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Emergency Response Fund Bill 2019

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2019

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

EMERGENCY RESPONSE FUND BILL 2019

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the M i n i s t e r f o r F i n a n c e ,

S e n a t or t he H on M a t h i a s C o r m a nn)

 



T a bl e o f a b b r e vi a tio n s a n d c o m m o n t e r m s

 

A bb re v i a t i on or

c o m m on te r m

Description

Acts Interpretation Act

means the Acts Interpretation Act 1901

A g e n c y

means the F u t u r e Fund M a n a g e m e n t A g e n c y established by section 74 of the Future Fund Act 2006

ATSILSFF

means the Aboriginal and Torres Strait Islander Land and Sea Future Fund established by section 9 of the ATSILSFF Act

ATSILSFF Act

means the Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018

Commonwealth official

means an official of a Commonwealth entity, as defined in section 13 of the PGPA Act

Constitution

means the Commonwealth of Australia Constitution Act

Corporations Act

means the Corporations Act 2001

CRF

means the Consolidated Revenue Fund

 DCAF

means the DisabilityCare Australia Fund established by

section 10 of the DCAF Act

 DCAF Act

means the DisabilityCare Australia Fund Act 2013

EIF

means the Education Investment Fund established by

section 131 of the NBF Act

EIF Special Account

means the Education Investment Fund Special Account established by section 132 of the NBF Act

Emergency Management Minister

means:

(a)     if there is a Minister whose title includes “Emergency Management”—that Minister; or

(b)    otherwise—the Minister declared by the Prime Minister, by notifiable instrument, to be the Emergency Management Minister for the purposes of this Act.

Finance Minister

has the same meaning as defined in section 8 of the PGPA Act

Emergency Response Fund

means the Emergency Response Fund established by clause 9 of this Bill

Emergency Response Fund Special Account

means the Emergency Response Fund Special Account established by clause 12 of this Bill

FDF

means the Future Drought Fund established by section 10 of the Future Drought Fund Act

FDF Act

means the Future Drought Fund Act 2019

Future Fund

means the Future Fund established by section 11 of the Future Fund Act

Future Fund Act

means the Future Fund Act 2006

Future Fund Board

means the Future Fund Board of Guardians established by section 34 of the Future Fund Act

Future Fund Special Account

means the Future Fund Special Account established by section 12 of the Future Fund Act

Home Affairs Department

means the Department administered by the Home Affairs Minister

Home Affairs Emergency Response Fund Special Account

means the Home Affairs Emergency Response Fund Special Account established by clause 27 of this Bill

Home Affairs Minister

means the Minster administering the Australian Federal Police Act 1979

ITAA

means the Income Tax Assessment Act 1997

Legislation Act

means the Legislation Act 2003

MRFF

means the Medical Research Future Fund established by section 11 of the MRFF Act

MRFF Act

means the Medical Research Future Fund Act 2015

NBF Act

means the Nation-building Funds Act 2008

PGPA Act

means the Public Governance, Performance and Accountability Act 2013

PGPA Rule

means the Public Governance, Performance and Accountability Rule 2014

Responsible Ministers

means the following:

(a)       the Treasurer; and

(b)       the Finance Minister



EMERGENCY RESPONSE FUND BILL 2019

 

OUTLINE

 

The Emergency Response Fund Bill 2019 (the Bill) gives effect to the Government’s decision to establish the Emergency Response Fund (the Fund) to fund emergency response and recovery following natural disasters in Australia that have a significant or catastrophic impact.

 

The Fund consists of the Emergency Response Fund Special Account and the investments of the Fund. It is a dedicated investment vehicle to provide an additional funding source for future emergency response and natural disaster recovery.

 

Uncommitted funds currently in the EIF, approximately $4 billion, would be transferred to the Fund on establishment. The Government is making increased investments in the education sector and the EIF is not needed to fund these initiatives. The last commitment from the EIF was announced in 2013 and all commitments have been paid.

 

The EIF will be closed, however the Government remains committed to a world class higher education system and is investing a record $17.7 billion in the university sector in 2019. This is projected to grow to more than $19 billion by 2022. The Government has recently made significant investments into education infrastructure projects including $150 million to support the relocation and redevelopment of the University of Tasmania’s Launceston and Burnie campuses and a further $30 million earmarked for the establishment of a new Central Queensland School of Mining and Manufacturing.

 

The Government’s fiscal management and record investment into the university sector means the uncommitted funds currently in the EIF can be used to fund emergency response and natural disaster recovery efforts across Australia.

 

The Fund would only be accessed when the Government determines there is a need for additional support following a natural disaster. Disbursements from the Fund would be available from 2019-20. To protect the balance of the Fund into the future, annual disbursements in any one financial year would be restricted to $150 million. Within 10 years, the $150 million amount would be reviewed to see if the Fund could support a higher maximum annual disbursement.

 

Any disbursements from the Fund would require formal Government approval, with the costs to be reflected in the forward estimates at the next Budget update. The Bill also establishes the Home Affairs Emergency Response Fund Special Account. When Government makes a decision to access the Fund following a natural disaster that has a significant or catastrophic impact, the Emergency Management Minister would request t h a t the agreed amount b e d e b it e d fr om t he Fund a n d cre d it e d t o the Home Affairs Emergency Response Fund Special Account for the purpose of funding emergency response and natural disaster recovery. Grants to a State or Territory would be channelled through the COAG Reform Fund.

 

The Future Fund Board would be responsible for deciding how to invest the Fund to enhance the Commonwealth’s ability to fund emergency response and natural disaster recovery. The Future Fund Board is an experienced, specialised and trusted sovereign investor currently responsible for investing over $200 billion across six funds with different purposes and investment mandates (the funds are the Future Fund, the DCAF, the MRFF, the EIF, the FDF and the ATSILSFF).

 

Investment mandate

 

The Bill requires the responsible Ministers to issue an investment mandate to the Future Fund Board regarding the investment of the Fund. The purpose of the investment mandate is to provide a mechanism for the Government to provide strategic guidance to the Future Fund Board on its expectations for the investment of the Fund.

 

As with other funds managed by the Future Fund Board, the Emergency Response Fund will benefit from sovereign immunity from taxation in Australia and foreign jurisdictions on the bulk of investments.

 

Expenses

 

E x p e ns e s associated with investment and administration of the Fund incurred by the Future Fund Board will be met from the Fund.

 

R e por ti ng

 

The Bill requires the Future Fund Board to keep the responsible Ministers informed. The Finance Minister may provide reports, documents and other information to Ministers.

 

The Bill provides the Finance Minister with the power to require the Future Fund Board to provide additional information about one or more specified matters relating to the performance of the Board’s functions under this Bill.

 

The Finance Minister has the power to publish information received from the Future Fund Board, as the Finance Minister deems appropriate and in the public interest.

 

The Emergency Management Minister will be required to publish up-to-date information about grants and arrangements on the Department of Home Affairs’ website.

 

Financial Impact Statement

 

The initial credit of the balance of the funds from the EIF to the Emergency Response Fund will not have a direct impact on the underlying cash and fiscal balances, as it will represent the transfer of financial assets between funds.

 

Positive interest earnings of the Fund will have a positive impact on the underlying cash and fiscal balances. Costs incurred by the Future Fund Board have a negative impact on the underlying cash and fiscal balances. Payments for the purposes of emergency response and natural disaster recovery will have a negative impact on the underlying cash and fiscal balances.

 

Statement of Compatibility with Human Rights

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

Emergency Response Fund Bill 2019

Overview of Bill

The Emergency Response Fund Bill 2019 would establish the Emergency Response Fund, a Commonwealth investment fund designed to provide an additional source of funding for emergency response and recovery following natural disasters that have a significant or catastrophic impact in Australia.

 

Human rights implications

The Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in subsection 3(1) of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth).

 

The Bill engages the following rights:

 

·                 Article 11(1) of the International Covenant on Economic Social and Cultural Rights (ICESCR) - right to an adequate standard of living, including food, water and housing.

·                 Article 12 of the ICESCR - right of everyone to the enjoyment of the highest attainable standard of physical and mental health.

Right to an adequate standard of living, including food, water and housing

Article 11(1) of the ICESCR recognises the right to an adequate standard of living, including food, water and housing. The United Nations Committee on Economic Social and Cultural Rights (the Committee) has noted that “States have a joint and individual responsibility, in accordance with the Charter of the United Nations, to cooperate in providing disaster relief and humanitarian assistance in times of emergency” [1] . This Bill would enhance the Commonwealth’s ability to fulfil its responsibility to provide natural disaster relief and humanitarian assistance.

The Committee has also noted that during emergency situations and natural disasters, States are bound by international humanitarian law, which includes the protection of objects indispensable for survival of the civilian population and the protection of the natural environment against widespread, long-term and severe damage. The Bill supports investment in key infrastructure to protect individuals, communities and the natural environment from the impacts of natural disasters.

