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Reserve Bank Amendment (Australian Reconstruction and Development Board) Bill 2013

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2013

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

THE SENATE

 

 

RESERVE BANK AMENDMENT

(AUSTRALIAN RECONSTRUCTION AND DEVELOPMENT BOARD) BILL 2013

 

 

 

EXPLANATORY MEMORANDUM

 

 

(Circulated by authority of Senators Xenophon and Madigan)

 

 

 

 

 

 

 

 

BACKGROUND

The aim of this Bill is to create a specific entity tasked with examining, reconstructing and improving the financial status of the Australian agricultural sector and its associated industries and infrastructures.

As such, the Bill establishes an "Australian Reconstruction and Development Board" (ARDB) under the Reserve Bank, with the task of forming and implementing rural reconstruction and development policy.

The Reserve Bank of Australia already has the necessary regulatory framework, powers and relevant duties legislatively assigned to be able to constitute the ARDB as a third Board within the Reserve Bank of Australia.

Australia has developed a highly-regarded capability to provide its own foods and agricultural products, and to trade surplus produce for the sustenance of others and the prosperity of the Australian nation. This capability has been diminished by recent events including a combination of adverse conditions originating beyond the farm gate, which have reduced farm incomes and imposed great strain upon production systems.

Rural Australia is struggling under an insurmountable debt burden, characterised by low farm income and lending practices of financial institutions in deregulated financial markets. In 1980, debt in Gross Value Farm Production was at 32% and this has escalated to historically high levels of debt, reaching 135.4% in 2012. With escalating debts, many farmers and producers are facing foreclosures. Forced sales are widening loan-to-value ratios, leading to a risk of ‘fire sales’, which could precipitate a raging financial contagion that may not be contained to rural and regional Australia.

In such circumstances of uncertainty and risk to nationally important agricultural and associated industries, reconstruction is critical to re-establish a sound financial basis, and development funds to maintain and sustainably develop capabilities.

The ARDB’s responsibilities include the ability to facilitate, and when necessary manage, rural adjustment and financial reconstruction activities. The ARDB is also able to tailor funding and financial arrangements to meet identified needs of nationally-important industries operating in particularly uncertain or risky environments.

The ARDB will also play a vital role in researching and monitoring industries to provide advance warning of emerging problems and to initiate reconstruction, development or other activities as deemed necessary.

The ARDB will provide a means of identifying and resolving serious financial imbalances, sectoral stresses and development shortfalls that, if left unaddressed, might impair the prosperity and welfare of the people of Australia, the maintenance of full employment, or the stability of the currency of Australia.

Such direct activities complement the existing monetary and general policy activities of the Board and the regulatory activities of the Payments System Board through Australian Prudential Regulation Authority (APRA).

Specifically, ARDB activities related to agriculture and associated industries and infrastructures will help develop:

·          the resilience, capabilities and ongoing financial viability of Australia’s food and natural fibre systems; 

·          a profitable farming sector exercising good stewardship of the resources associated with production; 

·          effective ways to mitigate the impacts of adverse events, particularly those associated with natural disasters, market failures and inadequate commercial financial arrangements; and 

·          the capability of agriculture to contribute more fully, responsibly and reliably to the economic prosperity and welfare of the people of Australia and the peoples of other nations.

 

 

NOTES ON CLAUSES

 

Part 1 - Preliminary

 

Clause 1 - Short Title

This clause is a formal provision and specifies that the short title of the Bill, once enacted, may be cited as the Reserve Bank Amendment (Australian Reconstruction and Development Board) Act 2013.

 

Clause 2 - Commencement

The Bill’s provisions are to commence the day after the Bill receives Royal Assent, except Schedule 1 (Amendments to the Reserve Bank Act 1959) which commences the 28 th day after the Bill receives Royal assent.

This is to ensure time to appoint members of the Australian Reconstruction and Development Board and take any other necessary steps to implement the Australian Reconstruction and Development Board.

 

Clause 3 - Schedule(s)

This clause states that each Act specified within a Schedule to this Bill is amended or repealed as set out by the provisions of the Bill.

 

Schedule 1 -

 

Amendments to Reserve Bank Act 1959

 

Item 1 inserts a new definition of ‘development task’ into subsection 5(1) of the Reserve Bank Act 1959 , in accordance with the meaning given by new subsection 10BB(2).

