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Thursday, 12 May 1994
Page: 709


Senator FAULKNER (Minister for the Environment, Sport and Territories) (9.59 a.m.) —I move:

  That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

  Leave granted.

  The speeches read as follows

FINANCIAL AGREEMENT BILL 1994

The signing of the new Financial Agreement Between the Commonwealth, States and Territories by the Prime Minister, the Premiers, and Chief Ministers at the meeting of the Council of Australian Governments on 25 February 1994 was an important step in the continuing evolution of the Commonwealth's financial relationship with the States and Territories.

The bill approves the new Financial Agreement which provides for the continued existence of a Loan Council with broadly specified role and powers, sets out certain obligations in respect of past Financial Agreement borrowings, and provides for formal membership of Loan Council for the Australian Capital Territory and the Northern Territory.

The original Financial Agreement Between the Commonwealth and the States was made in 1927 and approved under the Commonwealth's Financial Agreement Act 1928 and by the Parliament of each State. The Agreement established the Loan Council and required the Commonwealth and each State to submit an annual borrowing program for Loan Council approval. The Agreement was last amended in 1976 and many of its provisions are now obsolete. In particular, Loan Council scrutiny of public sector borrowings has for many years taken place under voluntarily agreed arrangements rather than the provisions of the Agreement. On this occasion it is proposed that the existing Agreement, as varied since 1927, be rescinded, as provided for under the constitution.

The bill, which is being introduced along with the National Debt Sinking Fund Repeal Bill 1994, establishes a new fund, the Debt Retirement Reserve Trust Account, through which the redemption of Commonwealth Government securities on issue on behalf of the States and the Northern Territory will be administered. This will replace arrangements through the National Debt Sinking Fund for the States and through the Northern Territory Debt Sinking Fund for the Northern Territory. The removal of the States from the ambit of the National Debt Sinking Fund will facilitate the repeal of the National Debt Sinking Fund Act 1966 and the establishment of a more efficient debt redemption framework for the Commonwealth.

The new Agreement would remove the requirement for future Commonwealth and State borrowings to be approved under the provisions of the Agreement. This would reflect the reality that for many years only the Commonwealth's annual borrowing program has been formally approved under the Financial Agreement because only the Commonwealth undertakes budget sector borrowings directly rather than through a central borrowing authority outside the Agreement. From 1993-94, Commonwealth, State and territory borrowings have been subject to Loan Council monitoring under the new deficit based arrangements agreed by Loan Council at its meetings in December 1992 and July 1993. These new arrangements, which superseded the global approach resolution, reflect the common interest of the Commonwealth and States in ensuring that overall public sector borrowing in Australia is consistent with sound macroeconomic policy and that borrowings by each government are consistent with a sustainable fiscal strategy. The emphasis in the new arrangements is on credible budgetary processes, ensuring a high level of public understanding of public sector financing, and facilitating increased financial market scrutiny.

The new Agreement would also remove the Commonwealth's explicit power to borrow on behalf of the States. Reflecting the States' own borrowing activities outside the provisions of the Agreement, the Commonwealth has undertaken no new money borrowings on behalf of the States since 1987-88. Loan Council decided in 1990 that the States would progressively take over responsibility for debt previously issued on their behalf under the Financial Agreement. These arrangements place full responsibility on the States for financing and managing their own debt, thus subjecting their fiscal and debt management strategies to greater community and financial market scrutiny.

In addition, the new Agreement would abolish the restriction on States borrowing by the issue of securities in their own names in domestic and overseas markets. This would again recognise that the States conduct extensive borrowing activities through their central borrowing authorities outside the provisions of the Agreement. These borrowings are regarded by the financial markets effectively as sovereign issues and rated accordingly.

As noted, the proposed Agreement was signed by all Heads of Government at the Council of Australian Governments meeting on Friday 25 February 1994. To become effective, the Agreement requires the passage of complementary legislation in the Commonwealth and all State and Territory Parliaments. That will inevitably take a little time but the Treasurer has asked his State and Territory counterparts to press ahead with their legislation so that the new Agreement can be brought into effect—in particular, so that the Territories can take their rightful place as full members of Loan Council—with a minimum of delay.

The Report of the Senate Select Committee on the Functions, Powers and Operation of the Australian Loan Council was recently tabled, calling, inter alia, for further redrafting of the Financial Agreement to reflect the Committee's recommendations for: increased accountability of Loan Council to Parliaments, including through an expanded role for Auditors-General; for the adoption of accrual accounting; and for legislative backing to be given to the new Loan Council reporting arrangements.

