Title Future Drought Fund Bill 2019
Database Explanatory Memoranda
Date 31-07-2019 10:33 AM
Source House of Reps
System Id legislation/ems/r6371_ems_6264e6b5-9c45-47a8-9c43-a427efa67fe4


Future Drought Fund Bill 2019

 

 

 

2019

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

FUTURE DROUGHT FUND BILL 2019

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Finance,
Senator the Hon Mathias Cormann)

 

 

 

 

 


Table of abbreviations and common terms

 

Abbreviation or

common term

Description

Acts Interpretation Act

means the Acts Interpretation Act 1901

Agency

means the Future Fund Management Agency established by section 74 of the Future Fund Act 2006

Agriculture Department

means the Department administered by the Agriculture Minister

Agriculture Future Drought Resilience Special Account

means the Agriculture Future Drought Resilience Special Account established by clause 33

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

BAF

means the Building Australia Fund established by section 12 of the NBF Act

BAF Special Account

means the Building Australia Fund Special Account established by section 13 of the NBF Act

Biodiversity Convention

means the Convention on Biological Diversity, done at Rio de Janeiro on 5 June 1992, as amended and in force for Australia from time to time

Climate Change Convention

means the United Nations Framework Convention on Climate Change, done at New York on 9 May 1992, as amended and in force for Australia from time to time

COAG Reform Fund

means the COAG Reform Fund established by section 5 of the COAG reform Fund Act 2008

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

Consultative Committee

means the Future Drought Fund Consultative Committee established by clause 36B of this Bill

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

Desertification Convention

means the United Nations Convention to Combat Desertification in those Countries Experiencing Serious Drought and/or Desertification, Particularly in Africa, done at Paris on 17 June 1994, as amended and in force for Australia from time to time.

Drought Minister

means:

(a)    if there is a Minister whose title includes the word “Drought” – that Minister; or

(b)   otherwise – the Agriculture Minister

EIF

means the Education Investment Fund established by
section 131 of the NBF Act

Finance Minister

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

Future Drought Fund

means the Future Drought Fund established by clause 10 of this Bill

Future Drought Fund Special Account

means the Future Drought Fund Special Account established by clause 13 of this Bill

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

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

Productivity Commission

means the Productivity Commission established by section 5 of the Productivity Commission Act 1998

Productivity Minister

means the Minister administering the Productivity Commission Act 1998

Ramsar Convention

means the Convention on Wetlands of International Importance especially as Waterfowl Habitat, done at Ramsar, Iran, on 2 February 1971, as amended and in force for Australia from time to time.

Remuneration Tribunal

means the Remuneration Tribunal established by section 4 of the Remuneration Tribunal Act 1973

RIC Act

means the Regional Investment Corporation Act 2018

RIC Board

means the Board of the Regional Investment Corporation established under the RIC Act

Responsible Ministers

means the following:

(a)       the Treasurer; and

(b)       the Finance Minister


FUTURE DROUGHT FUND BILL 2019

 

OUTLINE

 

The Future Drought Fund Bill 2019 (the Bill) gives effect to the Government’s decision to establish the Future Drought Fund (the Fund) to fund initiatives that enhance future drought resilience, preparedness and response across Australia.

 

The Fund consists of the Future Drought Fund Special Account and the investments of the Future Drought Fund. It is a dedicated investment vehicle to provide a secure revenue stream to be used for drought resilience, preparedness and response.

 

Uncommitted funds currently in the BAF, approximately $3.9 billion, would be transferred to the Fund on establishment. The last commitment from the BAF was made in the 2012-13 Budget. As announced in the 2019‑20 Budget, the Government has separately committed more than $100 billion over the next 10 years (including $47 billion over the forward estimates) to transport infrastructure projects across Australia. This means the uncommitted funds currently in the BAF can be used to fund initiatives that enhance future drought resilience, preparedness and response across Australia. By 2028-29, the Government expects that the Fund would grow to approximately $5 billion through reinvestment of net earnings (less disbursements). The Fund will provide disbursements from 1 July 2020.

 

The Bill also establishes the Agriculture Future Drought Resilience Special Account. Each financial year the Finance Minister must direct in writing that $100 million be debited from the Fund and credited to the Agriculture Future Drought Resilience Special Account for the purpose of making grants or payments under an arrangement relating to drought resilience.

 

The Drought Minister must have regard to advice from the RIC Board prior to making arrangements or grants and debiting amounts from the Agriculture Future Drought Resilience Special Account. In providing such advice, the RIC Board must comply with the Drought Resilience Funding Plan - which is a high-level plan to ensure there is a coherent and consistent approach to making arrangements or grants. The rolling four-year plan will be a legislative instrument and can be updated to reflect changing priorities.

 

The Bill also establishes the Future Drought Fund Consultative Committee and requires the Drought Minister to seek and have regard to advice from the Consultative Committee before determining a Drought Resilience Funding Plan. Before making an arrangement or grant, the Drought Minister must request advice from the Consultative Committee about whether the proposed design of the program of arrangements or grants is consistent with the Drought Resilience Funding Plan. The Consultative Committee will comprise of a Chair and four other members, all of whom will be appointed on a part-time basis.

 

The Future Fund Board will be responsible for deciding how to invest the Fund to enhance the Commonwealth’s ability to make arrangements with, and grants to, persons or bodies in relation to drought resilience. The Future Fund Board is an experienced, specialised and trusted sovereign investor currently responsible for investing around $188 billion across six sovereign wealth funds with different purposes and investment mandates (the funds are the EIF, the Future Fund, the DCAF, the MRFF, the BAF 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 sovereign wealth funds managed by the Future Fund Board, the Future Drought Fund will benefit from sovereign immunity from taxation in Australia and foreign jurisdictions on the bulk of investments.

