emergency Response Fund and
would therefore be subject to all the restrictions and requirements for
investments of the Emergency Response Fund.
Clause 49 - Securities lending arrangements
165. Clause 49 would provide that the Future Fund Board is able to enter
into securities lending arrangements. Lending of securities is
commonplace among institutional investors. It could also take collateral
as part of a securities lending arrangement. Any collateral it takes
would either be credited to the Emergency Response Fund Special Account
or become an investment of the Emergency Response Fund.
Clause 50 - Investment managers
166. Clause 50 would deal with the use of investment managers by the Future
Fund Board for purposes in connection with the Emergency Response Fund.
167. Subclause 50(1) would enable the Future Fund Board to engage one or
more investment managers. An 'investment manager' would be defined
broadly in clause 4 of the Bill to include custodians, transition
managers and other investment managers. However, the Agency would be
excluded from this definition as it is generally expected that
investment activities, such as acquiring derivatives or investing money,
will be outsourced.
168. Unless otherwise approved by the responsible Ministers, the Future
Fund Board would be required to use investment managers to invest money
in financial assets, acquire derivatives, and enter into securities
lending arrangements or to realise financial assets.
169. Subclause 50(2) would provide that the responsible Ministers may
provide approval in writing for certain methods of investment, other
than through investment managers, should it be prudent and cost
effective to do so.
170. Subclauses 50(3) and 50(4) would require the Future Fund Board to
ensure that investment managers operate within this Bill and report on
the state of investments of the Emergency Response Fund to the Future
Fund Board and the Agency. It would be expected that such obligations
would be set out in the contractual arrangements between the Future Fund
Board and the investment manager.
Clause 51 - Refund of franking credits
171. Under subsection 84B(1) of the Future Fund Act, the Future Fund Board
is deemed to be an exempt institution that is eligible for a refund of
franking credits under the ITAA. As the Future Fund Board is exempt from
income tax, it may have an investment bias towards assets whose return
had not previously been subject to income tax (such as debt instruments
or unfranked dividends). Refunding franking credits removes any
potential bias against franked dividends.
172. Clause 51 would deal with the refund of franking credits and provide
that if the Future Fund Board receives a refund of a tax offset under
the ITAA and the tax offset is attributable to the investment of the
Emergency Response Fund, any refund received is credited to the
Emergency Response Fund Special Account. Note 1 would refer the reader
to section 84B of the Future Fund Act. Note 2 would refer the reader to
Division 63 of the ITAA, which deals with refunds of tax offsets.
Clause 52 - Realisation of non-financial assets
173. Clause 52 would require the Future Fund Board to realise an asset that
ceases to be a financial asset or any asset acquired by the Board (as an
investment of the Emergency Response Fund) that is not a financial
asset. This could include circumstances where the Future Fund Board
holds an asset which was mistakenly acquired by the Board, or given to
the Board, or which ceases to be a financial asset.
174. The clause would require a non-financial asset to be treated as a
financial asset up to the time it is realised. Subclause 52(1) would
ensure that the asset is considered an investment of the Emergency
Response Fund and that relevant provisions relating to investments of
the Emergency Response Fund apply to that asset for the time it is held
by the Future Fund Board.
Clause 53 - Additional function of the Future Fund Board
175. Clause 53 would provide that the functions of the Future Fund Board
include the function of investing amounts in accordance with the Act.
Part 5 - Reporting obligations etc.
Clause 54 - Simplified outline of this Part
176. Clause 54 would provide a high-level introduction to the provisions in
this Part, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions of this Part.
Clause 55 - Finance Minister may require Future Fund Board to prepare
reports or give information
177. This clause would provide that the Finance Minister may require, in
writing, that the Future Fund Board prepare a report or a document on
one or more specified matters relating to the performance of the Future
Fund Board's functions under this Bill. This report or information would
be required to be provided as outlined in the Finance Minister's
request. Such a report could be requested, for example, in order to
satisfy the Government that the Future Fund Board's management of the
Emergency Response Fund complies with legislation and the Fund's
investment mandate.
178. Subclause 55(4) would be included to assist readers, as a report
prepared under subsection 55(1) would not be a legislative instrument
within the meaning of subsection 8(1) of the Legislation Act. Such
reports would be administrative in character, and would not determine or
alter the content of the law.
Clause 56 - Keeping the responsible Ministers informed etc.
179. Clause 56 would require the Future Fund Board to notify the
responsible Ministers of any information that the responsible Ministers
should know, including by providing any written information to the
Finance Minister. This could include significant investment results,
concerns regarding fraud and any non-compliance with the Future Fund
Board's policy on conflicts of interest.
Clause 57 - Finance Minister may give reports, documents and other
information to other Ministers etc.