Right of everyone to the enjoyment of the highest attainable standard of physical and mental health

Article 12 of the ICESCR recognises the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. Article 12(2) refers more specifically to taking steps to control diseases and create conditions to assure medical service and attention in the event of sickness. It is generally accepted that natural disasters can increase the risk of disease outbreak - for example, as a result of the breakdown of sanitation systems. This Bill would support initiatives to treat and/or control the outbreak of disease following a natural disaster, which may include the provision of medical facilities and other health infrastructure.

Conclusion

This Bill is compatible with human rights because it promotes:

·          the right to an adequate standard of living, enshrined in Article 11(1) of the ICESCR; and

·          the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, enshrined in Article 12(2) of the ICESCR.

The Bill would help individuals and communities to recover from natural disasters. This includes improving access to vital amenities, such as food, water and housing, as well as funding initiatives to treat or control the outbreak of disease in the aftermath of a natural disaster.

 



EMERGENCY RESPONSE FUND BILL 2019

 

 

NOTES ON CLAUSES



Part 1 - Preliminary

Clause 1 - Short title

1.                   Clause 1 is a formal provision specifying the short title of the Act.

Clause 2 - Commencement

2.                   This clause would provide for the commencement of the whole of the Act, as set out in the table. Item 1 in the table provides that the whole of this Act would commence on a single day to be fixed by Proclamation. However, if the Bill does not commence within 6 months of the Royal Assent, it will commence on the day after the end of that 6-month period.

3.                   Subclause 2(2) would provide that any information in column 3 of the table is not part of the Act. Information may be inserted in this column, or information in it may be edited, in any published version of the Act.

Clause 3 - Simplified outline of this Act

4.                   This clause would provide a high-level introduction to the provisions in the Bill, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions in the Bill.

Clause 4 - Definitions  

5.                   This clause would provide definitions to support the operation of provisions of the Bill. These definitions are discussed throughout the Explanatory Memorandum where they are relevant to the operation of a particular clause.

6.                   ‘Natural disaster’ would not be substantively defined in this Bill, so would be given its ordinary meaning.

7.                   The definition of ‘Emergency Management Minister’ refers to a Minister whose title includes the words “Emergency Management”. When making this assessment, a Minister’s formal title on the Government’s current Ministry list would be used as the authoritative reference. If there is no Minister whose title includes the words “Emergency Management”, the relevant responsibilities under the Emergency Response Fund legislation would go to the Minister declared by the Prime Minister, by notifiable instrument, to be the Emergency Management Minister.

Clause 5 - Crown to be bound

8.                   Clause 5 would provide that the Act binds the Crown in each of its capacities but does not make the Crown liable to be prosecuted for an offence.

Clause 6 - Extension to external Territories

9.                   Clause 6 would provide that the Act extends to every external Territory.

Clause 7 - Extra-territorial operation

10.               Clause 7 would provide for the geographical reach of the Act to apply outside of Australia. This would allow the Future Fund Board to invest in financial assets outside of Australia and would also allow recipients of grants or payments from the Emergency Response Fund to collaborate with international partners.

11.               The definition of ‘natural disaster’ in clause 4 would confine that definition to ‘natural disaster in Australia’. This has the effect that even though the Act would have extra-territorial operation, grants or payments could only be made in relation to emergency response and recovery from natural disasters in Australia.

Part 2 - Emergency Response Fund

Division 1 - Introduction

Clause 8 - Simplified outline of this Part

12.               This clause would provide a high-level introduction to the provisions in this Part, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions of this Part.

Division 2 - Establishment of the Emergency Response Fund and the Emergency Response Fund Special Account

Clause 9 - Establishment of the Emergency Response Fund

13.               Clause 9 would establish a financial asset fund - the Emergency Response Fund - consisting of amounts in the Emergency Response Fund Special Account and the investments of the Emergency Response Fund.

Clause 10 - Transfer of balance of the Education Investment Fund Special Account

14.               The Emergency Response Fund (Consequential Amendments) Bill 2019 would operate to close the EIF Special Account from the date of commencement of the Emergency Response Fund Act 2019 . Clause 10 would provide that, as soon as practicable after the commencement of the provision, an amount equal to the balance of the EIF Special Account immediately before commencement of the provision (that is, immediately before that special account is closed), is to be credited to the Emergency Response Fund Special Account.

15.               In effect, this would transfer the balance of the EIF Special Account immediately prior to its closure, to the Emergency Response Fund Special Account.

16.               The note at the end of this clause would alert readers to the fact that the balance of the EIF Special Account does not include the value of an investment of the EIF (which would be provided for by clause 11).

Clause 11 - Transfer of investments of the Education Investment Fund

17.               Clause 11 deals with the transfer of investments of the EIF to the Emergency Response Fund.

18.               Under subclause 11(1), section 11 would apply to financial assets, which immediately prior to the commencement of this Bill, were investments of the EIF. Subclause 11(2) provides for those assets to become investments of the Emergency Response Fund immediately after commencement of the section.

Clause 12 - Establishment of the Emergency Response Fund Special Account

19.               Clause 12 would establish the Emergency Response Fund Special Account, which would be a special account for the purposes of the PGPA Act.

20.               A special account is an appropriation mechanism that sets aside an amount within the CRF to be expended for specific purposes. Any amounts credited to the Emergency Response Fund Special Account would be quarantined from the rest of the CRF and could only be debited from the Emergency Response Fund for the purposes set out in the Bill.

21.               The note immediately following this clause would assist the reader by clarifying that amounts could be credited to the Emergency Response Fund Special Account by an Appropriation Act.

Division 3 - Credits of amounts to the Emergency Response Fund Special Account

Clause 13 - Credits of amounts

22.               This clause would establish a mechanism for specified amounts - other than the initial balance from the EIF Special Account - to be credited to the Emergency Response Fund Special Account. A specified amount would also be able to be credited in specified instalments.

23.               Amounts would be credited by a written determination of the responsible Ministers or their delegates (refer to clauses 59 and 60 for delegation powers of the Finance Minister and the Treasurer).

24.               Note 1 immediately following subclause 13(1) would assist readers by directing them to the subsection 33(3) of the Acts Interpretation Act, which provides that a power to make a legislative instrument includes the power to vary or revoke that instrument.

25.               Note 2 would assist readers by directing them to other sections of the Act requiring amounts to be credited to the Emergency Response Fund Special Account.

26.               Subclause 13(2) would provide that a determination to credit a specified amount to the Emergency Response Fund Special Account is a legislative instrument but is not subject to disallowance. Such determinations could be regarded as administrative, rather than legislative, in character. However, having the determination as a legislative instrument ensures transparency of amounts credited as a matter of public interest.

27.               A determination under subsection 13(1) is expected to be made only in exceptional circumstances following the initial credit provided for by clause 10. Amounts credited under section 13 are expected to be provided from other Appropriation Acts. In this respect, the determination would be a tool for the Government to manage its financial arrangements. Disallowance could also undermine commercial certainty, given that once an amount is credited to the Emergency Response Fund Special Account, the Future Fund Board would be able to invest the amount in any financial assets under clause 37 of the Bill.

28.               Providing for a determination under subsection 13(1) to be a legislative instrument that is not disallowable would be consistent with arrangements for other Funds invested by the Future Fund Board (see Item 3 of Schedule 1 of the Future Fund Act, section 15 of the MRFF Act and section 14 of the FDF Act).

 

 

Division 4 - Debits of amounts from the Emergency Response Fund

Clause 14 - Main purposes of the Emergency Response Fund Special Account

29.               Clause 14 would provide that the main purpose of the Emergency Response Fund Special Account would be to transfer amounts to the Home Affairs Emergency Response Fund Special Account (in accordance with the mechanism for these transfers set out in clause 28) for the purposes of:

·          paying amounts payable by the Commonwealth under an arrangement made under section 20, and making grants under section 21; and

·          transferring amounts to the COAG Reform Fund in accordance with section 32 for the purposes of making grants to the States and Territories under section 20.

30.                Clause 20 would provide the matters in relation to which a grant may be made or an arrangement entered into under this Bill.

Clause 15 - Purposes of the Emergency Response Fund Special Account - purposes related exclusively to the investments etc. of the Emergency Response Fund

31.               Clause 15 relates to the payment of various expenses that may be incurred by the Future Fund Board, which relate exclusively to the investments of the Emergency Response Fund, and which do not relate to the main purpose of the Fund. It sets out the additional purposes for which the Emergency Response Fund may be debited.

32.               The note at the end of this clause would direct readers to consider section 80 of the PGPA Act , which relates to the establishment of, crediting to and debiting against a special account established by an Act.