 

Expenses

 

Expenses associated with investment and administration of the Fundincurred by the Future Fund Board will be met from the Fund.

 

Reporting

 

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

 

The Bill provides the Finance Minister with the power to require the Board to provide additional information about one or more specified matters relating to the performance of the Future Fund 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 Drought Minister will be required to publish up-to-date information about grants and arrangements on the Agriculture Department’s website.

 

Financial Impact Statement

 

The initial credit of the balance of the funds from the BAF to the Future Drought Fund will not have a direct impact on underlying cash and fiscal balances, as these represent the transfer of financial assets between funds within the CRF.

 

Positive interest earnings of the Future Drought 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 initiatives to enhance future drought resilience will have a negative impact on the underlying cash and fiscal balance.

 

Statement of Compatibility with Human Rights

 

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 right:

 

·                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

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. States have an obligation to ensure the availability and accessibility of the resources necessary for the progressive realisation of this right.

The United Nations Committee on Economic, Social and Cultural Rights (the Committee) has stated that the core content of the right to adequate food implies both the availability and (economic and physical) accessibility of food.[1] The Bill seeks to promote this right by providing funding for drought resilience projects, including water infrastructure. These activities are intended to ensure that the impact of drought on the livelihoods of farmers and people in drought-affected communities is lessened, as well as reducing the impact of drought on the ability of Australian farms to produce food, thereby improving food security.

This right also includes the right to water.[2] The Committee has also noted the importance of ensuring sustainable access to water resources for agriculture to realise the right to adequate food.[3] The programs and projects funded under this Bill will help to ensure that farmers have sustainable access to water and water management systems, including through investment in emerging technologies. The drought resilience measures funded under this Bill will increase the availability of sufficient water for present and future generations.

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.


FUTURE DROUGHT 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 Act, as set out in the table. Item 1 in the table provides that the whole of the 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 – Object

4.                  This clause would set out the object of the Act, which is to enhance the public good by building drought resilience. This would include building the drought resilience of farms and communities. Drought resilience is defined in clause 5.

5.                  An example of where the public good may be enhanced by building drought resilience would be funding provided to a farmer to undertake activities that reduce soil erosion and sediment run-off from the property. This would conserve soils, increase soil moisture and mitigate the effects of flooding, which in turn would increase drought resilience and enhance farm productivity. It would also contribute to the public good by arresting and reversing land degradation, improving animal welfare and improving biodiversity outcomes.

6.                  The public good may also be enhanced by investing in research and development that relates to drought resilience. For example, research into improved availability of data and information on drought-related risks to agriculture may enable the insurance sector to target more affordable and relevant insurance products to meet specific needs within the farming sector.

7.                  Furthermore, effective communication of research findings to the farming sector will accelerate the adoption of new knowledge and technologies that build drought resilience through more efficient and effective farming practices and more sustainable management of natural resources.

8.                  The public good would not be enhanced by measures that solely benefit individual farm entities.

Clause 4 – Simplified outline of this Act

9.                  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 5 – Definitions  

10.              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.

11.              ‘Drought’ would not be substantively defined in this Bill, so would be given its ordinary meaning.

12.              The definition of ‘Drought Minister’ refers to a Minister whose title includes the word “Drought”. 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 word “Drought”, the relevant responsibilities under the Future Drought Fund legislation will default to the Agriculture Minister who is defined as the Minister who administers the Primary Industries Research and Development Act 1989.

 Clause 6 – Crown to be bound

13.              Clause 6 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 7 – Extension to external Territories

14.              Clause 7 would provide that the Act extends to every external Territory.

Clause 8 – Extra-territorial operation

15.              Clause 8 would provide for the geographical reach of the Act to apply outside of Australia, to allow for recipients of grants or payments from the Future Drought Fund to collaborate with international partners.

16.              The definition of ‘drought’ in clause 5 would confine that definition to ‘drought 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 drought resilience in Australia.

Part 2 – Future Drought Fund

Division 1 – Introduction

Clause 9 – Simplified outline of this Part

17.              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 Future Drought Fund and the Future Drought Fund Special Account

Clause 10 – Establishment of the Future Drought Fund

18.              Clause 10 would establish a financial asset fund – the Future Drought Fund – consisting of amounts credited to the Future Drought Fund Special Account and investments of the Future Drought Fund.

Clause 11 – Transfer of balance of the Building Australia Fund Special Account

19.              The Future Drought Fund (Consequential Amendments) Bill 2019 would operate to close the BAF Special Account from the date of commencement of the Future Drought Fund Act 2019. Clause 11 of the Future Drought Fund Bill 2019 would provide that, as soon as practicable after the commencement of the provision, an amount equal to the balance of the BAF Special Account immediately before commencement of the provision (that is, immediately before that special account is closed), is to be credited to the Future Drought Fund Special Account.

20.              In effect, this would transfer the balance of the BAF Special Account immediately prior to its closure, to the Future Drought Fund Special Account.

21.              The note at the end of this clause would alert readers to the fact that the balance of the BAF Special Account does not include the value of an investment of the BAF (which is to be transferred under Clause 12).

Clause 12 – Transfer of investments of the Building Australia Fund

22.              Clause 12 deals with the transfer of investments of the BAF to the Future Drought Fund.

23.              Under subclause 12(1), the section would apply to financial assets, which immediately prior to its commencement, were investments of the BAF. Subclause 12(2) provides for those assets to become investments of the Future Drought Fund immediately after commencement of the section.

