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Tuesday, 8 May 2012
Page: 4191

Mr BRADBURY (LindsayAssistant Treasurer and Minister Assisting for Deregulation) (19:59): I move:

That this bill be now read a second time.

Appropriation Bill (No. 2) 2012-2013, together with Appropriation Bill (No. 1) 2012-2013, is one of the principal pieces of legislation underpinning the government's budget.

Appropriation Bill (No. 2) 2012-2013 proposes appropriation for agencies to meet:

payments direct to local government, and some national partnership payments through the states, the Australian Capital Territory and the Northern Territory;

requirements for departmental equity injections; and

requirements to create or acquire administered assets and to discharge administered liabilities.

Appropriation Bill (No. 2) 2012-2013 seeks approval for appropriations from the Consolidated Revenue Fund of just over $7.2 billion.

Appropriation Bill (No. 2) 2012-13 also provides for amendments to the Commonwealth Inscribed Stock Act 1911.

The amendments will provide for the government's financing requirements, particularly normal within-year financing fluctuations, and will ensure flexibility in meeting the government's objective of maintaining a deep and liquid CGS market.

CGS on issue subject to the current legislative limit is projected to be below $250 billion at the end of each financial year across the forward estimates.

However, fluctuations in cash requirements within a financial year are a normal feature of the government's annual financing task. It is these requirements that determine the level of CGS that needs to be on issue at any particular time during the year.

These fluctuations mean that at certain points during the year the level of CGS on issue will exceed the current legislative limit.

The two key drivers of within-year fluctuations in CGS on issue are: the timing difference between government revenue collections and expenditure outlays throughout the financial year, and the timing of bond maturities.

While government expenditure outlays occur relatively evenly across the financial year, revenue collections tend to be higher toward the end of the financial year. As a consequence of this timing mismatch, expenditure tends to exceed receipts for the majority of the financial year.

In advance of the maturity of a bond line it is necessary to increase the volume of Treasury notes on issue in order to fund the maturity of a bond line.

This means that in the lead-up to a bond line maturing, there is a temporary increase in the total amount of CGS on issue owing to the combined value of the Treasury notes and the maturing bond line. The amount of CGS on issue falls, on the maturity date of the bond, by the face value of that bond. It is critical that the government maintains a clear and unambiguous message that debt market operations will not be impeded, for example by short-term borrowing constraints such as the legislative debt limit.

An increase in the legislative debt limit will enable the government to provide certainty to financial markets that the Australian Office of Financial Management will be able to undertake normal debt management operations.

To ensure flexibility in meeting the government's objective of maintaining a deep and liquid CGS market, and to most efficiently manage the normal within-year financing task, an amendment will be sought to the Commonwealth Inscribed Stock Act 1911 to increase the legislative limit on CGS to $300 billion.

Details of the proposed appropriations are set out in schedule 2 to the bill, the main features of which were outlined in the budget speech delivered by my colleague the Treasurer earlier this evening.

Debate adjourned.