180. Clause 57 would allow the Finance Minister to give reports, documents
and other information to another Minister. This includes reports and
documents under subsections 55(1) or 56(2) and any other information
obtained by the Finance Minister under the Bill. It is intended that the
Finance Minister will use this provision to inform the Emergency
Management Minister about matters relating to the Emergency Response
Fund, given the responsibility of the Emergency Management Minister for
making payments from the Home Affairs Future Emergency Response Fund
Special Account on behalf of the Commonwealth.
181. It is envisaged that the Emergency Management Minister would also
cause information about a payment or grant under section 20 to be
published in the Annual Report for the Department of Home Affairs,
however the personal privacy of individual recipients would remain
protected under subclause 26(1)(d).
Part 6 - Miscellaneous
Clause 58 - Simplified outline of this Part
182. This clause would provide a high-level introduction to the provisions
in this Part, to aid readability. The outline is not intended to be
comprehensive and should not be relied on in place of the substantive
provisions of this Part.
Clause 59 - Delegation by the Finance Minister
183. This clause would enable the Finance Minister to delegate certain of
the Finance Minister's functions and powers under this Bill.
184. Under subclause 59(1), the Finance Minister would be empowered to, in
writing, delegate his or her functions or powers under sections 13 and
28 of the Act to the Secretary of the Finance Department or to an SES
employee (or acting SES employee) in that Department. The Minister would
not be required to do so.
185. The Finance Minister's powers under sections 13 and 28 would relate to
the determination of a specified amount to be credited to the Emergency
Response Fund Special Account (in the case of section 13) or a direction
that a specified amount is to be transferred from the Emergency Response
Fund Special Account to the Home Affairs Emergency Response Fund Special
Account (in the case of section 28). Delegation of these functions to
the Secretary of, or SES official in, the Finance Department would
facilitate the efficient administration of these matters.
186. Subclause 59(2) would allow the Finance Minister to delegate, in
writing, any or all of the Finance Minister's powers under section 18 of
the Act to the Secretary of the Finance Department; or to an SES
employee (or acting SES employee) in that Department; or to the Chair of
the Future Fund; or an SES employee (or an acting SES employee) of the
Agency. Clause 18 would relate to the transfer of funds from the
Emergency Response Fund Special Account to the Future Fund Special
Account.
187. The notes would assist the reader by referring to the relevant section
of the Acts Interpretation Act in relation to the expressions 'SES
employee' and 'acting SES employee'.
188. It is envisaged that the delegate would be accountable to the Finance
Minister for his or her actions under any delegation. Subclause 59(3)
would reinforce this intention by requiring the delegate to comply with
any direction of the Finance Minister in exercising powers under a
delegation.
Clause 60 - Delegation by the Treasurer
189. Under subclause 60(1), the Treasurer would be empowered to, in
writing, delegate his or her powers under section 13 of the Act to the
Secretary of the Treasury Department or an SES employee (or acting SES
employee) in that Department. The Treasurer would not be required to do
so.
190. Section 13 of the Act would relate to the determination of a specified
amount to be credited to the Emergency Response Fund Special Account.
Delegation of this power to the Secretary of, or SES official in, the
Treasury would enable the efficient administration of these matters.
191. The note would assist the reader by referring to the relevant section
of the Acts Interpretation Act in relation to the expressions 'SES
employee' and 'acting SES employee'.
192. It is envisaged that the delegate would be accountable to the
Treasurer for his or her actions under any delegation. Subclause 60(2)
would reinforce this intention by requiring the delegate to comply with
any direction of the Treasurer in exercising powers under a delegation.
Clause 61 - Delegation by the Emergency Management Minister
193. Under subclause 61(1) the Emergency Management Minister would be
empowered to, in writing, delegate his or her powers under Division 2 of
Part 3 to the Secretary of the Home Affairs Department, an SES employee
(or acting SES employee) in that Department (so long as that employee
possesses expertise appropriate to the delegated power), or another
official of a Commonwealth entity who has the expertise appropriate to
the power. This delegation power is required to enable grants made under
section 20 to be administered by Commonwealth officials employed in an
Australian Government grants hub (for example, the Community Grants Hub,
managed by the Commonwealth Department of Social Services).
194. Division 2 of Part 3 of the Bill deals with making arrangements or
grants of financial assistance in relation to recovery from natural
disasters. Delegation of these functions to the Secretary of, or SES
official in, the Home Affairs Department, or a Commonwealth official
employed in the Australian Government Community Grants Hub, would enable
the efficient administration of these matters.
195. It is envisaged that the delegate would be accountable to the
Emergency Management Minister for his or her actions under any
delegation. Subclause 61(2) would reinforce this intention by requiring
the delegate to comply with any direction of the Emergency Management
Minister in exercising powers under a delegation.