Clause 13 – Establishment of the Future Drought Fund Special Account

24.              Clause 13 would establish the Future Drought Fund Special Account, which would be a special account for the purposes of the PGPA Act.

25.              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 Future Drought Fund Special Account would be quarantined from the rest of the CRF and could only be debited from the Future Drought Fund for the purposes set out in the Bill.

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

Division 3 – Credits of amounts to the Future Drought Fund Special Account

Clause 14 – Credits of amounts

27.              This clause would establish a mechanism for specified amounts – other than the initial balance from the BAF Special Account – to be credited to the Future Drought Fund Special Account. A specified amount would also be able to be credited in specified instalments.

28.              Amounts would be credited by a written determination of the responsible Ministers or their delegates (refer to clauses 61 and 62 for delegation powers of the Finance Minister and the Treasurer).

29.              Note 1 immediately following subclause 14(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.

30.              Note 2 would assist readers by directing them to other sections of the Act requiring amounts to be credited to the Future Drought Fund Special Account.

31.              Subclause 14(2) would provide that a determination to credit a specified amount to the Future Drought 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.

32.              A determination under subclause 14(1) is expected to be made only in exceptional circumstances following the initial credit under clause 11. Amounts credited under clause 14 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 Future Drought Fund Special Account, the Future Fund Board would be able to invest the amount in any financial assets under clause 39 of the Bill.

33.              Providing for a determination under subclause 14(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 and section 15 of the MRFF Act).

Division 4 – Debits of amounts from the Future Drought Fund

Clause 15 – Purpose of the Future Drought Fund Special Account – main purpose

34.              Clause 15 would provide that the main purpose of the Future Drought Fund Special Account would be to transfer amounts to the Agriculture Future Drought Resilience Special Account (in accordance with the mechanism for these transfers set out in clause 34) for the purposes of:

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

·         transferring amounts to the COAG Reform Fund in accordance with section 36AA for the purposes of making grants to the States and Territories under section 21.

35.              Clause 21 would provide the matters in relation to which a grant may be made or an arrangement entered into under this Bill.

Clause 16 – Purposes of the Future Drought Fund Special Account – purposes related exclusively to the investments etc. of the Future Drought Fund

36.              Clause 16 relates to the payment of various expenses that may be incurred by the Future Fund Board, which relate exclusively to the investments of the Future Drought Fund, and which do not relate to the main purpose of the Fund. It sets out the additional purposes for which the Future Drought Fund may be debited.

37.              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 – Purposes of the Future Drought Fund Special Account – purposes not related exclusively to the Future Drought Fund

38.              Clause 17 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 MRFF Act, the NBF Act, the DCAF Act, or the ATSILSFF Act. 

39.              Clause 17 would set out the range of additional purposes for which the Future Drought Fund Special Account may be debited in respect of costs that are common to the funds for which the Future Fund Board has responsibility.

40.              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 18 – Future Fund Board must ensure that the balance of the Future Drought Fund Special Account is sufficient to cover authorised debits etc.

41.              Clause 18 would require the Future Fund Board to take all reasonable steps to ensure that the balance of the Future Drought Fund Special Account is sufficient to cover amounts to be debited from the Future Drought Fund Special Account.

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

Clause 19 – Transfers from the Future Drought Fund to the Future Fund

43.              Clause 19 would allow for transfers from the Future Drought Fund Special Account to the Future Fund Special Account.

44.              This clause would allow for amounts to be transferred between the Future Drought 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 Future Drought Fund that have been debited from the Future Fund Special Account.

45.              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.

46.              Subclause 19(3) would be included to assist readers, as a direction under subclause 19(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 drought resilience

Division 1 – Introduction

Clause 20 – Simplified outline of this Part

47.              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 21 – Arrangements and grants

48.              This clause would provide a broad legislative spending power that is to be read subject to the constitutional limits in clause 26.

49.              Subclause 21(1) would allow the Drought Minister to make arrangements with or grants of financial assistance to a person or body for certain matters.  

50.              ‘Drought Minister’ would be defined in clause 5 as a Minister whose title includes the word “Drought”, or if no such Minister exists – the Agriculture Minister.

51.              ‘[A]rrangement’ would be defined in clause 5 to include a contract, agreement or deed. It would exclude a securities lending arrangement or securities lending arrangements (refer to clause 51).

52.              Subclause 21(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. These types of arrangements would be excluded because this Bill is not intended to provide these types of arrangements and because there are existing mechanisms through which the Government can enter into these types of arrangements, for example, the Regional Investment Corporation offers loans to farm business owners affected by drought, or who want to prepare for drought.

53.              ‘[P]erson’ would be defined in clause 5 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.

54.              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.

55.              The matters for which the Drought Minister may make arrangements or grants would be:

·         carrying out a project directed towards achieving drought resilience;

·         carrying out research directed towards achieving drought resilience;

·         provision of advice directed towards achieving drought resilience;

·         provision of a service directed towards achieving drought resilience; or

·         adoption of technology directed towards achieving drought resilience.

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

57.              ‘[D]rought resilience’ would be defined in clause 5 to mean:

·         resilience to drought;

·         preparedness for drought;

·         responsiveness to drought;

·         management of exposure to drought;

·         adaptation to the impact of drought;

·         recovery from drought; or

·         long-term drought-related sustainability of farms and communities that have been, are being, or are at significant risk of being, affected by drought.

58.              The words ‘at significant risk’ in the definition of drought resilience would require a higher threshold test than a farm or community that merely might be or could be affected by drought at some point in the future. The risk of being affected by drought would need to be ‘significant’ to attract this element of the definition of drought resilience.