The bill does not deal with all of the recommendations in the Senate Committee's report. On the other hand, it does not pre-empt the Committee's proposals on the issues that are not included. The Government is considering the Committee's final report, including its proposals in relation to the Financial Agreement, and will provide the Committee with a response to its recommendations. However, consultations with the States and Territories at official level have indicated that there would not be a consensus in favour of the recommendations.

The new Agreement has already been agreed by Premiers and Chief Ministers. Of course, any amendments to the Agreement by the Commonwealth Parliament would also need to be incorporated in complementary State and Territory legislation before they could become effective.

I commend this bill to the Senate and table the associated explanatory memorandum.

NATIONAL DEBT SINKING FUND REPEAL BILL 1994

The purpose of this bill is to effect the repeal of the National Debt Sinking Fund Act 1966, thereby abolishing the National Debt Sinking Fund and its controlling body, the National Debt Commission.

This bill is being introduced along with a bill to amend the Financial Agreement Act, to formalise changed borrowing and debt redemption arrangements agreed between the Commonwealth, the States and the Territories following decisions at the June 1990 meeting of the Loan Council.

In the past, the Commonwealth has been inhibited from rationalising the debt redemption arrangements through the Fund because of the necessary pre-condition for coordinated action by the Commonwealth and each of the States to amend the Financial Agreement. With the changes now proposed to the Financial Agreement Act, the opportunity is being taken to proceed with the repeal of the National Debt Sinking Fund Act 1966.

The Commission was originally constituted by the National Debt Sinking Fund Act 1923 which also established the National Debt Sinking Fund for the redemption of Commonwealth debt and placed the Fund under the Commission's control. The Financial Agreement of 1927 provided that sinking funds established in respect of the States' debts were placed under the control of the Commission. The National Debt Sinking Fund Act 1966, which replaced the 1923 Act, changed the sources of income to the Fund and the assessment of contributions to the Fund payable from the Consolidated Revenue Fund of the Commonwealth. Variations to the Financial Agreement of 1976 provided for the absorption of the States' Sinking Funds into the National Debt Sinking Fund, with separate accounts being maintained for the Commonwealth and each State.

Under the terms of the current Financial Agreement, the States have been required to contribute to their sinking fund accounts at a rate sufficient to redeem only a very small portion of maturing debt each year, the debt being mostly rolled over into new raisings by the Commonwealth on the States' behalf. However, following the June 1990 meeting of the Loan Council, the States have made sufficient contributions into the Fund to redeem in full their maturing debt each year. The amendments to the Financial Agreement encompass amongst other things a formalisation of that basis of contribution and establish a new Trust Fund, the Debt Retirement Reserve Trust Account, to handle the redemption of Commonwealth Government securities on issue to the States and the Northern Territory. The separate Northern Territory Debt Sinking Fund established under the Audit Act 1901, through which debt redemption has proceeded on an identical basis to that for the States, would cease to operate from the date of establishment of the Debt Retirement Reserve Trust Account. The final series of Commonwealth Government securities on issue for the States and the Territories will mature in 2005-06, bringing to an end the debt redemption arrangements through the Debt Retirement Reserve Trust Account.

With the removal of the States from the ambit of the National Debt Sinking Fund, the Fund is rendered a purely Commonwealth Fund, the separate existence of which is no longer necessary.

For the Commonwealth, the Fund was designed originally to provide investors with confidence that their investment was secure with the Government paying money into a fund to meet the eventual redemption, or in the case of certain issues floated overseas, to redeem the debt progressively over a specified time span. The Commonwealth's reputation in capital markets has, of course, subsequently become well established, rendering the Fund redundant also in this respect.

Further, in practice, the transactions of the Fund on behalf of the Commonwealth are integrated into the Commonwealth's overall debt management activities and the allocation of particular debt redemption transactions to the Fund is essentially an accounting matter.

Against this background, the role of the Commission has become vestigial. The sole activity of this body, chaired by the Treasurer and with, as other Commissioners, the Secretary to the Treasury, the Governor of the Reserve Bank, the Secretary to the Attorney-General's Department and a representative of the States, is to meet briefly once each year to formally authorise the program of transactions of the Fund for the current financial year and to approve its annual report for the past financial year. Secretariat services are provided to the Commission by the Commonwealth Treasury.