 

Item 2 inserts a new definition of ‘facilitative task’ into subsection 5(1) of the Reserve Bank Act 1959 , in accordance with the meaning given by new subsection 10BB(2).

 

Item 3 inserts a new definition of ‘reconstruction task’ into subsection 5(1) of the Reserve Bank Act 1959 , in accordance with the meaning given by new subsection 10BB(2).

 

Item 4 inserts a new definition of ‘rural reconstruction and development policy’ into subsection 5(1) of the Reserve Bank Act 1959 , in accordance with the meaning given by new subsection 10BB(2).

 

Item 5 amends subsection 7A(2) of the Reserve Bank Act 1959 to maintain the clarification that the members of the Reserve Bank Board, rather than those of the Australian Reconstruction and Development Board, are the directors of the Bank for the purposes of the Commonwealth Authorities and Companies Act 1997 .

 

Item 6 amends subsection 7A(3) of the Reserve Bank Act 1959 to clarify that members of the Board will be required to meet certain obligations under the Commonwealth Authorities and Companies Act 1997 . This is consistent with the requirements that must be met by the members of the Payments System Board under the Act.

 

Item 7 adds a new paragraph to section 8 of the Reserve Bank Act 1959 to extend the Bank’s general powers to include the power to acquire, hold, deal with and dispose of property.

 

Item 8 amends subsection 8A(1) of the Reserve Bank Act 1959 to increase the number of Boards of the Bank from two to three, consistent with the establishment of the Australian Reconstruction and Development Board.

 

Item 9 inserts a new paragraph 8A(1)(c) to include the Australian Reconstruction and Development Board in the list of boards of the Bank.

 

Item 10 amends subsection 8A(2) to clarify that the Reserve Bank Board is not responsible for the rural and reconstruction development policy. This responsibility lies with the Australian Reconstruction and Development Board established in this Bill.

 

Item 11 inserts a new subsection 8A(3A) to provide that the Australian Reconstruction and Development Board is responsible for the Bank’s rural reconstruction and development policy. The amendment refers to a later amendment (Section 10BB) which provides further details on the functions of the Australian Reconstruction and Development Board.

 

Item 12 makes a consequential amendment to subsection 8A(5) to clarify that the Commonwealth Authorities and Companies Act 1997 applies to three Boards of the Bank, to take into account the Board established under this Bill.

 

Item 13 amends subsection 10(1) to clarify that the Reserve Bank Board is not responsible for the rural and reconstruction development policy. This responsibility lies with the Australian Reconstruction and Development Board established in this Bill.

 

Item 14 inserts new sections 10BA and 10BB into the Act. The new section 10BA provides for the establishment of the Australian Reconstruction and Development Board of the Reserve Bank.

 

Subsection 10BB(1) provides that the Australian Reconstruction and Development Board has power to determine the Bank’s rural reconstruction and development policy.

 

Subsection 10BB(2) outlines the rural reconstruction and development policy, which is to be determined by the Australian Reconstruction and Development Board. The subsection determines that this policy consists of three tasks: the facilitative task, the development task and the reconstruction task.

 

The facilitative task consists of researching, reporting on and helping to develop the resilience, capabilities and ongoing financial viability of Australia’s food and natural fibre systems, and any other Australian industries or sectors that the Australian Reconstruction and Development Board has identified as being at risk. The Bill also provides that this task must be undertaken in a timely way.

 

The development task consists of contributing to the development of Australian agriculture, associated industries and infrastructure by developing and offering financial arrangements and reviewing financial arrangements.

 

The reconstruction task requires the Australian Reconstruction and Development Board to fairly, reasonably and effectively reduce or eliminate the debilitating impact of certain financial arrangements. This relates to financial arrangements which, because of certain conditions or circumstances, threaten or reduce the ongoing viability or sustainability of Australian agricultural enterprises or associated entities. These conditions or circumstances are outlined in paragraph 10BB(2)(c), and include design, inadequate evaluation, market or organisational failures, seasonal conditions, or any other adverse circumstances.

 

Subsection 10BB(3) provides the Australian Reconstruction and Development Board with the power to take whatever action is necessary to give effect to the rural reconstruction and development policy. This includes applying capital of the Bank referred to in section 28 as it considers appropriate.

 

Subsection 10BB(4) outlines the duties and requirements of the Australian Reconstruction and Development Board in relation to forming and giving effect to the rural reconstruction and development policy. Primarily, these duties relate to directing the policy to the greatest advantage of Australian people and industries, and the ways in which the tasks outlined above are undertaken. These include timeliness, transparency, equity, and economic responsibility.