Clause 16 - Purposes of the Emergency Response Fund Special Account - purposes not related exclusively to the Emergency Response Fund

33.               Clause 16 relates to the payment of various expenses that may be incurred by the Future Fund Board in respect of its broader functions under this Bill, as well as the Future Fund Act, the FDF Act, the MRFF Act, the DCAF Act or the ATSILSFF Act. 

34.               Clause 16 sets out the range of additional purposes for which the Emergency Response Fund Special Account may be debited in respect of costs that are common to the funds for which the Future Fund Board has responsibility.

35.               The note at the end of this clause would direct readers to consider section 80 of the PGPA Act , which relates to the establishment of, crediting to and debiting against a special account established by an Act.

Clause 17 - Future Fund Board must ensure that the balance of the Emergency Response Fund Special Account is sufficient to cover authorised debits etc.

36.               Clause 17 would require the Future Fund Board to take all reasonable steps to ensure that the balance of the Emergency Response Fund Special Account is sufficient to cover the debits of amounts from the Emergency Response Fund Special Account. Clause 34 specifies that the total amount debited from the Emergency Response Fund Special Account in a financial year must not exceed $150 million.

37.               The note immediately below this clause would assist readers to understand the obligations of the Future Fund Board in respect of this requirement.

Clause 18 - Transfers from the Emergency Response Fund to the Future Fund

38.               Clause 18 would allow for transfers from the Emergency Response Fund Special Account to the Future Fund Special Account.

39.               This clause would allow for amounts to be transferred between the Emergency Response Fund and the Future Fund. The purpose of this is to enable reimbursement to the Future Fund Special Account of expenses incurred in relation to the Emergency Response Fund that have been debited from the Future Fund Special Account.

40.               The clause would allow the Finance Minister to direct, in writing, that one Fund is to be debited and the other Fund credited by a specified amount.

41.               Subclause 18(3) would be included to assist readers, as a direction under subclause 18(1) would not be a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. Directions of this type are administrative in character because they are merely the application of a legal power in a particular case (i.e. they do not determine or alter the content of the law itself).

Part 3 - Arrangements and grants relating to emergency response

Division 1 - Introduction

Clause 19 - Simplified outline of this Part

42.               This clause would provide a high-level introduction to the provisions in this Part, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions of this Part.

Division 2 - Arrangements and grants

Clause 20 - Arrangements and grants

43.               This clause would provide a broad legislative spending power that is to be read subject to the constitutional limits in clause 24.

44.               Subclause 20(1) would allow the Emergency Management Minister to make arrangements with or grants of financial assistance to a person or body for certain matters.  

45.               ‘Emergency Management Minister’ would be defined in clause 4 as a Minister whose title includes “Emergency Management”, or if no such Minister exists, the Minister declared by the Prime Minister to be the Emergency Management Minister for the purposes of the Act.

46.               ‘[A]rrangement’ would be defined in clause 4 to include a contract, agreement or deed. It would exclude a securities lending arrangement or securities lending arrangements (refer to clause 49).

47.               Subclause 20(5) would expressly exclude the acquisition of shares in a company or the making of a loan from the arrangements that could be made under this clause.

48.               ‘[P]erson’ would be defined in clause 4 to include a partnership. Subsection 2C(1) of the Acts Interpretation Act further provides that ‘person’ includes a body politic or body corporate, as well as an individual.

49.               Under this clause arrangements could therefore be made with, and grants provided to, individuals, incorporated or unincorporated bodies, not-for-profit organisations, educational institutions (such as a university), State and Territory governments, and local government bodies. This list should not be considered exhaustive.

50.               The matters for which the Emergency Management Minister may make arrangements or grants would be the carrying out of a project, the provision of a service or the adoption of technology, so long as that activity is directed towards achieving recovery from a natural disaster or post-disaster resilience in relation to an area that has been affected (whether directly or indirectly) by a natural disaster. Arrangements and grants in relation to post-disaster resilience are subject to the limitations in subclause 20(6), which limits post-disaster resilience to circumstances where at least one arrangement or grant has been made in relation to recovery from the same natural disaster.

51.               The Emergency Management Minister would also be able to make arrangements or grants for a matter that is incidental or ancillary to any of the above matters.

52.               The types of things that could be funded under subclause 20(1) may include:

·          tailored financial assistance to help persons or bodies recover from, and build economic sustainability and resilience to withstand, the impacts from a catastrophic natural disaster;

·          additional recovery grants to help primary producers or small business owners re-establish their enterprises/businesses;

·          economic aid packages to help areas affected, either directly or indirectly, to recover and transition from a natural disaster;

·          training and information for individuals, primary producers, small businesses or non-government organisations on strategies to help with long-term recovery, including post-disaster mitigation;

·          tools to better understand local climate variability and advice on climate risk applied to specific locations for future land-use planning;

·          financial management advice for persons or bodies to improve their ability to manage through lower income periods caused by a natural disaster;

·          improving data on the effects and consequences of natural disasters;

·          supporting industry to recover and develop post-disaster future risk mitigation measures;

·          support and development of alternative solutions for supply chain operations; and

·          infrastructure built to withstand future natural disasters.

53.               The above list should not be considered to be exhaustive or conclusive regarding the types of projects that could receive funding. It would be a matter for the Emergency Management Minister to decide whether or not to make a particular arrangement or grant (following a decision of Government to access the Emergency Response Fund). This list merely provides examples of possible projects.

54.               Subclauses 20(2) to (4) would clarify that, without limiting anything in subclause 20(1), in making an arrangement or grant under this clause, the Commonwealth may reimburse, or partly reimburse, costs or expenses that the other party has incurred or expended prior to the making of the arrangement or grant.

55.               The notes at the end of subclause 20(1) would assist readers by directing them to subsection 20(6) (which relates to post-disaster resilience) and section 24 (which places constitutional limits on the exercise of the spending powers provided for by this clause).

56.               Subclause 20(6) would define “post-disaster resilience” for the purposes of section 20. Post-disaster resilience, for the purposes of section 20, would be limited to an area that has been affected (whether directly or indirectly) by a natural disaster. Paragraph (b) would further limit post-disaster resilience to circumstances where at least one arrangement or grant has been made under subsection 20(1) in relation to recovery from the natural disaster.

57.               Paragraphs 20(6)(c) to (f) provide that where the above conditions are met, the following activities would constitute post-disaster resilience in relation to an area, for the purposes of making arrangements and grants under subsection (20)(1):

·          resilience to a future natural disaster of that kind that could affect that area (whether directly or indirectly);

·          preparedness for a future natural disaster of that kind that could affect that area (whether directly or indirectly);

·          reduction of the risk of a future natural disaster of that kind that could affect that area (whether directly or indirectly); and

·          the long-term sustainability of a community or communities in that area.

58.               The effect of subclause 20(6) is that the Emergency Management Minister cannot make an arrangement or grant under subsection 20(1) that is directed towards post-disaster resilience in relation to an area that has been affected (whether directly or indirectly) by a natural disaster, unless there has been an arrangement or grant made under subsection 20(1) that is directed towards recovery from the natural disaster.

59.               Subclause 20(7) would provide that section 20 does not apply to a natural disaster that occurs before the commencement of the section. In other words, grants and arrangements could only be made in relation to natural disasters that occur after the commencement of section 20 of the Act.

Clause 21 - Terms and conditions of grants

60.               This clause would require the terms and conditions for a grant of financial assistance under clause 21 to be set out in a written agreement between the Commonwealth and the grant recipient, and that the Emergency Management Minister would enter into such an agreement on behalf of the Commonwealth. That agreement would be required to provide the circumstances in which the grant recipient must repay amounts to the Commonwealth - this would not limit the terms and conditions that can be provided in an agreement, but would set out a minimum requirement.

61.               Subclause 21(3) would require a recipient of a grant under clause 21 to comply with the terms and conditions set out in the agreement made under this clause.

62.               The note at the end of subclause 21(2) would assist readers by directing them to section 24, which places constitutional limits on the exercise of the spending powers provided in this clause.

63.               The note at the end of subclause 21(4) would assist readers by alerting them to the fact that an amount repayable to the Commonwealth would be a debt to the Commonwealth.

Clause 22 - Emergency Management Minister has powers etc. of the Commonwealth

64.               This clause would specify that the Emergency Management Minister would hold and exercise all the rights, responsibilities, duties and powers of the Commonwealth as a party to an arrangement or the grantor of a grant under clause 20. This would include, but is not limited to:

·          paying amounts payable by the Commonwealth under a section 20 arrangement;

·          receiving amounts payable to the Commonwealth under a section 20 arrangement;

·          paying section 20 grants to grant recipients;

·          receiving amounts payable to the Commonwealth by way of the repayment of the whole or a part of a section 20 grant; and

·          instituting actions or proceedings on behalf of the Commonwealth in relation to a matter that concerns either an arrangement or a grant made under section 20.