59.              The types of things that could be funded under subclause 21(1) may include:

·         the creation or development of water infrastructure;

·         financial and business planning for primary producers to improve ability to manage through lower income periods caused by drought;

·         restoring native vegetation for soil or water regeneration;

·         pest control;

·         fire mitigation;

·         training and information for primary producers on sustainable stock management during drought;

·         training and information on local climate variability and advice on climate risk applied to specific locations;

·         blue-sky research in drought resilience; or

·         improving data on fodder and impacts from drought, including market trends.

60.              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 Drought Minister to decide whether or not to make a particular arrangement or grant in relation to drought resilience. This list merely provides examples of possible projects.

61.              Subclauses 21(2) to (4) would clarify that, without limiting anything in subclause 21(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.

62.              The note at the end of subclause 21(1) would assist readers by directing them to section 25 (which relates to compliance with the Drought Resilience Funding Plan), section 26 (which places constitutional limits on the exercise of the spending powers provided for by this clause) and section 28 (which requires the Drought Minister to request and take into account advice from the RIC Board in relation to making arrangements or grants under this clause).

Clause 22 – Terms and conditions of grants

63.              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 Drought Minister or delegate would enter 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.

64.              Subclause 22(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.

65.              The note at the end of subclause 22(2) would assist readers by directing them to section 25 (which relates to compliance with the Drought Resilience Funding Plan), section 26 (which places constitutional limits on the exercise of the spending powers provided in this clause), and section 28 (which requires the Drought Minister to request and take into account advice from the RIC Board in relation to making arrangements or grants under this clause).

66.              The note at the end of subclause 22(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 23 –Drought Minister has powers etc. of the Commonwealth

67.              This clause would specify that the Drought 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 21. This would include, but is not limited to:

·         paying amounts payable by the Commonwealth under a clause 21 arrangement;

·         receiving amounts payable to the Commonwealth under a clause 21 arrangement;

·         paying clause 21 grants to grant recipients;

·         receiving amounts payable to the Commonwealth by way of the repayment of the whole or a part of a section 21 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 clause 21.

Clause 24 – Conferral of powers on the Drought Minister

68.              This clause would provide a legislative basis for the Drought Minister to exercise a power conferred on him or her by an arrangement under clause 21 or an agreement under clause 22 in relation to a grant.

Clause 25 – Compliance with Drought Resilience Funding Plan

69.              In order to ensure a coherent and consistent approach in making arrangements or grants under clause 21 or agreements under clause 22, this clause would require the Drought Minister to comply with a Drought Resilience Funding Plan in force under clause 31 when exercising a power under either of those clauses.

Clause 26 – Constitutional limits

70.              This clause would set out the Constitutional powers under which the Act would operate. It would provide that the Drought Minister may only exercise a power under sections 21 and 22 where one of the enumerated Constitutional powers is enlivened. It would act as a limitation on the broad spending power provided under sections 21 and 22.

71.              Clause 26 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 provided for by clauses 21 and 22.

72.              The other clauses of this Bill (other than clauses 21 and 22) would be incidental in character. That is, they would be incidental to the purpose of providing funding in relation to drought resilience, in that they establish the mechanism for investment of funds in order to ensure there are sufficient amounts available to make relevant payments under the powers in clause 21.

73.              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.

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

·         activities implementing Australia’s international obligations under the Desertification Convention, which may include assisting communities at risk of drought by funding measures to assist in drought preparedness;

·         activities implementing Australia’s international obligations under the Climate Change Convention, which may include undertaking climate‑change mitigation projects;

·         activities implementing Australia’s obligations under the Ramsar Convention, which may include funding activities that improve the resilience of Ramsar-listed and other wetlands to drought;

·         activities implementing Australia’s obligations under the Biodiversity Convention, which may include funding the recovery of threatened species or ecological communities, or the restoration of degraded ecosystems;

·         activities directed towards matters of international concern such as, for example, drought resilience;

·         grants of financial assistance to a State or Territory to incentivise natural resource management activities;

·         grants of financial assistance to a constitutional corporation for the purposes of carrying out the corporation’s activities including for example, financial planning for primary producers to improve ability to manage through lower income periods caused by drought;

·         activities within a Territory to restore native vegetation for soil/water regeneration;

·         activities at Commonwealth places to restore native vegetation for soil/water regeneration;

·         funding for primary producers 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 drought mitigation activities;

·         funding for grants to use the postal, telegraphic telephonic or like services to improve access to information on drought resilience and mitigation measures to provide better information to primary producers;

·         funding for the research and development of new patentable invention which would improve drought resilience;

·         grants of financial assistance for meteorological observations to enhance climate observation and forecasting data to provide better information to primary producers;

·         grants of financial assistance to assist insurers and insurance customers to fund activities that improve weather data and assessments to advance the development and adoption of better targeted and lower the cost of insurance products;

·         funding for activities that are responsive to national emergencies or crises and that can only be carried out by the Commonwealth including, for example, measures to address drought emergency and crises; 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 27 – Executive power of the Commonwealth

75.              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 27A - Publication of information relating to arrangements and grants

76.              This clause would require the Drought Minister to publish detailed and up‑to‑date information about grants and arrangements on the Agriculture 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.

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 27A(2) and (3) would require the information to be published as soon as practicable.

Division 3 – Advice

79.              This Division would relate to advice to the Drought Minister about the exercise of powers under clauses 21 and 22, that is, in relation to making arrangements or grants of financial assistance in relation to drought resilience.

Clause 28 –Drought Minister must request advice from the Regional Investment Corporation Board

80.              Subclause 28(1) would require the Drought Minister to request advice from the RIC Board regarding whether to make an arrangement or grant under clause 21, or whether to enter into an agreement under clause 22, prior to making the arrangement or grant or entering the agreement. Subclause 28(2) would require the RIC Board to provide the requested advice.

