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Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018

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2016-2017-2018

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

SENATE

 

 

 

 

 

Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

(Circulated by authority of Senator Hanson)



Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018

 

OUTLINE

 

 

The purpose of the Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018 is to limit the amount the government can borrow to 35% of gross domestic product.

The Bill is needed because there is no limit on government borrowing and the government debt has grown significantly since the debt ceiling was repealed in 2013. It is too easy for a government to see the present day advantages of borrowing when other generations are left to repay the debt, a debt which now stands at over $530 billion. When governments borrow heavily in good economic times the capacity to borrow in bad economic times is reduced. Australians expect their government to support the economy in bad economic times and to spend when others have stopped spending but this capacity is much reduced when the government already has a heavy debt.

The Australian Office of Financial Management’s mission is to arrange debt financing for the government. The passage of Schedule 1 would ensure that the Office cannot issue further stock if this would result in the value of stock and securities on issue to be an amount greater than 35% of Australia’s gross domestic product.

The Bill places boundaries on government spending and requires any government to be careful when borrowing. It acts to encourage effective and efficient spending of taxpayer’s money and recognises that no government can predict the arrival of financial shocks and that prudent and responsible government should balance their budgets so that debt is used as a last resort in bad economic times.

 

 

NOTES ON CLAUSES

 

Clause 1: Short Title

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

 

Clause 2: Commencement

2.       This clause provides for the provisions of the Bill to commence on the day after this Bill receives the Royal Assent.

 

Clause 3: Schedules

3.       This clause provides that each Act specified in a schedule to this Act is amended or repealed as is set out in the applicable items in the schedule, and that any other item in has effect according to its terms.

 

Schedule 1—Amendments

Commonwealth Inscribed Stock Act 1911

4.       This Schedule sets a debt ceiling at 35% of gross domestic product.

 

Item 1 - After section 4

 

5.       This item adds new section 5 to the Commonwealth Inscribed Stock Act 1911 , which provides that new stock must not be issued or sold if the total face value of stocks and securities on issue under that Act or the Loans Securities Act 1919 would at any time exceed 35% of gross domestic product.

 

6.       New subsections 5(2) and 5(3) provide guidance for working out the total face value of stock and securities for the purposes of subsection 5(1), and relevant definitions.

 

Item 2 - Application provision

 

7.       This item applies the changes made by item 1 to stock and securities on issue on or after the commencement of the item. The debt ceiling will apply to stock and securities that were issued before or after the commencement of item 1.

 



 

Statement of Compatibility with Human Rights

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

 

Commonwealth Inscribed Stock Amendment (Restoring the Debt Ceiling) Bill 2018

 

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

 

Overview of the Bill

The purpose of the Commonwealth Inscribed Stock Amendment (Restoring the Debt ceiling) Bill 2018 is to reinstate an upper limit on the amount of debt a government can incur without returning to the Parliament to get approval to increase the debt.

The Bill will establish a maximum total face value of stock and securities on issue under the Commonwealth Inscribed Stock Act 1911 and the Loans Securities Act 1919 of 35% of gross domestic product .

 

Human rights implications

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

 

Conclusion

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

 

Senator Hanson