The continued existence of the Fund would perpetuate an unduly complicated accounting and administrative structure for only a portion of the Commonwealth's debt redemption activities. In years of significant budget surplus, such as in the late 1980s, the annual redemption of the Commonwealth's debt is greater through other accounts within the Commonwealth Public Account, such as the Loan Consolidation and Investment Reserve, than through the Fund. In years of budget deficit, redemptions of the Commonwealth's debt through the Fund are met under an appropriation from the Consolidated Revenue Fund, but in effect they are financed by borrowing and the debt is therefore rolled over.

In addition, while debt redemption processes through the National Debt Sinking Fund have been by way of reimbursement by the Fund of payments made on its behalf to holders of debt, the Fund has also been required to maintain balances as if it was paying debt holders directly. This has been of significance given the standing of the Fund as separate from other elements of the Trust Fund within the Commonwealth Public Account. As a consequence, there has been the potential for higher debt issuance and Public Debt Interest costs than those which would have been necessary with non-separation of the National Debt Sinking Fund. An offset to this increase has been provided by resultant higher interest earnings on the Commonwealth's cash balances.

On the repeal of the National Debt Sinking Fund Act 1966, a more streamlined debt redemption framework would be established. Redemptions on behalf of the Commonwealth would be met through the Consolidated Revenue Fund, the Loan Fund and the Loan Consolidation and Investment Reserve under existing standing appropriation provisions and legislative authorities. These funds are already used for redemptions which are unable to be funded through the resources of the Sinking Fund. Under these arrangements, a comprehensive reporting of the financial year's debt redemption activity would continue in order to maintain public accountability.

I commend this bill to the Senate and table the associated explanatory memorandum.

SOCIAL SECURITY LEGISLATION AMENDMENT BILL (NO 2) 1994

This bill gives legislative effect to several measures announced in the context of the 1993 Budget and to a number of other changes.

Some people with disabilities are unable to find jobs in the open labour market because their disability prevents them from being able to do the job to the level expected of people without disabilities. Under the existing award wage system they have to be paid full award rates.

As announced in the 1993 Budget, a new payment type, disability wage supplement, will be introduced from 1 July 1994. The supplement will be based on the qualification and payability conditions for disability support pension and will be available each year for up to 1,000 people who enter the `supported wage system' administered by the Department of Human Services and Health. The supported wage system aims at assisting persons with a disability to enter the workforce and will provide that the person may be paid less than the award wage based on his or her productivity compared to a person in the same occupation who does not have such a disability.

Disability wage supplement will be available at the same rates applicable to disability support pensioners and will be subject to similar rules, including the income and assets tests. As a result, income earned under the supported wage system by a disability wage supplement client will count as income for the purposes of determining a rate of disability wage supplement.

As part of the 1993 Budget process, the Government agreed that from 1 January 1995, the maximum rate of additional family payment payable in respect of children who have not turned 16 should be increased by $1 a week per child. This bill gives effect to that agreement. Approximately 800,000 low income families will benefit from this measure at an estimated cost of $45.0m in 1994-95 and $46.0m in 1995-96.

To qualify for age pension, a woman currently must be 60 and a man 65. This bill provides for amendments to be made to the Social Security Act 1991 to increase the pension age for women from 60 to 65. As announced in the 1993 Budget, the increase is to be phased in over a 20 year period, starting on 1 July 1995, in recognition of any remaining labour force disadvantages incurred over the years by the older women affected by the proposal. By 1 July 2013, the women's age pension age will be 65 following pension age increases of six months every 2 years.

As mentioned previously, this bill gives effect to a number of non-Budgetary measures.

First, the Social Security Act 1991 will be amended so as to impose a cap of 50% on the rate of return for shares and managed investments for ordinary income assessment purposes. It will also be amended so as to provide that the rate of return of a managed investment or listed security, that has not been available for the whole of a 12 months assessment period, is to be calculated on the basis of the performance of the product to date without extrapolating that performance over the 12 month period. These are beneficial measures for social security clients.

Secondly, as a result of amendments made by the Migration Reform Act 1992 to the Migration Act 1958, major consequential changes will be made to the Migration Regulations by the Minister for Immigration and Ethnic Affairs, to take effect on 1 September 1994. In turn, there is a need for amendments to be made to the Social Security Act 1991 to allow the Minister for Social Security to take account of these changes by way of disallowable instrument.

In a general sense, these amendments will ensure that relevant provisions in the Social Security Act will either refer to visas specified in the Migration Act or, if this is not possible, allow the Minister to amend references to the Migration Regulations by way of disallowable instrument.