Clause 23 - Conferral of powers on the Emergency Management Minister

65.               This clause would provide a legislative basis for the Emergency Management Minister to exercise a power conferred on him or her by an arrangement under section 20 or an agreement under section 21 in relation to a grant.

Clause 24 - Constitutional limits

66.               This clause would set out the Constitutional powers under which the Act would operate. It would provide that the Emergency Management Minister may only exercise a power under sections 20 and 21 where one of the enumerated Constitutional powers is enlivened. In other words, the Minister could generally only make an arrangement or grant where one or more of the powers listed in clause 24 were available.

67.               Clause 24 would act as a limitation on the broad spending power provided for by sections 20 and 21. The Emergency Management Minister may need to assess, where relevant and on a case-by-case basis, whether the making of a grant or arrangement is supported by a source of Constitutional power in clause 24.

68.               Clause 24 would inform a court how the Act is capable of operating within the Commonwealth’s legislative powers.  It would not apply to every provision of the Bill; instead, it confines only the principal spending powers in clauses 20 and 21.

69.               The other clauses of this Bill (other than clauses 20 and 21) would be incidental in character. That is, they would be incidental to the purpose of providing funding in relation to emergency response and natural disaster recovery, in that they establish the mechanism for investment of funds in order to ensure there is sufficient amounts available to make relevant payments under the powers in clause 20.

70.               Nothing in this clause is intended to narrow the scope of the enumerated Constitutional powers, but rather to clarify the powers relied upon to support the Parliament enacting this legislation.

71.               Some examples of potential measures could include, but are not limited to:

·          tailored financial assistance to help persons and bodies recover from the impacts from a catastrophic natural disaster;

·          financial assistance grants to a State or Territory to fund community recovery packages, which may include post disaster resilience (for example, the development of a flood levee to reduce the impact of future significant flooding events);

·          recovery activities within a Territory to build sustainability and resilience to assist with the long-term recovery of a community and help it to withstand significant future natural disasters;

·          recovery activities implementing Australia’s international obligations under the Covenant of Economic, Social and Cultural Rights, which may include assisting affected communities recovering from a natural disaster that are at risk of future natural hazards, by funding measures to assist in natural disaster preparedness;

·          grants of financial assistance to a constitutional corporation for the purposes of carrying out the corporation’s activities including, for example, providing income support grants to employees of a factory affected by a natural disaster to help with the long-term recovery of the local community;

·          activities at Commonwealth places to restore Government decision making infrastructure or restore national parks;

·          funding for bodies engaged in trade and commerce between Australia and other countries, among the States or within a Territory, between a State and a Territory or between two Territories, to undertake natural disaster post-disaster mitigation activities;

·          funding for grants to use the postal, telegraphic telephonic or like services to improve emergency warnings communications;

·          funding the research and development of new patentable invention which would improve natural disaster resilience;

·          support grants and arrangements for research into natural disasters that involves statistical collection and analysis;

·          grants of financial assistance for meteorological observations to enhance climate observation and forecasting data to provide better information to individuals or bodies;

·          arrangements to assist insurers and insurance customers to improve their long-term resilience to hazard impacts through post-disaster mitigation activities, thereby lowering the cost of insurance products; and

·          grants of financial assistance that are for purposes incidental to the execution of any of the legislative powers of the Parliament or the executive power of the Commonwealth.

Clause 25 - Executive power of the Commonwealth

72.               This clause would clarify that this Division does not impliedly limit the executive power of the Commonwealth contained in section 61 of the Constitution.

Clause 26 - Publication of information relating to arrangements and grants

73.               This clause would require the Emergency Management Minister to publish detailed and up-to-date information about grants and arrangements on the Home Affairs Department’s website. The information to be published would include, but is not limited to, amounts paid and payable under grants and arrangements as well as the names of recipients of grants and arrangements.

74.               Where the recipient is an individual, there would be no requirement to publish the name of that individual online, nor the purpose of the grant to, or arrangement with, that individual. This will ensure that the personal privacy of individual recipients is protected. 

75.               The names of individual recipients are not disclosed under other emergency management relief programs, such as the Australian Government Disaster Recovery Payments.

76.               The Emergency Management Minister will still be required to publish detailed information relating to arrangements and grants, including each amount paid under an arrangement or grant, the total amounts paid and payable and the date on which the most recent payment was made. For all recipients that are not individuals, the name of the recipient as well as the purpose of the arrangement or grant will also need to be published.

77.               The information required to be published under this clause would be additional to the information that must be published in accordance with the Commonwealth Grants Rules and Guidelines and the Commonwealth Procurement Rules.

78.               Subclauses 26(2) and 27(3) would require that the information is kept up-to-date and published as soon as practicable.

Division 3 - Home Affairs Emergency Response Fund Special Account

Clause 27 - Home Affairs Emergency Response Fund Special Account

79.               Clause 27 would establish the Home Affairs Emergency Response Fund Special Account, which would be a special account for the purposes of the PGPA Act. The Secretary of the Home Affairs Department would be responsible for the special account. ‘Home Affairs Department’ would be defined in clause 4 to mean the Department administered by the Home Affairs Minister.

80.               The note immediately following subclause 27(2) would assist the reader by clarifying that amounts could be credited to the Home Affairs Emergency Response Fund Special Account by an Appropriation Act.

81.               A special account is an appropriation mechanism that sets aside an amount within the CRF to be expended for specific purposes. Any amounts credited to the Home Affairs Emergency Response Fund Special Account would be quarantined from the rest of the CRF and could only be debited from the Home Affairs Emergency Response Fund Special Account for the purposes set out in the Bill.

Clause 28 - Transfers from the Emergency Response Fund Special Account to the Home Affairs Emergency Response Fund Special Account

82.               This clause would provide the mechanism by which amounts could be transferred from the Emergency Response Fund Special Account to the Home Affairs Emergency Response Fund Special Account, where it can then be used to make grants or payments under arrangements provided for by clause 20.

83.               For certainty, amounts would only be transferred under this clause following a decision by the Government to use the Emergency Response Fund to make grants or arrangements following a natural disaster.

84.               Subclause 28(1) would allow the Emergency Management Minister to request transfers of specified amounts with respect to payments that will be payable during a financial year under arrangements that have been, or will be, entered into under section 20.

85.               Subclause 28(2) would specify that the Emergency Management Minister could not make more than one request under subsection 28(1) in relation to a particular amount that will be payable under an arrangement. This would prohibit the Minister from accessing the fund more than once in relation to a particular arrangement; in effect, limiting the total value of requests under subsection 28(1) to the amount that will be payable under section 20 arrangements.

86.               Subclause 28(3) would provide that the Emergency Management Minister could make more than one request under subsection 28(1) in a given financial year, despite the limitation in subclause 28(2). This would provide flexibility for the Minister to request more than one transfer in a financial year. This could be in relation to different programs of arrangements or different arrangements under the same program of arrangements agreed by the Government in the same financial year, and could relate to the same natural disaster or separate natural disasters.

87.               Subclauses 28(4) to (6) would mimic subclauses 28(1) to (3) in respect of grants to be paid to persons other than a State or Territory. The note immediately following subclause 28(4) would direct readers to section 32, which relates to grants to a State or Territory.

88.               Subclause 28(7) would require the Finance Minister to direct, in writing, that a transfer be made from the Emergency Response Fund Special Account to the Home Affairs Emergency Response Fund Special Account in instances where a request has been made by the Emergency Management Minister under subsection 28(1) or (4) and the Finance Minister is satisfied that the transfer will not result in a breach of the annual limit as provided for by clause 34.

89.               Subclauses 28(8) would provide that a direction by the Finance Minister under subsection 28(7) is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. Directions of this type are administrative in character because they are merely the application of a legal power in a particular case (i.e. they do not determine or alter the content of the law itself).

90.               Subclause 28(9) would specify that the Finance Minister must provide the Emergency Management Minister and the Treasurer with a copy of any directions made under subsection 28(7).

91.               It is expected that Emergency Management Minister and the Finance Minister would consult each other in exercising their powers under section 28, to ensure that transfers can accommodate any agreed payment schedules as provided for by clause 20 arrangements or grants or clause 21 agreements.

Clause 29 - Other credits to the Home Affairs Emergency Response Fund Special Account

92.               This clause would require amounts to be credited to the Home Affairs Emergency Response Fund Special Account that are equal to amounts paid to the Commonwealth:

·          under an arrangement made under section 20;

·          by way of damages or compensation for breach of an arrangement under section 20; and

·          by way of the repayment of the whole or part of a grant made under section 20.

93.               This would ensure that any amounts payable to the Commonwealth arising out of an arrangement or grant made under section 20 would be credited to the Home Affairs Emergency Response Fund Special Account to be used for the purposes of that special account and would not return to the Emergency Response Fund Special Account.

