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Loan Bill 1996
House: House of Representatives
Commencement: On Royal Assent or 1 July 1996, which ever is the later.
To provide for the financing of a prospective deficit in the Consolidated Revenue Fund.
The Commonwealth Public Account, which is the main bank account of the Commonwealth, consists of the CRF, the Loan Fund and the Trust Fund. The CRF is the main working account of the Commonwealth and its main sources of receipts are income tax, sales tax, payroll tax, customs duties, excise and other departmental receipts. The main payments from the CRF are for payments to or for other levels of government; social welfare and health benefits; defence services; departmental expenditure on running expenses, works and other services; and interest payments and sinking fund contributions.
Where payments for the CRF exceed receipts such that the CRF would be in deficit, the CRF is balanced by charging certain payments to the Loan Fund. Usually this is done by passing a Loan Act, which generally provides for certain expenditures, usually defence expenditures, to be charged to the Loan Fund. The CRF is thus reimbursed for any relevant defence expenditures which may have been made from it. Defence expenditures tend to be chosen because they involve large amounts of money and because the Commonwealth does not seek Australian Loan Council approval for borrowings of a defence nature. A Loan Act may also authorise the use of Loan Fund monies to supplement the CRF receipts for the purpose of covering certain other, non- defence payments.
The Trust Fund contains money held in trust for people and authorities other than the Commonwealth Government; working accounts covering certain factories, stores and services; other money held in trust under the authority of Parliament to meet future expenditure; and funds and accounts not part of the accounts of the Minister for Finance but which, because of their enabling legislation, are part of the Trust Fund.
The term 'current financial year' is defined by clause 3 to be the year ending 30 June 1997.
Clause 4 will authorise the Treasurer to borrow funds, by the issue of bonds or Treasury Bills, for defence services during the current financial year.
Clause 5 provides that funds raised under clause 4 are only to be spent on defence services and borrowing costs.
Clause 6 will authorise the Treasurer to borrow, during the financial year, funds to supplement the CRF. The amount borrowed is not to exceed the deficit in the CRF and borrowing costs; is to be raised by the issue of bonds or Treasury Bills and be within limits approved by the Loan Council. Funds so borrowed are only to be used to make payments to the CRF and to meet borrowing costs ( clause 7).
A common source of confusion is the relationship between the CRF outcome and the Budget outcome. It can occur, for example, that the CRF may be in deficit and a Loan Act may be required to be passed in order for the CRF to be balanced, while the Budget outcome itself might be in surplus. 1
There are two reasons why this situation may arise. Firstly, the Budget outcome reflects transactions on all three Funds in the Commonwealth Public Account, not just the CRF. Secondly, the outcome of the CRF reflects the difference between the payments and receipts of that Fund, whereas the Budget outcome reflects the differences between Budget outlays and revenue. 2
1 D. James, An Overview of the Commonwealth Budgetary Process, Parliamentary Research Service - Department of the Parliamentary Library, 1993, p. 9.
Ian Ireland Ph. 06 277 2438
Bills Digest Service
13 May 1996
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1996.