196. Under subclause 61(3), the Emergency Management Minister would be
empowered to, in writing, delegate his or her powers under sections 28,
31 and 32 of the Act to Secretary of the Home Affairs Department or an
SES employee (or acting SES employee) in that Department.
197. The Emergency Management Minister's powers under sections 28, 31 and
32 would relate to transfers between the Emergency Response Fund Special
Account and the Home Affairs Emergency Response Fund Special Account (in
the case of sections 28 and 31) and transfers from the Emergency
Response Fund Special Account to the COAG Reform Fund (in the case of
section 32).
198. Delegation of these functions to the Secretary of, or SES official in,
the Home Affairs Department would facilitate the efficient
administration of these matters. The list of potential delegates in
subclause 61(3) is narrower than the list in subclause 61(1), as
delegations of the relevant powers will not need to be made to officials
outside the Home Affairs Department.
199. The notes immediately following subclauses 61(1) and 61(3) would
assist the reader by referring to the relevant section of the Acts
Interpretation Act in relation to the expressions 'SES employee' and
'acting SES employee'.
Clause 62 - Transitional - receipts relating to the Education Investment
Fund
200. This transitional clause would provide that any amount received by the
Future Fund Board that relates to the EIF would be credited to the
Emergency Response Fund Special Account. This clause would operate after
the closure of the EIF, which takes effect with the commencement of this
Bill. The amounts that may still be received by the Future Fund Board
that relate to the EIF could include accrued interest, fee refunds, or
withholding tax refunds.
Clause 63 - Review of operation of Act
201. Subclause 63(1) would require the responsible Ministers to cause a
review of the operation of the Act to be undertaken before the tenth
anniversary of the commencement of section 63.
202. This review mechanism is intended to provide the opportunity to
consider whether the Act is providing the outcomes envisaged. Subclause
63(2) would provide that the 10-year review must consider the extent to
which financial assistance provided under the Act has complemented other
financial assistance provided by the Commonwealth, States and
Territories in relation to natural disasters.
203. A review under section 63 must also consider whether the annual limit
in section 34 of the Act could be increased. Section 34 would set an
annual limit of $150 million that may be debited from the Emergency
Response Fund Special Account during a financial year for the purposes
arrangements and grants in relation to recovery from a natural disaster.
204. In considering whether the annual limit could be increased, the review
should assess the balance of the Emergency Response Fund, the likelihood
of funding debits from the Fund in the future and the objective of
providing a sustainable source of funding for natural disaster emergency
response and recovery into perpetuity.
205. Subclause 63(4) would require the responsible Ministers the person or
persons who conduct the review to give the responsible Ministers a
written report of the review before the tenth anniversary of the
commencement of section 63.
206. Subclause 63(5) would require the responsible Ministers to table, in
both Houses of the Parliament, a copy of the terms of reference for the
review as well as the report of the review. This must occur within 15
sitting days (for each House of the Parliament) after the tenth
anniversary of the commencement of section 63.
207. Under subclause 63(6), the responsible Ministers must publish on the
internet both the terms of reference for the review as well as a report
of the review. This must occur as soon as practicable after the tenth
anniversary of the commencement of section 63.
Clause 64 - Rules
208. Clause 64 would provide that the Finance Minister may, by legislative
instrument, make rules covering matters required to be prescribed in
this Bill, or matters that it would be necessary or convenient to
prescribe for the purposes of this Bill.
209. Enabling the making of rules rather than regulations would accord with
the Office of Parliamentary Counsel's Drafting Direction No. 3.8 -
Subordinate Legislation. Paragraph 2 of that Drafting Direction states
that "OPC's starting point is that subordinate instruments should be
made in the form of legislative instruments (as distinct from
regulations) unless there is good reason not to do so".
210. Paragraph 3 of the Drafting Direction states that matters such as
compliance and enforcement, the imposition of taxes, setting amounts to
be appropriated, and amendments to the text of an Act, should be
included in regulations unless there is a strong justification
otherwise. The Bill does not intend to enable the rules to provide for
any of the types of matters listed.
211. In addition, clause 64 of the Bill would clarify that the rules made
under the Act would be a legislative instrument for the purposes of the
Legislation Act. Pursuant to sections 38 and 39 of that Act, all
legislative instruments and their explanatory statements must be tabled
in both Houses of the Parliament within 6 sitting days of the date of
registration of the instrument on the Federal Register of Legislation.
Once tabled, the rules would be subject to the same level of
Parliamentary scrutiny as regulations (including consideration by the
Senate Standing Committee on Regulations and Ordinances), and a motion
to disallow the rules may be moved in either House of the Parliament
within 15 sitting days of the date the rules are tabled (see section 42
of the Legislation Act).
212. Subclause 64(2) would be a declaratory clause, included for the
avoidance of doubt.
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[1] UN Committee on Economic, Social and Cultural Rights, General Comment
No 12 (1999), paragraph 38