 

Subsection 10BB(5) provides that a House of the Parliament, a committee of a House or a joint committee may request the Board take a matter into account when performing its functions, or report on a matter relevant to the Board’s functions.

 

Item 15 inserts new subsections at the end of section 10C of the Act, which relates to resolving differences in policy between the Boards of the Bank. These new subsections are consistent with the procedures already in place for dealing with differences between the Reserve Bank Board and the Payments System Board.

 

Subsection 10C(4) provides that, where there is a difference in policy, the Reserve Bank Board’s policy prevails, unless the Australian Reconstruction and Development Board’s policy is amended to remove the inconsistency.

 

Subsection 10C(5) provides that, if there is a difference in policy as described in subsection 10C(4), then the disagreement is to be resolved by the Governor.

 

Subsection 10C(6) provides that, if there is a disagreement between the Boards regarding which of the Boards is responsible for a particular policy area, the disagreement is to be resolved by the Treasurer.

 

Item 16 inserts a new paragraph 11(1)(c) to state that it is the responsibility of the Australian Reconstruction and Development Board to inform the Government, of the Bank’s rural reconstruction and development policy.

 

Item 17 inserts new wording into subsection 11(2) to clarify that, when a difference of opinion occurs between the Government and the Board regarding the rural reconstruction and development policy, the policy must be determined to the greatest advantage of Australia and Australian industries.

 

Item 18 makes a consequential amendment to subsection 12(2) to insert a reference to new section 10BB.

 

Item 19 inserts a new Part IIIB into the Act. This Part relates to the structure and administration of the Australian Reconstruction and Development Board.

 

New section 25NA relates to the membership of the Board. Subsection 25NA(1) provides that the members of the Australian Reconstruction and Development Board consist of the following members:

·          the Governor;

·          one representative of the Bank; and

·          seven other members with relevant rural or agricultural experience.

Subsection 25NA(2) provides that among the seven members with relevant rural and agricultural experience the following must be included:

·          an economist;

·          an accountant;

·          a banker;

·          a representative of the States and Territories; and

·          a farmer.

 

New section 25NB provides for the appointment of members. It specifies that the representative of the Bank referred to in 25NA is to be appointed by the Governor. The person appointed must be a member of the Reserve Bank Board or a staff member of the Reserve Bank Service. This appointment is not for a specified time; however their appointment can be terminated at any time.

Each other member referred to in 25NA(2) is to be appointed by the Treasurer for a period specified in the instrument of appointment, not exceeding 5 years. All appointments under this section are to be on a part-time basis. It is also noted that the Governor is an ex-officio member of the Australian Reconstruction and Development Board, and therefore is not separately appointed to the Board.

 

New section 25NC provides that the Chair is to be appointed by the members of the Australian Reconstruction and Development Board.

 

New section 25ND provides that the Deputy Chair is to be either the Governor or the representative of the Bank, as chosen by the Board. The Deputy Chair is to act as the Chair during any period where the Chair is vacant, absent from Australia, or is for any reason unable to perform the duties of the Chair. The Deputy Chair has, when acting as the Chair, all the powers, rights, duties and entitlements of the Chair of the Australian Reconstruction and Development Board.

 

New section 25NE provides requirements to be filled by each member of the Board before taking their positions. These requirements include making an oath or affirmation of allegiance and making a declaration of secrecy. These requirements do not apply to if the member is also a member of the Reserve Bank Board and has previously made an oath or affirmation of allegiance and declaration of secrecy.

 

The section specifies that the oath or affirmation of allegiance is to be in accordance with the form set out in the Schedule to the Constitution and is to be made before a Justice of the Peace or a Commissioner for taking Affidavits. It also specifies that the declaration of secrecy is to be in the prescribed form and is to be made before a Justice of the Peace or a Commissioner for taking Affidavits.

 

New Section 25NF relates to the procedure for meetings of the Board, and requires that the Board is to meet at times and places as determined by the Board or as directed by the Chair. The Chair is to preside over all meetings of the Board. In the case of the Chair’s absence, the Deputy Chair is to preside.

 

Subsection 25NF(3) provides that five members of the Board form a quorum at a meeting. Subsection 25NF(4) provides that questions arising from a meeting of the Board are to be decided by a majority of votes of the members present and voting. Subsection 25NF(5) states that the presiding member at a meeting of the Board has a deliberative vote and, if necessary, a casting vote.

