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2016-2017
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
INTERNATIONAL MONETARY AGREEMENTS AMENDMENT BILL 2017
EXPLANATORY MEMORANDUM
(Circulated by authority of the
Treasurer, the Hon Scott Morrison MP)
Table of contents
Glossary ................................................................................................. 1
General outline and financial impact....................................................... 3
Chapter 1 Bilateral loan agreement with the IMF ........................... 5
Index....................................................................................................... 9
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
Abbreviation Definition
2012 loan agreement Loan Agreement between Australia and the
International Monetary Fund signed at
Tokyo on 13 October 2012.
2016 loan agreement Loan Agreement between Australia and the
International Monetary Fund signed at
Canberra on 19 December 2016 and at
Washington D.C. on 4 January 2017
IMA Act International Monetary Agreements Act 1947
IMF International Monetary Fund
SDR Special Drawing Rights
1
General outline and financial impact
Bilateral loan agreement with the IMF
The Bill amends the International Monetary Agreements Act 1947
(IMA Act) to provide standing appropriation and authority to borrow for
payments to meet drawings made by the International Monetary Fund
(IMF) under a new bilateral loan agreement.
The agreement was signed at Canberra on 19 December 2016 and at
Washington D.C. on 4 January 2017. The term of the agreement ends on
31 December 2019 and is extendable by the IMF for one further year with
Australia's consent.
Date of effect: Schedule 1 to the Bill implementing the agreement will
apply from the date that the agreement enters into force.
Proposal announced: These amendments have not been previously
announced.
Financial impact: The Bill would have an indirect impact on the
underlying cash balance if the agreement is activated and funds are
provided. This impact would arise where the Australian Government's
lending to the IMF increases Australia's own borrowing requirement and
where the interest payable on any money borrowed by Australia to meet
an IMF drawdown exceeds the interest paid by the IMF in regard to that
drawdown.
The maximum amount of Australia's lending commitment to the IMF is
Special Drawing Rights (SDR) 4.61 billion (around $A8.39 billion) under
the agreement.
The SDR is an international reserve asset created by the IMF and is
defined by a basket of currencies (the US dollar, euro, Chinese renminbi,
Japanese yen and British pound sterling). The IMF can allocate SDRs to
its member countries in proportion to their IMF quotas. Countries holding
SDRs can exchange them for any of the currencies in the basket. The
value of the SDR is determined daily by the IMF and the Australia dollar
to SDR exchange rate is available on the Reserve Bank of Australia's
website.
The IMF can only seek to activate the agreement when additional funds
are required to support its lending to member countries.
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International Monetary Agreements Amendment Bill 2017
The bilateral agreement will be included in the budget papers as
quantifiable contingent liabilities.
Human rights implications: This Bill does not raise any human rights
issue. See Statement of Compatibility with Human Rights -- Chapter 1,
paragraphs 1.20 to 1.23.
Compliance cost impact: Nil.
4
Chapter 1
Bilateral loan agreement with the IMF
Outline of chapter
1.1 Schedule 1 to this Bill amends the IMA Act to give force of law
in Australia to the Loan Agreement between Australia and the IMF signed
at Canberra on 19 December 2016 and at Washington D.C. on
4 January 2017 (the 2016 loan agreement).
Context of amendments
1.2 A bilateral Loan Agreement between Australia and the IMF
signed at Tokyo on 13 October 2012 (the 2012 loan agreement) by the
Deputy Prime Minister and Treasurer and the Managing Director of the
IMF was for Australia to provide a contingent bilateral loan to the IMF as
part of a broad global effort to increase the resources available to the IMF
for crisis prevention and resolution.
1.3 The 2012 loan agreement expires on 17 July 2017, so the
2016 loan agreement is to continue Australia's commitment to increasing
the IMF's available resources for those purposes.
1.4 The amendments establish a standing appropriation and
authority to borrow for payments to meet drawings made by the IMF
under the 2016 loan agreement.
Summary of new law
1.5 The amendments establish a standing appropriation for
payments to the IMF to meet drawings under the 2016 loan agreement.
The appropriation covers the agreement and any subsequent amended
agreement where the maximum value that may be lent or the term of the
agreement is not amended.
1.6 Further legislative amendments will be required if any
subsequent amended agreement affects the maximum value that may be
lent under the agreement or the duration of the agreement.
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International Monetary Agreements Amendment Bill 2017
Comparison of key features of new law and current law
New law Current law
The Consolidated Revenue Fund is The Consolidated Revenue Fund is
appropriated for payments made for appropriated for payments made for
drawings by the IMF under the drawings by the IMF under the
2016 loan agreement. 2012 loan agreement.