Clause 30 - Purposes of the Home Affairs Emergency Response Fund Special Account

94.               This clause would set out the purposes of the Home Affairs Emergency Response Fund Special Account, which would be to:

·          pay amounts payable by the Commonwealth under an arrangement made under section 20; and

·          to make grants under section 20.

95.               The note at the end of this clause would direct readers to consider section 80 of the PGPA Act , which relates to the establishment of, crediting to and debiting against a special account established by an Act.

Clause 31 - Excess balance of the Home Affairs Emergency Response Fund Special Account must be transferred to the Emergency Response Fund Special Account

96.               Subclause 31(1) would require the Emergency Management Minister to make a half-yearly assessment of whether the balance of the Home Affairs Emergency Response Fund Special Account exceeds what is sufficient to cover payments related to arrangements and grants in the upcoming 12-month period. If the Emergency Management Minister determines that the balance exceeds what is sufficient to cover the required payments, the Emergency Management Minister must also make an assessment of the excess amount.

97.               The Emergency Management Minister must make this assessment during the first 15 days of each half-year. Clause 4 would define ‘half-year’ to mean a period of 6 months starting on 1 January or 1 July.

98.               Subclause 31(2) would specify that where the Emergency Management Minister makes an assessment under subsection 31(1) that an excess amount exists, the Emergency Management Minister must direct, in writing, that the excess amount be transferred from the Home Affairs Emergency Response Fund Special Account to the Emergency Response Fund Special Account.

99.               The direction must be made as soon as practicable after the assessment is made under subsection 31(1), and the direction must direct that the excess amount be transferred as soon as practicable after the direction is given. This will ensure that excess amounts that are not required for funding natural disaster recovery can be returned to the Emergency Response Fund, where they can be invested to grow the Fund.

100.           Subclause 31(3) would make the readers aware that a direction by the Emergency Management Minster under subsection 31(2) is a notifiable instrument, to provide increased transparency of transfers between special accounts.

101.           Subclause 31(4) would require the Emergency Management Minister to provide the Treasurer and Finance Minister with a copy of a direction under subsection 31(2).

Division 4—Channelling State/Territory grants through the COAG Reform Fund

Clause 32 - Channelling State/Territory grants through the COAG Reform Fund

102.           This clause would enable the channelling of grants of financial assistance, as provided for by clause 20 of this Bill, to a State or Territory through the COAG Reform Fund.

103.           Subclause 32(1) would specify that in order to make a grant of financial assistance to a State or Territory, the Emergency Management Minister must, by writing, direct that the amount of the grant be debited from the Home Affairs Emergency Response Fund Special Account and credited to the COAG Reform Fund on a specified day.

104.           Subclause 32(2) would require that the direction must be expressed to be given in order to enable the amount to be debited form the COAG Reform Fund for the purposes of making the grant.

105.           Subclause 32(3) would ensure that the Emergency Management Minister would not be permitted to give a direction under subsection 32(1) if it would breach the annual limit on debits from the Emergency Response Fund Special Account as provided for by clause 34.

106.           Subclause 32(4) would clarify that one document can be used to make two or more directions provided for by subclause 32(1).

107.           Subclause 32(5) would clarify that a direction under subsection (1) is not a legislative instrument. Directions of this type are administrative in character because they are merely the application of a legal power in a particular case (i.e. they do not determine or alter the content of the law itself).

108.           Subclause 32(6) would require the Emergency Management Minister to give a copy of a direction provided for by subclause 32(1) to the Treasurer and the Finance Minister.

Clause 33 - Debits from the COAG Reform Fund

109.           Clause 33 would provide that when a transfer has been made to the COAG Reform Fund under paragraph 32(1)(b), the Treasurer must ensure that the COAG Reform Fund is debited, for the same amount, for the purposes of making the grant of financial assistance to a State or Territory. The Treasurer must do this as soon as practicable after the amount has been credited into the COAG Reform Fund.

Division 5—Annual limit on amounts debited from the Emergency Response Fund Special Account

Clause 34 - Annual limit on amounts debited from the Emergency Response Fund Special Account

110.           Clause 38 would limit the total amount debited from the Emergency Response Fund Special Account during a financial year, for the purposes of transfers under sections 28 and 32, to $150 million. Transfers under section 28 relate to arrangements and grants, except for grants made to a State or Territory, made under section 20. Transfers under section 32 relate to grants of financial assistance to a State or Territory under section 20.

Part 4 - Investment of the Emergency Response Fund

Clause 35 - Simplified outline of this Part

111.           This clause would provide a high-level introduction to the provisions in this Part, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions of this Part.

Clause 36 - Objects of investment of the Emergency Response Fund

112.           Subclause 36(1) would reinforce that amounts would be invested by the Future Fund Board for the main objects of enhancing the Commonwealth’s ability to transfer amounts for the purposes of making grants and arrangements in relation to emergency response and recovery from a natural disaster.

113.           Subclause 36(2) would provide that the ancillary objects of the investment of the Emergency Response Fund are for enhancing the ability of the Commonwealth and the Future Fund Board to discharge costs, expenses, obligations and liabilities set out in clauses 15 and 16.

Clause 37 - Investment of the Emergency Response Fund

114.           Clause 37 would take account of the investment powers provided for under section 58 of the PGPA Act. However, subclause 37(1) expands on those powers to provide for the investment of the Emergency Response Fund in a broad range of financial assets. Specific conditions on the acquisition of derivatives are separately covered in clause 47. This approach to the investment of the Emergency Response Fund is consistent with investment arrangements for other Commonwealth investment funds, including the Future Fund and the Future Drought Fund.

115.           Investments of the Emergency Response Fund would be made in the name of the Future Fund Board (rather than the Commonwealth) to make clear that the Future Fund Board would manage the Emergency Response Fund at arm’s length from the Government. However, beneficial ownership of the Emergency Response Fund assets would remain with the Commonwealth at all times.

Clause 38 - Management of investments of the Emergency Response Fund

116.           Subclauses 38(1) and 38(2) would provide that income derived from an investment of the Emergency Response Fund, including a return of capital or another form of financial distribution, must be credited to the Emergency Response Fund Special Account. This is consistent with the requirements under sections 81 and 83 of the Constitution (which, in effect, provide that public money forms part of the CRF and can only be spent if authorised by an appropriation made by law). In practice, any amount that has not been invested must be held in the Emergency Response Fund Special Account.

117.           Subclauses 38(3) to (5) would relate to the arrangements that would apply in relation to the realisation of assets, and allow the Future Fund Board to authorise, prior to an investment maturing, that the proceeds of this investment be automatically reinvested with the same entity. This would avoid the need for the proceeds of realisation of the investment to be treated as public money and credited to the CRF, only to be then reappropriated and reinvested. Any reinvestment would be an investment of the Emergency Response Fund.

118.           Subclause 38(6) would provide that section 58 of the PGPA Act does not apply to an investment of the Emergency Response Fund. Section 58 of the PGPA Act authorises the Finance Minister or the Treasurer to invest public money in only a limited range of investments, such as government bonds and bank deposits. However, subclause 37(1) would provide for the investment of the Emergency Response Fund in a broader range of financial assets.

Clause 39 - Emergency Response Fund Investment Mandate

119.           This clause would provide the Government, as owner of the Emergency Response Fund, with a mechanism for articulating its expectations for how the Emergency Response Fund will be invested and managed by the Future Fund Board. Clause 39 establishes a framework that enables the Government to give strategic guidance to the Future Fund Board while preserving the Board’s role in managing the investments of the Emergency Response Fund at arm’s length from the Government. This approach is consistent with the arrangements in place for the other Funds invested by the Future Fund Board.

120.           Subclause 39(1) would provide the responsible Ministers with the power to give the Future Fund Board written directions in relation to the performance of its investment functions and the exercise of its powers. This clause would be subject to the limitations in section 41. The responsible Ministers must issue at least one such direction, and these directions will be collectively known as the Emergency Response Fund Investment Mandate (subclause 39(3) refers). Note that the Emergency Response Fund investment function would be defined in clause 4.

121.           While the responsible Ministers can issue new directions at any time, the intention is that the Investment Mandate will reflect the Government’s policy intent with regard to the investments of the Emergency Response Fund. Any new directions would therefore be expected to take account of significant policy changes or material changes in the investment environment faced by the Emergency Response Fund.

122.           These requirements will give the Future Fund Board and Parliament assurance that the responsible Ministers must make appropriately considered directions in regard to investment targets, while providing flexibility to take account of broader policy issues and national interest considerations.

123.           Subclause 39(2) would provide that in setting an Investment Mandate the responsible Ministers must have regard to maximising the return on the Emergency Response Fund over the long term consistent with international best practice for institutional investment, and of the need to enhance the Commonwealth’s ability to provide grants for or pay amounts under arrangements in relation to emergency response and recovery from natural disasters, and any other matters the responsible Ministers consider to be relevant.