81.              Subclause 28(3) would require the Drought Minister, in making a decision about making an arrangement or grant under clause 21, or entering an agreement under clause 22, to have regard to any advice given to him or her by the RIC Board under this clause. This clause does not preclude the Drought Minister from seeking advice from other sources in addition to the RIC Board. Subclause 28(4) would clarify that that the Drought Minister may have regard to matters other than the advice of the RIC Board.

Clause 29 – Compliance with Drought Resilience Funding Plan

82.              In order to ensure a coherent and consistent approach in making arrangements or grants provided for by clause 21 or agreements provided for by clause 22, this clause would require the RIC Board to comply with a Drought Resilience Funding Plan in force under clause 31 when giving advice to the Drought Minister under section 28.

Clause 30 – Disclosure of interests

83.              This clause sets out the disclosure requirements where a member of the RIC Board has a material personal interest that relates to the advisory affairs of the RIC Board. ‘[A]dvisory affairs’ of the RIC Board would be defined in clause 5 to mean the affairs of the Regional Investment Corporation Board that relate to its function of giving advice to the Drought Minister under section 28.

84.              The scope set out in subclause 30(1) would mirror the disclosure threshold for Commonwealth officials under section 29 of the PGPA Act, that is, ‘material personal interest that relates to the affairs of’ the body. ‘Material personal interest’ is also the threshold that applies to members of the EIF and MRFF Advisory Boards.

85.              As members of the RIC Board would be advising on the disbursement of public resources, it would be vital for material personal interests to be raised as soon as practicable and dealt with effectively. Failure to do so could undermine confidence and trust in the advisory role of the RIC Board under this Bill. The public and the Government rightfully expects that decisions about how public resources are used will be made in the public interest, and not for other reasons, such as personal gain.

86.              The duty would not be absolute – it would only apply to material personal interests. What constitutes a material personal interest relating to the advisory affairs of the RIC Board will depend on the particular facts, but would not be confined to financial or similar interests. For example, a material personal interest may involve a direct or indirect advantage or benefit to the extent that it has the capacity to influence how the member would assess a particular proposal.

87.              The phrase ‘relating to the advisory affairs of the Regional Investment Corporation Board’ should be read broadly.

88.              Subclause 30(2) would require a member with such an interest to, as soon as practicable after becoming aware of the interest, disclose it:

·         at a meeting of the RIC Board – this would ensure that the other members of the RIC Board are aware of the relevant interest when preparing advice for the Drought Minister; and

·         to the Drought Minister – this would ensure that when making a decision in regard to a matter on which the RIC Board has provided the advice, the Minister would be aware of the relevant interest.

89.              Subclause 30(3) would require certain details of the interest to be included in a disclosure under subclause 30(2).

90.              Subclause 30(4) would require a disclosure at a meeting of the RIC Board to be recorded in the minutes of the meeting.

91.              Subclause 30(5) would require a member who has disclosed a material personal interest under subclause 30(2) to not be present when the matter to which the interest relates is being discussed and to not vote on that matter. This would prevent that member’s interest from unduly influencing the discussions, decisions or advice of the RIC Board.

92.              Subclause 30(6) would allow the Drought Minister to terminate the appointment of a member of the RIC Board if that member, without reasonable excuse, fails to comply with the disclosure requirements in subclause 30(2) or the requirements in relation to a meeting at which the relevant matter is considered in subclause 30(5). This would not limit the termination provisions contained in section 26 of the RIC Act.

93.              Subclause 30(8) would provide that the disclosure requirements and the consequences of disclosure in this clause override subsection 29(1) of the PGPA Act, or any rules made under subsection 29(2) of that Act. The effect of this override would be that the Minister could not allow members with a conflict to participate in a meeting where a matter in which they have a material personal interest is being considered, despite that interest (refer section 15 of the PGPA Rule).

Division 4 – Drought Resilience Funding Plan

Clause 31 – Drought Resilience Funding Plan

94.              Clause 31 would require the Drought Minister to determine a plan, to be known as the Drought Resilience Funding Plan, that sets out a coherent and consistent approach for making arrangements or grants in relation to drought resilience or entering into agreements in relation to such grants. The plan would be high level and could not require arrangements to be made with, or grants provided to, a particular person or project.

95.              The Drought Minister would be required to take all reasonable steps to ensure that the first Drought Resilience Funding Plan comes into force before 1 July 2020. This would provide time for extensive consultation with stakeholders, whilst still ensuring the plan is in place before payments from the Future Drought Fund commence.

96.              The plan would be in place for up to four years, to provide a longer‑term focus for drought resilience funding. The plan would be repealed after four years, unless a replacement plan comes into force at an earlier time. Future plans would be required to be in force as soon as the preceding plan is repealed to ensure there is always a plan in force.

97.              In developing the plan, the Drought Minister would have regard to the National Drought Agreement and any successive agreements, as well as any related Australian Government drought policies and strategies.

98.              The plan would be a legislative instrument for the purposes of the Legislation Act. The instrument would be disallowable under section 42 of that Act.

99.              In addition to the registration and publication requirements contained in the Legislation Act, the plan would be required to be published on the Agriculture Department’s website, making it more easily accessible to the public.

100.          Subclause 31(9) would provide that the power to make an instrument under section 31 does not include the power to repeal, rescind, revoke, amend, or vary any such instrument as provided by subsection 33(3) of the Acts Interpretation Act. However, subclause 31(5) would enable a new Drought Resilience Funding Plan to revoke an existing plan at the time it comes into force, which would allow the amendment or revocation of the plan by replacing it with a new plan with any desired amendments. This would allow the Drought Minister to provide an updated plan outside of the four-year cycle, for example, where there have been changes to the policy context.

