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International Monetary Agreements Amendment Bill 2013

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2010-2011-2012-2013

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

international Monetary agreements amendment bill 2013

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

 



Table of contents

General outline and financial impact............................................................ 3

Chapter 1               Amendments to the IMA Act............................................... 5

Chapter 2               Statement of Compatibility with Human Rights.............. 9

Index................................................................................................................. 11

 



 

Glossary

The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

IMA Act

International Monetary Agreements Act 1947

IMF

International Monetary Fund

SDR

Special Drawing Rights

 



Outline

This Bill amends the International Monetary Agreements Act 1947 (IMA Act) to provide a standing appropriation and authority to borrow for payments to meet drawings made by the International Monetary Fund (IMF) under a bilateral loan agreement entered into by Australia and the IMF on 13 October 2012.  The loan agreement will come into force following Royal Assent of the Bill.

The Loan Agreement will provide for Australia to lend to the IMF up to the equivalent of Special Drawing Rights (SDR) 4.61 billion (around A$6.8 billion).  The bilateral loan shall have a term of two years, extendable by the IMF for up to two additional one-year periods, for a maximum total term of four years.

The IMF may make drawings under the Agreement only if its existing quota and New Arrangements to Borrow resources are insufficient to support its lending to borrowing member countries.  The Agreement is not expected to be drawn upon over the forward estimates period as the IMF’s currently available resources are sufficient to cover its projected lending activities.

1.1                   Date of effect: The amendments in this Bill will apply from the day after it receives Royal Assent.

Proposal announced In April 2012 the Deputy Prime Minister and Treasurer announced Australia’s commitment to provide a US$7 billion 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. 

On 13 October 2012, the Deputy Prime Minister and Treasurer and the Managing Director of the IMF signed the bilateral loan agreement at the IMF/World Bank Annual Meetings.

Financial impact The Bill will have no direct impact on either the underlying cash balance or the fiscal balance.  Loans to the IMF represent monetary assets and associated transactions would be classified as financing transactions.  Therefore, they would have no impact on the Australian Government’s net debt but would add to its borrowing requirement.  In the event of the IMF drawing on this credit line, the loan would be repaid to Australia in full, with interest. 

The maximum amount available to be drawn under the Agreement is the equivalent of SDR 4.61 billion (around A$6.8 billion). 

Human rights implications :  This Bill does not raise any human rights issues.  See Statement of Compatibility with Human Rights — Chapter 2.

Compliance cost impact Nil.

 



 

Chapter 1          

Amendments to the IMA Act

Context of the Amendments

1.1                   In April 2012 the Deputy Prime Minister and Treasurer announced Australia’s commitment to provide a US$7 billion 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 resolutions.

1.2                   On 13 October 2012, the Deputy Prime Minister and Treasurer and the Managing Director of the IMF signed the bilateral loan agreement at the IMF/World Bank Annual Meetings.

Summary of new law

1.3                   A standing appropriation is established for payments to the IMF to meet drawings under the bilateral loan agreement between Australia and the IMF that was signed on 13 October 2012.  The appropriation covers the agreement, and any subsequent amended agreement except in the case that the maximum value that may be lent or the term of the agreement is amended.

1.4                   A standing appropriation is established for payments made by Australia under section 3 of Article III of the IMF’s Articles of Agreement which deals with payments when quotas are changed. 

Comparison of key features of new law and current law

New law

Current law

The Consolidated Revenue Fund is appropriated for payments made for drawings by the IMF under a bilateral loan agreement between Australia and the IMD.

No equivalent. 

Amendments to the bilateral loan agreement must be notified by legislative instrument with the exception of amendments to the maximum amount that may be borrowed under the agreement or the term of the agreement.

No equivalent.

The Consolidated Revenue Fund is appropriated for payment for changes in Australia’s quota.

The Consolidated Revenue Fund is appropriated for payment for changes in Australia’s quota made by way of SDRs and/or securities.

Detailed explanation of new law

1.5                   This Bill establishes a standing appropriation for payments to meet drawings made under a bilateral loan agreement between Australia and the IMF that was done on 13 October 2012.  The bilateral loan agreement provides that the IMF may make drawings up to the equivalent of SDR 4.61 billion (around $A6.8 billion).  The IMF may only make drawings under the loan agreement if its existing quota and New Arrangements to Borrow resources are insufficient to support its lending to borrowing member countries.  [Schedule 1, item 1, section 3 and Schedule 1, item 7, section 8CAA]

1.6                   The loan agreement will come into force following Royal Assent of the Bill commencing its term of two years.  However, the agreement may be extended for an additional one year by the IMF notifying Australia of an extension and a further additional one year with the consent of Australia. 