124.           Subclause 39(4) would provide that the Investment Mandate may include, but is not limited to, statements about policies the Future Fund Board must pursue in relation to risk and return and the allocation of the Emergency Response Fund to particular financial assets. This may include restrictions or thresholds for investing the Emergency Response Fund in certain jurisdictions or asset classes and statements of the Government’s appetite for risk.

125.           Subclause 39(5) would make it clear that a Ministerial direction under subsection 39(1) prevails over section 40 to the extent of any inconsistency, and places limitations on responsible Ministers in issuing the Investment Mandate. This means that the Investment Mandate could not have the effect of requiring the Future Fund Board to do anything inconsistent with this Bill, including the aim of enhancing the Commonwealth’s ability to provide grants for or pay amounts under arrangements in relation to emergency response and recovery from natural disasters.

126.           Subclause 39(6) would provide that the Investment Mandate would not formally commence until at least 15 calendar days after it is issued. This would allow the Future Fund Board time to adjust to any revised directions issued by the responsible Ministers. Importantly, this would allow the Future Fund Board to know with certainty when the new direction would come into force.

127.           Subclause 39(7) would provide that a direction under subsection 39(1) is a legislative instrument, and as such must be tabled in Parliament and registered on the Federal Register of Legislation. Note 1 would alert the reader that a direction is not subject to disallowance, in accordance with regulations made for the purposes of paragraph 44(2)(b) of the Legislation Act. Note 2 alerts the reader that a direction is not subject to sunsetting, in accordance with regulations made for the purposes of paragraph 54(2)(b) of the Legislation Act.

128.           The Government considers it is appropriate that a direction under subclause 39(1) of the Bill is not subject to disallowance. The Bill would provide adequate scrutiny of directions comprising the Emergency Response Fund Investment Mandate through mandated consultation with the Future Fund Board (clause 42). Exemption from disallowance together with consultation would give the Future Fund Board necessary certainty when investing through the Emergency Response Fund. While it would be possible to provide that a direction under subsection 39(1) does not come into effect until disallowance periods have expired, this approach would significantly impede the ability of Government to make urgent changes to the Emergency Response Fund Investment Mandate in the national interest.

129.           The Government also considers it is appropriate that a direction under subclause 39(1) of the Bill is not subject to sunsetting. The process for setting the Emergency Response Fund Investment Mandate has been designed to ensure the mandate remains relevant over the long term, subject to appropriate revisions to take into account changing circumstances. This process means the Emergency Response Fund Investment Mandate may comprise of multiple directions issued at different times. Not being subject to sunsetting would ensure that directions comprising the Emergency Response Fund Investment Mandate remain coherent, regardless of when specific directions were issued.

130.           This approach enables the public and the Parliament to hold the Government accountable for the directions it issues to the Future Fund Board without impeding the Government’s ability to manage its finances. The approach is consistent with other investment mandates in respect of the other investment funds managed by the Future Fund Board.

Clause 40 - Obligation on Future Fund Board in performing investment functions

131.           This clause would require the Future Fund Board, in exercising its Emergency Response Fund investment function, to seek to maximise the return on the Emergency Response Fund over the long term, consistent with international best practice for institutional investment. It is expected that international best practice will be reflected in the investment policies of the Emergency Response Fund.

Clause 41 - Limitation on Emergency Response Fund Investment Mandate

132.           Clause 41 would provide that the responsible Ministers must not direct the Future Fund Board to use the assets of the Emergency Response Fund to invest in a particular financial asset, for example shares in a particular company. It would also prevent the responsible Ministers from issuing a direction that has the effect of requiring the Future Fund Board to use the assets of the Emergency Response Fund to support a particular business entity, activity or business.

Clause 42 - Future Fund Board to be consulted on Emergency Response Fund Investment Mandate

133.           Consistent with arrangements for the other Funds invested by the Future Fund Board, the responsible Ministers would be required to consult the Future Fund Board before issuing an Emergency Response Fund Investment Mandate direction under subsection 39(1).

134.           Subclause 42(1) would require the responsible Ministers to send a draft of a direction under subsection 39(1) to the Future Fund Board and invite the Board to make a submission within a specified time limit. The specified time limit would be determined on a case by case basis with regard to relevant circumstances and priorities at the time. It may be the case that urgent changes are required in the national interest. In this situation it would be reasonable for the Future Fund Board to be asked to consider a draft direction quickly. However, where there is less urgency, or the change in the Emergency Response Fund Investment Mandate is substantial, it would be reasonable to provide the Future Fund Board with a longer period of time to consider a draft direction. Any submission that is received within the specified time limit would need to be considered by the responsible Ministers.

135.           Subclause 42(2) would require any submission received from the Future Fund Board on a draft direction to be tabled in the Parliament along with the direction. This would ensure that the Parliament is kept informed of any concerns raised by the Future Fund Board about the impact of the direction on the Emergency Response Fund. 

Clause 43 - Compliance with Emergency Response Fund Investment Mandate

136.           This clause would deal with compliance of the Future Fund Board with the Emergency Response Fund Investment Mandate.

137.           Subclause 43(1) would require the Future Fund Board to take all reasonable steps to ensure that all policies and decisions regarding the operation and investment of the Emergency Response Fund are in accordance with the Emergency Response Fund Investment Mandate issued by the responsible Ministers. Since the Emergency Response Fund Investment Mandate is intended to provide broad guidance to the Future Fund Board, it may contain directions that require the Board to apply its judgment on whether or not Emergency Response Fund investments comply with the Emergency Response Fund Investment Mandate.

138.           Subclause 43(2) would provide that if the Future Fund Board becomes aware of a breach of the Emergency Response Fund Investment Mandate, the Board must inform the responsible Ministers in writing as soon as is practicable, and set out a proposed strategy to bring the operations of the Emergency Response Fund into compliance with the Emergency Response Fund Investment Mandate.

139.           Similarly, subclauses 43(3) and 43(4) would provide that if the Government identifies areas where the Future Fund Board is not complying with the Emergency Response Fund Investment Mandate, the responsible Ministers can issue written directions to the Future Fund Board to provide an explanation and to take action to remedy the situation. The Future Fund Board would be required to comply with any such directions, noting that the responsible Ministers would be the final arbiters on what is intended by the Emergency Response Fund Investment Mandate.

140.           A direction from the responsible Ministers to the Future Fund Board under subsection 43(3) should only require the Board to take actions in order to comply with an Investment Mandate. A direction is not intended to determine or alter the content of the law with which the Board must comply.

141.           Subclause 43(5) would provide that any transactions undertaken by the Future Fund Board and subsequently deemed not to have complied with the Emergency Response Fund Investment Mandate remain valid, and the Future Fund Board is required to honour any commitments made. This would protect third parties who enter into transactions with the Future Fund Board or its agents in good faith.

142.           Subclause 43(6) is included to assist readers, as a direction under subsection 45(3) is not a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. Directions of this type are administrative in character because they are merely the application of a legal power in a particular case (i.e. they do not determine or alter the content of the law itself).

Clause 44 - Future Fund Board must not trigger the takeover provisions of the Corporations Act 2001

143.           Clause 44 aims to minimise market distortion and eliminate the potential for conflicts of interest for the Government as a market regulator. It would provide that the Future Fund Board is prohibited from triggering the takeover provisions under section 606 of the Corporations Act.

144.           Section 606 of the Corporations Act essentially prohibits acquisitions of relevant interests in the voting shares of a listed company, or unlisted company with more than 50 shareholders, if a person’s voting power increases from a figure at or below 20 per cent to a figure above 20 per cent (or from a figure above 20 per cent but below 90 per cent to a higher figure) - unless the shares are acquired in one of the circumstances set out at section 611 of that Act.

145.           It is the Government’s intention that the takeover threshold be adhered to quite strictly in relation to listed companies and unlisted companies with more than 50 shareholders. Therefore, subclause 44(1) would provide that the exceptions under section 611 of the Corporations Act (that is, exceptions to the prohibition in section 606) do not apply in relation to acquisitions by the Future Fund Board if the acquisition is the result of the performance by the Future Fund Board of its Emergency Response Fund investment functions.

146.           Subclause 44(2) would provide that if for some reason the Future Fund Board has not complied with section 606 of the Corporations Act (as it is applied to the Future Fund Board under subclause 46(1)) the relevant transactions would still be valid. The aim of this provision is to ensure third parties are not affected adversely by any non-compliance of the Future Fund Board.

147.           The note at the end of this clause would assist the reader by referring to section 39 of the Future Fund Act, which sets out the application of the Corporations Act to the Future Fund Board.

Clause 45 - Borrowing

148.           Clause 45 would prohibit the Future Fund Board from borrowing money, except for short-term borrowing associated with the settlement of transactions, or in other circumstances prescribed in the rules.