Clause 32 – Consultation before determining a Drought Resilience Funding Plan

101.          This clause would provide the consultation requirements for the Drought Resilience Funding Plan. It would require the Drought Minister, before determining the plan, to publish a draft plan and the final report of the Productivity Commission review of the previous plan (if any) on the Agriculture Department’s website and invite submissions on the draft plan for at least 42 days. The Minister would be required to consider any submissions received before determining the plan.

102.          This clause would not limit the consultation provisions in relation to legislative instruments contained in section 17 of the Legislation Act.

Clause 32A – Productivity Commission review of effectiveness of Drought Resilience Funding Plan

103.          This clause would require the Productivity Minister to initiate an inquiry, to be conducted by the Productivity Commission, into the effectiveness of the Drought Resilience Funding Plan. The inquiry, which must be initiated within three years of a Drought Resilience Funding Plan coming into force, would have regard to economic, social and environmental outcomes.

104.          Subclause 32A(2) would require the report of the inquiry to be submitted by the Productivity Commission at least five months before the Drought Resilience Funding Plan expires. The Productivity Commission would be required to make recommendations on the matter considered by the inquiry.

105.          The note immediately below subclause 32A(2) would bring the reader’s attention to a requirement, under the Productivity Commission Act 1998, that the report be tabled in each House of the Parliament.

106.          Subclause 32A(3) would state that inquiries under this clause would be matters relating to industry, industry development and productivity for the purposes of the Productivity Commission’s functions under its enabling Act (the Productivity Commission Act 1998).

Division 5 – Agriculture Future Drought Resilience Special Account

Clause 33 – Agriculture Future Drought Resilience Special Account

107.          Clause 33 would establish the Agriculture Future Drought Resilience Special Account, which would be a special account for the purposes of the PGPA Act. The Secretary of the Agriculture Department would be responsible for the special account. ‘Agriculture Department’ would be defined in clause 5 to mean the Department administered by the Agriculture Minister.

108.          The note immediately following subclause 33(2) would assist the reader by clarifying that amounts could be credited to the Agriculture Future Drought Resilience Special Account by an Appropriation Act.

109.          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 Agriculture Future Drought Resilience Special Account would be quarantined from the rest of the CRF and could only be debited from the Agriculture Future Drought Resilience Special Account for the purposes set out in the Bill.

Clause 34 – Transfers to the Agriculture Future Drought Resilience Special Account

110.          This clause would provide the mechanism by which amounts can be transferred from the Future Drought Fund Special Account to the Agriculture Future Drought Resilience Special Account, where it can then be used to make grants or payments under arrangements provided for by clause 21. This clause would enable transfers from 1 July 2020.

111.          Subclause 34(2) would require the Finance Minister to direct that $100 million be debited from the Future Drought Fund Special Account and credited to the Agriculture Future Drought Resilience Special Account on a specified day. A direction could also provide that the $100 million is to be transferred in specified instalments on specified days in the financial year. This would enable the Finance Minister to balance the objective of growing the Future Drought Fund to around $5 billion by 2028-29, with the requirement to ensure the Agriculture Future Drought Resilience Special Account has enough funds to meet funding obligations under the arrangements, grants or agreements entered or made as provided for by clauses 21 and 22.

112.          It is expected that the Finance Minister would consult with the Drought Minister before making a determination as provided for by subclause 34(2). This would ensure that, in making a determination, the Finance Minister could accommodate any agreed payment schedules as provided for by clause 21 arrangements or grants or clause 22 agreements.

113.          Such a direction must be in writing. The effect of subclause 34(1) would be to require at least one direction to be made each financial year from the financial year beginning 1 July 2020.

114.          Subclause 34(3) would be included to assist readers, as a direction under proposed subsection 34(2) 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).

115.          Subclause 34(4) would require the Finance Minister to provide a copy of a direction made under proposed subsection 34(2) to the Treasurer and the Drought Minister.

Clause 35 – Other credits to the Agriculture Future Drought Resilience Special Account

116.          This clause would require amounts to be credited to the Agriculture Future Drought Resilience Special Account that are equal to amounts paid to the Commonwealth:

·         under an arrangement made under proposed section 21;

·         by way of damages or compensation for breach of an arrangement under proposed section 21; and

·         by way of the repayment of the whole or part of a grant made under proposed section 21.

117.          This would ensure that any amounts payable to the Commonwealth arising out of an arrangement or grant made under proposed section 21 would be credited to the Agriculture Future Drought Resilience Special Account to be used for the purposes of that special account and would not return to the Future Drought Fund Special Account.

Clause 36 – Purposes of the Agriculture Future Drought Resilience Special Account

118.          This clause would set out the purposes of the Agriculture Future Drought Resilience Special Account, which would be to:

·         pay amounts payable by the Commonwealth under an arrangement made under proposed section 21 and to make grants under proposed section 21; and

·         transfer amounts to the COAG Reform Fund for the purposes of making grants to the States and Territories under proposed section 21.

119.          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.

Division 5A – Channelling State/Territory grants through the COAG Reform Fund

Clause 36AA - Channelling State/Territory grants through the COAG Reform Fund

120.          This clause would enable the channelling of grants of financial assistance, as provided for by clause 21 of this Bill, to a State or Territory through the COAG Reform Fund.

121.          Subclause 36AA(1) would specify that in order to make a grant of financial assistance to a State or Territory, the Drought Minister must, by writing, direct that the amount of the grant be debited from the Agriculture Future Drought Resilience Special Account and credited to the COAG Reform Fund on a specified day.