The third set of minor amendments are to overcome an unexpected loophole in the Social Security Act 1991 that has arisen as a result of a recent decision of the Administrative Appeals Tribunal. The Social Security Act has always required that, for most social security payments to be payable, the recipient must provide his or her tax file number to the Department if requested to do so by the Secretary.

In 1993 the Administrative Appeals Tribunal in Re Malloch and Secretary, Department of Social Security held that the Principal Act does not prevent payment to a person who refuses to provide a tax file number to the Department on the basis that they do not have a tax file number and have no intention of getting one.

Amendments in respect of all relevant payment types are included in this bill with a view to preventing payment in the situation that arose on Malloch's case.

Finally, the bill provides for several minor amendments to be made to the Social Security Act 1991, the Veterans' Entitlements Act 1986 and the Farm Household Support Act 1992 that are consequential upon the introduction of the new home child care and partner allowances by the Social Security (Home Child Care and Partner Allowances) Legislation Amendment Bill 1993.

I present the explanatory memorandum and commend the bill to the Senate.

VETERANS' AFFAIRS LEGISLATION AMENDMENT BILL 1994

This bill re-introduces the amendments proposed in the Veterans' Affairs Legislation Amendment Bill (No.3) 1993 with the exception of Part 7. Part 7 of that bill dealt with amendments to the managed investments legislation. The 1993 bill was laid aside by the House of Representatives on 24 February 1994 following disagreement between the Houses about the inclusion of Part 7. Aside from renumbering to take account of this omission, the remainder of the 1993 bill has been duplicated in the Veterans' Affairs Legislation Amendment Bill 1994.

The Government proposed the amendments to the managed investment legislation as they are beneficial to service pensioners with this form of investment. There are not `winners and losers' as the Opposition tried to argue during the debate on the 1993 bill. There are only winners. In fact, this is reflected in the commencement date of the proposed changes which was to ensure that the amendments retrospectively commence from 1 April 1993. However, in weighing up the totality of the bill, the Minister for Veterans' Affairs feels that there would be a greater injustice in not passing the bill at all; in particular, the 10,000 veterans and their dependants who would not be able to get the Commonwealth Seniors Health Card from the Department of Veterans' Affairs from 1 July 1994.

I will now turn to the measures in this bill.

In Building On Strength, the Government announced as part of its advancement towards a fairer Australia that it would improve the position of low income retirees by easing the pensions assets test and by introducing a Commonwealth seniors health card.

The Government fulfilled the first part of this commitment by introducing legislation to ease the pensions assets test from 20 September 1993. This bill meets the second part of that commitment by introducing a Commonwealth seniors health card from 1 July 1994. This card will give certain low income non-service pensioners access to concessional pharmaceutical benefits, hearing aid concessions and optometry services. It is estimated that this proposal will assist a total of 10,000 veterans and dependants.

It is also befitting in the Year of the Family that the Government proposes a bill containing amendments to the child related payments legislation. These amendments introduce greater flexibility in the delivery of child related payments recognising the important role of the primary care giver and the financial burden placed on them. This initiative is part of the Government's on-going commitment to families.

The main features of this initiative are:

the ability to redirect child related payments to the partner;

adjusting the pension payment in shared care cases so that the child related payments are also shared;

backdating child related payments to the first payday after the date of birth in those cases where notification is received within thirteen weeks of the birth; and

ensuring, where pensioners have children and are receiving maintenance income, the maintenance income only affects the child related payments.

These changes result in a more equitable method for assessing child related payments and flow from the family payments structure under the Social Security Act 1991.

This bill provides consistency in the arrangements for offsetting compensation payments against disability pension for the same incapacity or death for which compensation is paid. At present, this provision applies only to disability pensions paid under Part IV of the Veterans' Entitlements Act in respect of defence or certain peacekeeping service. The amendment ensures that the offsetting arrangements will also apply to disability pension paid under Part II in respect of war or operational service. This provision will apply only to payments of compensation made after the date of Royal Assent.

The bill also clarifies the operation of the tax file number provisions where a person fails to comply with a request for a tax file number. In such instances, the Veterans' Entitlements Act currently directs that the person's pension or allowance is not to be paid.

The amendments set out the effect of failing to comply with a request for a tax file number and introduce a generous reconsideration period. It is proposed to give the person three months from the date the pension was last paid to comply with the request for a tax file number and still receive full restitution of the cancelled payment. This would allow the person time to consider the consequences of failing to provide the tax file number. If, however, a person complies with the request after the expiration of the three month period, the pension or allowance will then be restored from the payday after compliance.