149.           The overall aim of this provision is to ensure that the Future Fund Board is able to operate efficiently without exposing the Budget to undue risk.

150.           Subclause 45(3) would provide that the rules may specify circumstances in which it is appropriate for the Future Fund Board to be able to borrow. The rules could also be used to clarify any uncertainty on whether a particular activity constitutes borrowing. While it is not anticipated that the Future Fund Board will have a need to borrow, this provision allows for unforeseen events or changes in the investment environment without the need to amend the primary legislation. The power to make rules would be provided for in clause 84 of the Bill.

Clause 46 - Emergency Response Fund investment policies

151.           Clause 46 would require the Future Fund Board to formulate, publish and comply with a number of policies on its investment activities. The aim of this provision is to ensure rigour and transparency around how the Future Fund Board performs its investment function in relation to the Emergency Response Fund, including risk management, performance assessment and benchmarks.

152.           Subclauses 46(1) and 46(7) require the Future Fund Board to formulate and comply with policies and any additional matters specified in the rules. For certainty, these clauses do not prescribe a substantive exemption from the requirements of the Legislation Act. A note at the end of subclause 46(1) would remind the reader that, under subsection 33(3) of the Acts Interpretation Act, the Future Fund Board is able to repeal, rescind, revoke, amend, or vary any such policies.

153.           Subclause 46(2) would provide that the policies that the Future Fund Board develops must be consistent with the Emergency Response Fund Investment Mandate.

154.           Subclauses 46(3) and 46(4) would require the Future Fund Board to publish such policies on the internet.

155.           Subclauses 46(5) and 46(6) would require the Future Fund Board to conduct reviews of these policies periodically, and when the responsible Ministers change the Emergency Response Fund Investment Mandate. It is not expected that the results of the reviews would be published. However, if a review resulted in any changes to policies, it is intended that the updated policies would be published on the internet.

156.           Subclause 46(8) would provide that if the Future Fund Board enters into a transaction which is not consistent with a policy that it has published under this section, the transaction would still be valid. This would ensure that third parties would not be affected by a failure of the Future Fund Board to comply with policies formulated under subclause 46(1). However, subclause 46(7) would require the Future Fund Board to take all reasonable steps to comply with the policies it develops under subsection 46(1).

157.           Subclause 46(9) would be included to assist readers, as a policy formulated under subsection 46(1) would not be a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. Such policies would be administrative in character, and would not determine or alter the content of the law. Rather they would be administrative policies that the Future Fund Board would be required to formulate and comply with, to ensure rigour and transparency around how the Board performs its investment function.

Clause 47 - Derivatives

158.           Derivatives are widely used by financial market participants as a tool for risk management.

159.           Clause 47 would provide for the Future Fund Board to make use of derivatives for certain purposes. This includes as a risk management tool and to achieve indirect exposure to assets that it could not otherwise achieve. The Future Fund Board could also use derivatives to reduce the transaction cost of achieving required exposures.

160.           Subclause 47(1) would enable the Future Fund Board to acquire a derivative for specified purposes, but would make it clear that the Board cannot acquire or use derivatives for the purposes of speculation or leverage.

161.           Subclause 47(2) would provide that the acquisition of derivatives under this clause cannot be inconsistent with the requirement under subsection 46(1) of the Act for the Future Fund Board to formulate a policy on its investment strategy and take all reasonable steps to comply with that policy.

162.           Subclauses 47(3) and 47(4) would provide that derivatives would be held in the name of the Future Fund Board and be taken to be an investment of the Emergency Response Fund.

163.           Similar to other investments, derivatives could be realised by the Future Fund Board under subsection 38(3) of the Bill.

Clause 48 - Additional financial assets

164.           Clause 48 would provide that if the Future Fund Board becomes a holder of another financial asset (for example through a capital distribution) that asset would become an investment of the Emergency Response Fund and would therefore be subject to all the restrictions and requirements for investments of the Emergency Response Fund.

Clause 49 - Securities lending arrangements

165.           Clause 49 would provide that the Future Fund Board is able to enter into securities lending arrangements. Lending of securities is commonplace among institutional investors. It could also take collateral as part of a securities lending arrangement. Any collateral it takes would either be credited to the Emergency Response Fund Special Account or become an investment of the Emergency Response Fund.

Clause 50 - Investment managers

166.           Clause 50 would deal with the use of investment managers by the Future Fund Board for purposes in connection with the Emergency Response Fund.

167.           Subclause 50(1) would enable the Future Fund Board to engage one or more investment managers. An ‘investment manager’ would be defined broadly in clause 4 of the Bill to include custodians, transition managers and other investment managers. However, the A g e n c y would be excluded from this definition as it is generally expected that investment activities, such as acquiring derivatives or investing money, will be outsourced.

168.           Unless otherwise approved by the responsible Ministers, the Future Fund Board would be required to use investment managers to invest money in financial assets, acquire derivatives, and enter into securities lending arrangements or to realise financial assets.

169.           Subclause 50(2) would provide that the responsible Ministers may provide approval in writing for certain methods of investment, other than through investment managers, should it be prudent and cost effective to do so.

170.           Subclauses 50(3) and 50(4) would require the Future Fund Board to ensure that investment managers operate within this Bill and report on the state of investments of the Emergency Response Fund to the Future Fund Board and the A g e n c y. It would be expected that such obligations would be set out in the contractual arrangements between the Future Fund Board and the investment manager.

Clause 51 - Refund of franking credits

171.           Under subsection 84B(1) of the Future Fund Act, the Future Fund Board is deemed to be an exempt institution that is eligible for a refund of franking credits under the ITAA. As the Future Fund Board is exempt from income tax, it may have an investment bias towards assets whose return had not previously been subject to income tax (such as debt instruments or unfranked dividends). Refunding franking credits removes any potential bias against franked dividends.

172.           Clause 51 would deal with the refund of franking credits and provide that if the Future Fund Board receives a refund of a tax offset under the ITAA and the tax offset is attributable to the investment of the Emergency Response Fund, any refund received is credited to the Emergency Response Fund Special Account. Note 1 would refer the reader to section 84B of the Future Fund Act. Note 2 would refer the reader to Division 63 of the ITAA, which deals with refunds of tax offsets.

Clause 52 - Realisation of non-financial assets

173.           Clause 52 would require the Future Fund Board to realise an asset that ceases to be a financial asset or any asset acquired by the Board (as an investment of the Emergency Response Fund) that is not a financial asset. This could include circumstances where the Future Fund Board holds an asset which was mistakenly acquired by the Board, or given to the Board, or which ceases to be a financial asset.

174.           The clause would require a non-financial asset to be treated as a financial asset up to the time it is realised. Subclause 52(1) would ensure that the asset is considered an investment of the Emergency Response Fund and that relevant provisions relating to investments of the Emergency Response Fund apply to that asset for the time it is held by the Future Fund Board.

Clause 53 - Additional function of the Future Fund Board

175.           Clause 53 would provide that the functions of the Future Fund Board include the function of investing amounts in accordance with the Act.

Part 5 - Reporting obligations etc.

Clause 54 - Simplified outline of this Part

176.           Clause 54 would provide a high-level introduction to the provisions in this Part, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions of this Part.

Clause 55 - Finance Minister may require Future Fund Board to prepare reports or give information

177.           This clause would provide that the Finance Minister may require, in writing, that the Future Fund Board prepare a report or a document on one or more specified matters relating to the performance of the Future Fund Board’s functions under this Bill. This report or information would be required to be provided as outlined in the Finance Minister’s request. Such a report could be requested, for example, in order to satisfy the Government that the Future Fund Board’s management of the Emergency Response Fund complies with legislation and the Fund’s investment mandate.

178.           Subclause 55(4) would be included to assist readers, as a report prepared under subsection 55(1) would not be a legislative instrument within the meaning of subsection 8(1) of the Legislation Act. Such reports would be administrative in character, and would not determine or alter the content of the law.

Clause 56 - Keeping the responsible Ministers informed etc.

179.           Clause 56 would require the Future Fund Board to notify the responsible Ministers of any information that the responsible Ministers should know, including by providing any written information to the Finance Minister. This could include significant investment results, concerns regarding fraud and any non-compliance with the Future Fund Board’s policy on conflicts of interest.

Clause 57 - Finance Minister may give reports, documents and other information to other Ministers etc.

180.           Clause 57 would allow the Finance Minister to give reports, documents and other information to another Minister. This includes reports and documents under subsections 55(1) or 56(2) and any other information obtained by the Finance Minister under the Bill. It is intended that the Finance Minister will use this provision to inform the Emergency Management Minister about matters relating to the Emergency Response Fund, given the responsibility of the Emergency Management Minister for making payments from the Home Affairs Future Emergency Response Fund Special Account on behalf of the Commonwealth.