1.7                   The Treasurer must be satisfied that a payment must be made to meet Australia’s obligations under the loan agreement before directing that the payment is made.  Therefore, a standing appropriation ensures that payments can be made in a timely manner when the loan agreement is called upon, however, the appropriation is limited to drawings made by the IMF that are covered by the terms of the loan agreement and hence, the maximum amount specified by the agreement.  This is identical to the process for making payments under the New Arrangements to Borrow.  [Schedule 1,  item 7, subsection 8CAA(1)]  

1.8                   The appropriation remains in place if the loan agreement is amended if the Treasurer gives notice of the amendment by tabling a legislative instrument, except in the case of amendments to either, or both, of the maximum amount that Australia may lend to the IMF or to the term of the agreement.  [Schedule 1,  item 7, subsection 8CAA(3)]

1.9                   This approach ensures that any minor amendments to the loan agreement are subject to parliamentary scrutiny as they must be tabled in a legislative instrument and can be disallowed.  This avoids the need for legislative change of the IMA Act for minor amendments of the loan agreement.  However, the IMA Act would have to be amended before payments could be made pursuant to an amended agreement with changes to the maximum amount that Australia may lend or the term of the agreement. 



 

1.10               A legislative instrument notifying an amendment to the loan agreement will come into force on the later of:

•                the day that is specified in the instrument or the day after the instrument is registered (whichever applies); or

•                the day after the last day on which Parliament may pass a resolution disallowing the instrument under the Legislative Instruments Act 2003 .    [Schedule 1,  item 7, section 8CAA(4)]

1.11               A legislative instrument will only come into effect until the period of time within which Parliament may disallow has elapsed.  This is necessary as any amendments of the loan agreement will only become effective following Australia’s parliamentary requirements being completed including that the legislative instrument has not been disallowed.  [Schedule 1,  item 7, section 8CAA(4)]

1.12               Any legislative instrument made notifying an amendment will be repealed the day after the loan agreement expires.  [Schedule 1,  item 7, subsection 8CAA(5)]

1.13               For the avoidance of any doubt, section 6 of the IMA Act will also be amended to clarify that the Treasurer will have authority to borrow in order to make payments that meet Australia’s obligations under the loan agreement.  This is consistent with the existing provision that authorises the Treasurer to borrow in relation to Australia’s membership of the IMF and to meet obligations under the New Arrangements to Borrow.  [Schedule 1,  item 3, paragraph 6(1)(c)]

Consequential amendments

1.14               The reference to the Commonwealth Inscribed Stock Act 1911 is being updated to reflect the convention of referring to Acts by the year of their commencement.  [Schedule 1,  item 2, subsection 6(1)]

1.15               The National Debt Sinking Fund Act 1923 was repealed in 1994 which means that subsection 6(3) of the IMA Act is now redundant.  Therefore, this subsection will be repealed.  [Schedule 1,  item 4, subsection 6(3)]

1.16               Currently, the appropriation for payments to the IMF for changes to Australia’s quota in the IMF relies on section 5 of the IMA Act to the extent a payment is made in SDRs and section 7 to the extent the quota change is satisfied by issuing securities.  However, this prevents the Commonwealth from making payments for changes in Australia’s quota using a foreign currency or, if accepted by the IMF, in Australian currency.

1.17               Therefore, a standing appropriation for the payment of quota changes under section 3 of Article 3 of the IMF’s Articles of Agreement provides flexibility in the way the Commonwealth may pay for a change in Australia’s quota and will ensure that the appropriation covers payments that are made using a foreign currency or Australian currency.  [Schedule 1,  items 5 and 6, section 8]

Application

1.18               The amendments in this Bill commence on the day after Royal Assent.

 

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Chapter 2          

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 2013

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

The general purpose of the Bill is to bring into force a bilateral loan agreement between Australia and the International Monetary Fund (IMF), and provide borrowing and appropriation authority for any drawings under the agreement.

Human rights implications

This Bill does not engage any of the applicable rights or freedoms.

Conclusion

This Bill is compatible with human rights as it does not raise any human rights issues.

The Hon.  Wayne Swan MP, Deputy Prime Minister and Treasurer



Schedule 1:  IMF loan agreement 2012

Bill reference

Paragraph number

Item 1, section 3 and item 7, section 8CAA

1.5

Item 2, subsection 6(1)

1.14

Item 3, paragraph 6(1)(c)

1.13

Item 4, subsection 6(3)

1.15

Items 5 and 6, section 8

1.17

Item 7, subsection 8CAA(1)

1.7

Item 7, subsection 8CAA(3)

1.8

Item 7, section 8CAA(4)

1.10, 1.11

Item 7, subsection 8CAA(5)

1.12

 

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