This three month period is in addition to the 28 days that the Secretary of the Department of Veterans' Affairs already allows the person to comply with the request before action is taken to stop the pension payment.

This amendment puts beyond doubt the intention of the legislation.

Of course, this initiative will apply only to pensioners required by the Secretary to provide a tax file number. If the individual or a pensioner category has been exempted from providing a tax file number, these amendments will not apply.

Another initiative simplifies the current arrangements for withdrawing an application to determine qualifying service or a claim for service pension. It allows for a person to orally withdraw an application or a claim and to reactivate that application or claim, within 28 days of its withdrawal, without penalty to the original one. This initiative is consistent with the aim of assisting pensioners in their dealings with the Department by encouraging oral communications.

A further amendment will be made to the definition of `income' to exempt from that definition payments received from the New South Wales Medically-Acquired HIV Trust. This follows a similar amendment to the Veterans' Entitlements Act in 1992 which exempted payments received from the Mark Fitzpatrick Trust.

Finally, this bill will make a number of minor changes in the area of service pension assessment including a series of technical and consequential amendments.

I commend the bill to the Senate and present the explanatory memorandum.

EMPLOYMENT, EDUCATION AND TRAINING LEGISLATION AMENDMENT BILL 1994

The purpose of this bill is to make minor amendments to the Higher Education Funding Act 1988 and the Maritime College Act 1978, and to repeal other Acts relating to employment, education and training.

The amendment to the Higher Education Funding Act 1988 provides minor adjustments to financial amounts. These adjustments flow from the transfer of responsibilities for funding the Institute of the Arts of the Australian National University from the ACT Government to the Commonwealth.

The ACT Government receives special revenue assistance as part of general revenue payments from the Commonwealth. The level of special revenue assistance has in the past made allowance (as assessed by the Commonwealth Grants Commission) for the cost of funding the Institute of the Arts so as to maintain the same level of courses as existed at the time of self-government. In accordance with the Commonwealth Grants Commission's 1992 Update of relativities, the Commonwealth will provide the funding directly to the Australian National University through the Higher Education Funding Act 1988 with a consequential reduction in special revenue assistance to the ACT Government.

Additional funding adjustments are required as a result of Senate amendments to the Higher Education Funding Legislation Amendment Bill 1993 which removed the provisions for a double rate of the Higher Education Contribution Scheme (HECS) on undergraduate students undertaking a second degree at the same or lower level.

As a result of the financial adjustments to the Higher Education Funding Act 1988 relating to the transfer of funding for the Institute of the Arts and the removal of double HECS, this bill will provide an additional $26.1 million in 1994, $31 million in 1995 and $30.2 million in 1996. The increase in outlays will be partly offset by a reduction in payments from the Higher Education Contribution Scheme Trust Account of $20.9 million in 1994, $20.5 million in 1995 and $18.9 million in 1996. In the longer term, Commonwealth outlays will increase by approximately $27 million each year due to the removal of the double HECS provisions. In addition, a reduction in general revenue payments to the ACT Government of $3.3 million in 1995 and 1996 will be made to fully offset the payments for the Institute of the Arts.

It is usually convenient to include all the amendments affecting payments under the Higher Education Funding Act in a Higher Education Funding Amendment Bill implementing Budget or additional estimates decisions about higher education funding.

However, the current amendment affects amounts to be paid in calendar year 1994 and it is therefore desirable that the revised amounts be legislated as soon as practicable. This bill is the first available vehicle on the legislation program for this portfolio which can contain the amendment.

The Attorney-General's Department has advised that there is no Constitutional or other legal impediment to including the amendment to the Higher Education Funding Act in this bill.

The bill's provisions also include amendments to the Maritime College Act 1978. These amendments include appointing the Chairperson of the Academic Board as an ex officio member of the Australian Maritime College Council. This will give appropriate representation on the Council to senior teaching staff and leave one member of the Council to be elected by the whole of the College's teaching staff.

Other amendments to the Maritime College Act include changes to gender specific references in order to reflect current drafting practices.

This bill will also repeal three Acts relating to employment, education and training. These Acts have been superseded and are no longer required.

I present the explanatory memorandum to this bill and commend the bill to the Senate.

  Debate (on motion by Senator Panizza) adjourned.

  Motion (by Senator Faulkner) agreed to:

  That the Financial Agreement Bill 1994 and the National Debt Sinking Fund Repeal Bill 1994 be listed on the Notice Paper as one order of the day, and the remaining bills be listed as separate orders of the day.