Amendments to the 2016 loan Amendments to the 2012 loan
agreement must be notified by agreement must be notified by
legislative instrument, except for legislative instrument, except for
amendments to the maximum amount amendments to the maximum amount
that may be borrowed under the that may be borrowed under the
agreement or the term of the agreement or the term of the
agreement. agreement.
Detailed explanation of new law
1.7 Schedule 1 to this Bill establishes a standing appropriation and
authority to borrow for payments to meet drawings made by the IMF
under the 2016 loan agreement.
1.8 The 2016 loan agreement provides that the IMF may make
drawings up to the equivalent of SDR 4.61 billion (around
A$8.39 billion). The IMF may only make drawings under the 2016 loan
agreement if its existing quota and the New Arrangements to Borrow
resources are insufficient to support its lending to its member countries.
1.9 The Treasurer must be satisfied that a payment is required to
meet Australia's obligations under the 2016 loan agreement before
directing the payment to be made. Once the Treasurer gives the direction,
the amounts are appropriated from the Consolidated Revenue Fund.
[Schedule 1, items 2 and 5, section 3 definition of 'IMF loan agreement 2016' and
subsection 8CAA(1)]
1.10 If the 2016 loan agreement is amended, the Treasurer can
continue to use the standing appropriation for payments under the
amended agreement as long as the amendment does not affect the
maximum amount that Australia may lend to the IMF or the term of the
2016 loan agreement. However, in order to do this, the Treasurer must
give notice of the amendment to the 2016 loan agreement by tabling a
legislative instrument. [Schedule 1, item 7, subsection 8CAA(3)]
1.11 Any such legislative instrument made will be repealed the day
after the 2016 loan agreement expires. [Schedule 1, item 10, subsection 8CAA(5)]
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Bilateral loan agreement with the IMF
1.12 The agreement will expire on 31 December 2019, unless
Australia consents to the decision of the IMF Executive Board to extend
the agreement for one further year. [Schedule 1, item 9, note 2 to
subsection 8CAA(3)]
Consequential amendments
1.13 The definition of IMF loan agreement 2016 is inserted by the
amendments to enable the establishment of the standing appropriation to
fund payments to be made under the 2016 loan agreement. [Schedule 1,
item 2, section 3 definition of 'IMF loan agreement 2016']
1.14 A range of consequential amendments are made to the relevant
provisions that support the standing appropriation, including providing the
Treasurer with the authority to borrow to meet Australia's obligations
under the 2016 loan agreement. [Schedule 1, items 1, 3, 4, 6 and 8, section 3
definition of 'IMF loan agreement 2012', paragraph 6(1)(c) and section 8CAA]
Application and transitional provisions
1.15 The amendments apply to appropriation for a payment to the
IMF to meet drawings under the 2016 loan agreement once the agreement
enters into force.
1.16 The 2016 loan agreement enters into force on the date that the
IMF acknowledges the receipt of a written communication from Australia
notifying the IMF that this Bill has received Royal Assent.
1.17 Upon the 2016 loan agreement entering into force, the 2012 loan
agreement will be terminated.
1.18 However, the IMF is able to draw funds from Australia after the
expiry or termination of the 2012 loan agreement to meet funding
commitments that were made during the term of that agreement (such as
when a funding commitment by the IMF is payable in instalments over a
number of years).
1.19 The standing appropriation will continue to allow for those
payments to be made. [Schedule 1, item 11]
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International Monetary Agreements Amendment Bill 2017
STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS
Prepared in accordance with Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011
International Monetary Agreements Amendment Bill 2017
1.20 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
1.21 The Bill is to bring into force a bilateral loan agreement between
Australia and the IMF, and provide borrowing and appropriation authority
for any drawings under the agreement.
Human rights implications
1.22 This Bill does not engage any of the applicable rights or
freedoms.
Conclusion
1.23 This Bill is compatible with human rights as it does not raise any
human rights issues.
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Index
Schedule 1: International Monetary Agreements Amendment
Bill 2017
Bill reference Paragraph number
Items 1, 3, 4, 6 and 8, section 3 definition of 'IMF loan agreement 1.14
2012', paragraph 6(1)(c) and section 8CAA
Item 2, section 3 definition of 'IMF loan agreement 2016' 1.13
Items 2 and 5, section 3 definition of 'IMF loan agreement 2016' 1.9
and subsection 8CAA(1)
Item 7, subsection 8CAA(3) 1.10
Item 9, note 2 to subsection 8CAA(3) 1.12
Item 10, subsection 8CAA(5) 1.11
Item 11 1.19
9