 

New section 25NG regards the conduct of meetings, and provides that the Board may regulate proceedings at its meetings as it considers appropriate. However, proceedings at a meeting may not be inconsistent with any other provisions in this Part.

 

New section 25NH allows the Board to make resolutions without meetings. Under this section, a resolution is taken to have passed if the Board determines that resolutions may be passed without a meeting and certain conditions are met. These conditions include that a majority of members (defined as the number that would have constituted a quorum at a meeting of the Board) support the resolution, and that all members were informed of the resolution, or that reasonable efforts were made to inform all members of the resolution.

 

New section 25NI relates to remuneration of Board members, and sets out the conditions for remuneration. It provides that the Remuneration Tribunal determines payment remunerations of members of the Board. If there is no determination of that remuneration, the member is to be paid the remuneration that is prescribed. It also provides that a member of the Board is to be paid the allowances prescribed. This section is subject to the Remuneration Tribunal Act 1973.

 

New section 25NJ provides the Board with the powers to grant leave of absence to a member on the terms and conditions the Board requires.

 

New section 25NK relates to the resignation of the members of Australian Reconstruction and Development Board.

 

Paragraph 25NK(a) requires the member of the Board who is also the representative of the Bank resign by giving a written notice to the Governor. Paragraph 25NK(b) requires any of the seven Board members selected for their relevant rural and agriculture experience to resign by giving written notice to the Treasurer.

 

New section 25NL provides for the termination of appointment of members of the Board.

Subsection 25NL(1) states that the Governor may at any time terminate the member and representative of the Bank on the Board. The member’s appointment is considered to be terminated if he or she ceases to be a member of the Reserve Bank Board to a staff member of the Reserve Bank Service.

 

Subsection 25NL(2) states that the Treasurer may at any time terminate a Board member who is one of the seven members selected for their relevant rural and agriculture experience. The termination may only occur in cases of misbehaviour or if the member is unable to perform their duties of office due to mental or physical incapacity.

 

Subsection 25NL(3) states that the Treasurer must terminate a member who is one of the seven Board members selected for their relevant rural and agriculture experience if:

·          the member becomes permanently incapable of performing his or her duties; or

·          the member:

o    becomes bankrupt;

o    applies to take the benefit of any law for relief of bankruptcy or insolvent debtors;

o    compounds with his or her creditors; or

o    makes an assignment of his or her remuneration for the benefit of his or her creditors; or

·          the member is absent (except on leave of absence granted by the Australian Reconstruction and Development Board) from:

o    two or more consecutive meetings of the Australian Reconstruction and Development Board; or

o    three or more meetings of the Australian Reconstruction and Development Board in any period of 12 months; or

·          the member fails to comply with the members obligations under section 25F or 25J of the Commonwealth Authorities and Companies Act 1997.

 

New section 25NM outlines the Board’s reporting requirements to the Treasurer. Under this section, the report must be delivered as soon as is practicable after 30 June each year. It must also describe the actions the Bank has taken in the last financial year to give effect to the rural reconstruction and development policy; describe the impact of those actions; identify and explain any changes made to this policy; and include details of any requests made to the Board under subsection 10BB(5), which relates to requests from Parliament or Parliamentary committees.

 

Subsection 25NM(2) requires the Treasurer to table a copy of the report in each House of Parliament within 15 sitting days of receipt.

 

Item 20 amends section 28 of the Reserve Bank Act 1959 , which is concerned with central banking and capital for the Bank. The amendment provides that the capital for the Bank should also be for the purposes of the Bank’s rural and reconstruction and development policy.

 

Item 21 amends section 79A(1) of the Reserve Bank Act 1959 to ensure that the secrecy provisions apply to a member of the Board (now included as a definition of an officer).

 

Item 22 amends section 79A(6) of the Reserve Bank Act 1959 to ensure that the secrecy provisions apply to a member of the Board and does not prohibit a person from disclosing protected information or producing protected documents.

 

 



 

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

RESERVE BANK AMENDMENT

(AUSTRALIAN RECONSTRUCTION AND DEVELOPMENT BOARD) 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 of the Bill

This Bill establishes an "Australian Reconstruction and Development Board" (ARDB), with the capacity to reconstruct debilitating financial arrangements, and to provide suitably tailored funds and capital arrangements that enable the sustainability and development of at-risk Australian agriculture and its associated industries and infrastructures.

 

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.