122.          Subclause 36AA(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.

123.          Subclause 36AA(3) would clarify that one document can be used to make two or more directions provided for by subclause 36AA(1).

124.          Subclause 36AA(4) would clarify that a direction under proposed subsection (1) is not a legislative instrument.

125.          Subclause 36AA(5) would require the Drought Minister to give a copy of a direction provided for by subclause 36AA(1) to the Treasurer and the Finance Minister.

Clause 36AB – Debits from the COAG Reform Fund

126.          Clause 36AB would require the Treasurer to ensure that the COAG Reform Fund is debited for the purposes of making a grant as soon as practicable after the amount has been credited under paragraph (b) of proposed subsection 36AA(1).

Division 6 – Future Drought Fund Consultative Committee

Clause 36A – Definitions

127.          This clause would provide definitions to support the operation of provisions in Division 6 of Part 3 of this Bill.

Clause 36B – Future Drought Fund Consultative Committee

128.          This clause would establish the Consultative Committee.

Clause 36C – Functions of the Committee

129.          This clause would provide that the Consultative Committee would have the functions given to it by Subdivision C of Division 6 of Part 3 of the Act.

Clause 36D –Drought Minister must request advice from Committee about draft Drought Resilience Funding Plan

130.          Subclause 36D(1) would require the Drought Minister to request advice from the Consultative Committee about a draft Drought Resilience Funding Plan before determining a Drought Resilience Funding Plan. The subclause would also require the Drought Minister to have regard to any advice received from the Consultative Committee about the draft plan before determining a Drought Resilience Funding Plan.

131.          The requirements under subclause 36D(1) are in addition to the Drought Minister’s consultation obligations under subclause 32(1) of the Bill.

132.          Subclause 36D(2) would require the Consultative Committee to comply with any request from the Drought Minister for advice about the draft Drought Resilience Funding Plan.

133.          Subclause 36D(3) would provide that the clause does not limit section 17 of the Legislation Act, which requires rule‑makers to be satisfied that appropriate consultation has taken place before making a legislative instrument.

Clause 36E –Drought Minister must request advice from the Committee on design relating to arrangements and grants

134.          This clause would require the Drought Minister to request advice from the Consultative Committee before first making an arrangement or grant under clause 21 of the Bill.

135.          The advice would relate specifically to whether the proposed design of the program of arrangements or grants is consistent with the Drought Resilience Funding Plan.

136.          Subclause 36E(2) would require the Consultative Committee to comply with any requests made by the Drought Minister under subclause 36E(1).

 

 

Clause 36F – Powers of the Committee

137.          This clause would provide the Consultative Committee with the power to do all things necessary or convenient to be done for, or in connection with, the performance of its functions.

Clause 36G – Membership of the Committee

138.          This clause would provide that the Consultative Committee would consist of a Chair and 4 other members. For clarity, the Chair would be considered a member of the Consultative Committee.

Clause 36H – Appointment of members of the Committee

139.          Subclause 36H(1) would require members of the Consultative Committee to be appointed by the Drought Minister, by way of written instrument. The note immediately following subclause 36H(1) would assist readers by specifying that members may be reappointed, subject to subsection 36J(2).

140.          Members would hold their position on a part-time basis (subclause 36H(2)) and must not be appointed unless they have expertise or experience in at least 2 of the areas listed in subclause 36H(3), including drought resilience measures, the agriculture industry, rural and regional development and/or economics.

141.          Subclause 36H(4) would require the Drought Minister to ensure (as far as practicable) a balance of gender, knowledge and skills among members of the Consultative Committee.

Clause 36J – Period of appointment for members of the Committee

142.          Subclause 36J(1) would limit the period of appointment of any member to a maximum of 4 years. The period would be specified in the written instrument of appointment.

143.          Subclause 36J(2) would impose an 8-year limit on the period when a person could hold office as a member of the Consultative Committee.

Clause 36K – Acting Appointments

144.          Clause 36K deals with the appointment of acting Consultative Committee members.

145.          Subclause 36K(1) would enable the Drought Minister to appoint a member of the Consultative Committee to act as the Chair during a vacancy in the office of the Chair, as well as any periods when the Chair is absent (from their duty or Australia), or otherwise unable to perform their duties.

146.          Subclause 36K(2) would enable the Drought Minister to appoint a person to act as a member of the Consultative Committee (other than the Chair) during a vacancy in the office of a member (other than the Chair), as well as any periods when the appointed member is absent (from their duty or Australia) or unable to perform their duties.

147.          Subclause 36K(3) would provide that a person must be eligible for appointment as a member of the Consultative Committee in order to be eligible to be appointed to act as a member of the Committee.

 

 

Clause 36M – Remuneration

148.          Under subclause 36M(1), members of the Consultative Committee would be paid remuneration as determined by the Remuneration Tribunal. However, if there is no determination in operation, members would be paid the remuneration prescribed by an instrument under subsection 36M(4).

149.          Subclause 36M(2) provides that members would be paid the allowances prescribed (if any) by an instrument under subsection 36M(4).

150.          Subclause 36M(3) clarifies that clause 36M operates subject to the Remuneration Tribunal Act 1973, which provides for the Remuneration Tribunal to conduct inquiries and make determinations on the remuneration of certain officer holders. That is, if the remuneration prescribed under this Bill conflicts with a determination by the Remuneration Tribunal, the latter determination applies.  

151.          Subclause 36M(4) empowers the Drought Minister to prescribe remuneration and allowances for members of the Future Drought Fund Consultative Committee, by way of legislative instrument.