181.           It is envisaged that the Emergency Management Minister would also cause information about a payment or grant under section 20 to be published in the Annual Report for the Department of Home Affairs, however the personal privacy of individual recipients would remain protected under subclause 26(1)(d).

Part 6 - Miscellaneous

Clause 58 - Simplified outline of this Part

182.           This clause would provide a high-level introduction to the provisions in this Part, to aid readability. The outline is not intended to be comprehensive and should not be relied on in place of the substantive provisions of this Part.

Clause 59 - Delegation by the Finance Minister

183.           This clause would enable the Finance Minister to delegate certain of the Finance Minister’s functions and powers under this Bill.

184.           Under subclause 59(1), the Finance Minister would be empowered to, in writing, delegate his or her functions or powers under sections 13 and 28 of the Act to the Secretary of the Finance Department or to an SES employee (or acting SES employee) in that Department. The Minister would not be required to do so.

185.           The Finance Minister’s powers under sections 13 and 28 would relate to the determination of a specified amount to be credited to the Emergency Response Fund Special Account (in the case of section 13) or a direction that a specified amount is to be transferred from the Emergency Response Fund Special Account to the Home Affairs Emergency Response Fund Special Account (in the case of section 28). Delegation of these functions to the Secretary of, or SES official in, the Finance Department would facilitate the efficient administration of these matters.

186.           Subclause 59(2) would allow the Finance Minister to delegate, in writing, any or all of the Finance Minister’s powers under section 18 of the Act to the Secretary of the Finance Department; or to an SES employee (or acting SES employee) in that Department; or to the Chair of the Future Fund; or an SES employee (or an acting SES employee) of the Agency. Clause 18 would relate to the transfer of funds from the Emergency Response Fund Special Account to the Future Fund Special Account.

187.           The notes would assist the reader by referring to the relevant section of the Acts Interpretation Act in relation to the expressions ‘SES employee’ and ‘acting SES employee’.

188.           It is envisaged that the delegate would be accountable to the Finance Minister for his or her actions under any delegation. Subclause 59(3) would reinforce this intention by requiring the delegate to comply with any direction of the Finance Minister in exercising powers under a delegation .

Clause 60 - Delegation by the Treasurer

189.           Under subclause 60(1), the Treasurer would be empowered to, in writing, delegate his or her powers under section 13 of the Act to the Secretary of the Treasury Department or an SES employee (or acting SES employee) in that Department. The Treasurer would not be required to do so.

190.           Section 13 of the Act would relate to the determination of a specified amount to be credited to the Emergency Response Fund Special Account. Delegation of this power to the Secretary of, or SES official in, the Treasury would enable the efficient administration of these matters.

191.           The note would assist the reader by referring to the relevant section of the Acts Interpretation Act in relation to the expressions ‘SES employee’ and ‘acting SES employee’.

192.           It is envisaged that the delegate would be accountable to the Treasurer for his or her actions under any delegation. Subclause 60(2) would reinforce this intention by requiring the delegate to comply with any direction of the Treasurer in exercising powers under a delegation.

Clause 61 - Delegation by the Emergency Management Minister

193.           Under subclause 61(1) the Emergency Management Minister would be empowered to, in writing, delegate his or her powers under Division 2 of Part 3 to the Secretary of the Home Affairs Department, an SES employee (or acting SES employee) in that Department (so long as that employee possesses expertise appropriate to the delegated power), or another official of a Commonwealth entity who has the expertise appropriate to the power. This delegation power is required to enable grants made under section 20 to be administered by Commonwealth officials employed in an Australian Government grants hub (for example, the Community Grants Hub, managed by the Commonwealth Department of Social Services).

194.           Division 2 of Part 3 of the Bill deals with making arrangements or grants of financial assistance in relation to recovery from natural disasters. Delegation of these functions to the Secretary of, or SES official in, the Home Affairs Department, or a Commonwealth official employed in the Australian Government Community Grants Hub, would enable the efficient administration of these matters.

195.           It is envisaged that the delegate would be accountable to the Emergency Management Minister for his or her actions under any delegation. Subclause 61(2) would reinforce this intention by requiring the delegate to comply with any direction of the Emergency Management Minister in exercising powers under a delegation.

196.           Under subclause 61(3), the Emergency Management Minister would be empowered to, in writing, delegate his or her powers under sections 28, 31 and 32 of the Act to Secretary of the Home Affairs Department or an SES employee (or acting SES employee) in that Department.

197.           The Emergency Management Minister’s powers under sections 28, 31 and 32 would relate to transfers between the Emergency Response Fund Special Account and the Home Affairs Emergency Response Fund Special Account (in the case of sections 28 and 31) and transfers from the Emergency Response Fund Special Account to the COAG Reform Fund (in the case of section 32).

198.           Delegation of these functions to the Secretary of, or SES official in, the Home Affairs Department would facilitate the efficient administration of these matters. The list of potential delegates in subclause 61(3) is narrower than the list in subclause 61(1), as delegations of the relevant powers will not need to be made to officials outside the Home Affairs Department. 

199.           The notes immediately following subclauses 61(1) and 61(3) would assist the reader by referring to the relevant section of the Acts Interpretation Act in relation to the expressions ‘SES employee’ and ‘acting SES employee’.

Clause 62 - Transitional - receipts relating to the Education Investment Fund

200.           This transitional clause would provide that any amount received by the Future Fund Board that relates to the EIF would be credited to the Emergency Response Fund Special Account. This clause would operate after the closure of the EIF, which takes effect with the commencement of this Bill. The amounts that may still be received by the Future Fund Board that relate to the EIF could include accrued interest, fee refunds, or withholding tax refunds.

Clause 63 - Review of operation of Act

201.           Subclause 63(1) would require the responsible Ministers to cause a review of the operation of the Act to be undertaken before the tenth anniversary of the commencement of section 63.

202.           This review mechanism is intended to provide the opportunity to consider whether the Act is providing the outcomes envisaged. Subclause 63(2) would provide that the 10-year review must consider the extent to which financial assistance provided under the Act has complemented other financial assistance provided by the Commonwealth, States and Territories in relation to natural disasters.

203.           A review under section 63 must also consider whether the annual limit in section 34 of the Act could be increased. Section 34 would set an annual limit of $150 million that may be debited from the Emergency Response Fund Special Account during a financial year for the purposes arrangements and grants in relation to recovery from a natural disaster.

204.           In considering whether the annual limit could be increased, the review should assess the balance of the Emergency Response Fund, the likelihood of funding debits from the Fund in the future and the objective of providing a sustainable source of funding for natural disaster emergency response and recovery into perpetuity.

205.           Subclause 63(4) would require the responsible Ministers the person or persons who conduct the review to give the responsible Ministers a written report of the review before the tenth anniversary of the commencement of section 63.

206.           Subclause 63(5) would require the responsible Ministers to table, in both Houses of the Parliament, a copy of the terms of reference for the review as well as the report of the review. This must occur within 15 sitting days (for each House of the Parliament) after the tenth anniversary of the commencement of section 63.

207.           Under subclause 63(6), the responsible Ministers must publish on the internet both the terms of reference for the review as well as a report of the review. This must occur as soon as practicable after the tenth anniversary of the commencement of section 63.

Clause 64 - Rules

208.           Clause 64 would provide that the Finance Minister may, by legislative instrument, make rules covering matters required to be prescribed in this Bill, or matters that it would be necessary or convenient to prescribe for the purposes of this Bill.

209.           Enabling the making of rules rather than regulations would accord with the Office of Parliamentary Counsel's Drafting Direction No. 3.8 - Subordinate Legislation. Paragraph 2 of that Drafting Direction states that "OPC's starting point is that subordinate instruments should be made in the form of legislative instruments (as distinct from regulations) unless there is good reason not to do so".

210.           Paragraph 3 of the Drafting Direction states that matters such as compliance and enforcement, the imposition of taxes, setting amounts to be appropriated, and amendments to the text of an Act, should be included in regulations unless there is a strong justification otherwise. The Bill does not intend to enable the rules to provide for any of the types of matters listed.

211.           In addition, clause 64 of the Bill would clarify that the rules made under the Act would be a legislative instrument for the purposes of the Legislation Act. Pursuant to sections 38 and 39 of that Act, all legislative instruments and their explanatory statements must be tabled in both Houses of the Parliament within 6 sitting days of the date of registration of the instrument on the Federal Register of Legislation. Once tabled, the rules would be subject to the same level of Parliamentary scrutiny as regulations (including consideration by the Senate Standing Committee on Regulations and Ordinances), and a motion to disallow the rules may be moved in either House of the Parliament within 15 sitting days of the date the rules are tabled (see section 42 of the Legislation Act).

212.           Subclause 64(2) would be a declaratory clause, included for the avoidance of doubt.

 

 

 

 

 




[1] UN Committee on Economic, Social and Cultural Rights, General Comment No 12 (1999), paragraph 38