Clause 36N – Disclosure of interests to the Drought Minister

152.          This clause would require members of the Consultative Committee to notify the Drought Minister in writing of all of their interests that conflict or could conflict with the proper performance of their functions as a member.  

Clause 36P – Outside work

153.          This clause would prohibit members from engaging in any paid work that conflicts with, or may conflict with, the proper performance of their duties as a member of the Consultative Committee.

Clause 36Q – Leave of absence

154.          Subclause 36Q(1) would enable the Drought Minister to grant a leave of absence to the Chair of the Consultative Committee on the terms and conditions determined by the Minister.

155.          Subclause 36Q(2) would allow the Chair of the Consultative Committee to grant a leave of absence to a member (other than the Chair) on the terms and conditions determined by the Chair.

Clause 36R – Resignation

156.          Under subclause 36R(1), a member of the Committee would be permitted to resign their appointment by writing to the Drought Minister.

157.          Subclause 36R(2) would provide that a resignation under subclause 36R(1) would take effect on the day specified in written resignation. If no day is specified, the resignation would take effect on the day the written resignation is received by the Drought Minister.

Clause 36S – Termination of appointment

158.          Subclause 36S(1) would enable the Drought Minister to terminate the appointment of a member of the Consultative Committee if that member is unable to perform their duties due to physical or mental incapacity.

159.          Under subclause 36S(2), the Drought Minister would be empowered to terminate the appointment of a Committee member for other reasons listed in this subclause, including for reasons related to financial hardship, failure to comply with disclosure obligations and absence from Committee meetings.

Clause 36T – Other terms and conditions

160.          This clause provides that, with respect to matters not covered by the Bill, members of the Consultative Committee hold office on the terms and conditions (if any) determined by the Drought Minister.

Part 4 – Investment of the Future Drought Fund

Clause 37 – Simplified outline of this Part

161.          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 38 – Objects of investment of the Future Drought Fund

162.          Subclause 38(1) would reinforce that amounts would be invested by the Future Fund Board for the main object of enhancing the Commonwealth’s ability to provide grants for or enter arrangements in relation to drought resilience.

163.          Subclause 38(2) would provide that the ancillary objects of the investment of the Future Drought 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 16 and 17.

Clause 39 – Investment of the Future Drought Fund

164.          Clause 39 would take account of the investment powers provided for under section 58 of the PGPA Act. However, subclause 39(1) expands on those powers to provide for the investment of the Future Drought Fund in a broad range of financial assets. Specific conditions on the acquisition of derivatives are separately covered in clause 49. This approach to the investment of the Future Drought Fund is consistent with investment arrangements for the Future Fund.

165.          Investments of the Future Drought 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 Future Drought Fund at arm’s length from the Government. However beneficial ownership of the Future Drought Fund assets would remain with the Commonwealth at all times.

Clause 40 – Management of investments of the Future Drought Fund

166.          Subclauses 40(1) and (2) would provide that income derived from an investment of the Future Drought Fund, including a return of capital or another form of financial distribution, must be credited to the Future Drought 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 Future Drought Fund Special Account.

167.          Subclauses 40(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 Future Drought Fund.

168.          Subclause 40(6) would provide that section 58 of the PGPA Act does not apply to an investment of the Future Drought 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, clause 39(1) would provide for the investment of the Future Drought Fund in a broader range of financial assets.

Clause 41 – Future Drought Fund Investment Mandate

169.          This clause would provide the Government, as owner of the Future Drought Fund, with a mechanism for articulating its expectations for how the Future Drought Fund will be invested and managed by the Future Fund Board. Clause 41 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 Future Drought 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.

170.          Subclause 41(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 43. The responsible Ministers must issue at least one such direction, and these directions will be collectively known as the Future Drought Fund Investment Mandate (subclause 41(3) refers). Note that the Future Drought Fund investment function would be defined in clause 5. Directions comprising the Future Drought Fund Investment Mandate would be informed by expert advice, including advice on setting an appropriate benchmark rate of return and appropriate risk tolerances to meet the Government’s policy objectives.

171.          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 Future Drought 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 Future Drought Fund.

172.          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.

173.          Subclause 41(2) would provide that in setting an Investment Mandate the responsible Ministers must have regard to maximising the return on the Future Drought 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 drought resilience, and any other matters the responsible Ministers consider to be relevant.

174.          Subclause 41(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 Future Drought Fund to particular financial assets. This may include restrictions or thresholds for investing the Future Drought Fund in certain jurisdictions or asset classes and statements of the Government’s appetite for risk.

175.          Subclause 41(5) would make it clear that a Ministerial direction under subsection 41(1) prevails over section 42 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 drought resilience.

176.          Subclause 41(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.

177.          Subclause 41(7) would provide that a direction under subsection 41(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.

178.          The Government considers it is appropriate that a direction under subclause 41(1) of the Bill is not subject to disallowance. The Bill would provide adequate scrutiny of directions comprising the Future Drought Fund Investment Mandate through mandated consultation with the Future Fund Board (clause 44). Exemption from disallowance together with consultation would give the Future Fund Board necessary certainty when investing through the Future Drought Fund. While it would be possible to provide that a direction under subclause 41(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 Future Drought Fund Investment Mandate in the national interest.

179.          The Government also considers it is appropriate that a direction under subclause 41(1) of the Bill is not subject to sunsetting. The process for setting the Future Drought 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 Future Drought Fund Investment Mandate may comprise of multiple directions issued at different times. Not being subject to sunsetting would ensure that directions comprising the Future Drought Fund Investment Mandate remain coherent, regardless of when specific directions were issued.

180.          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 42 – Obligation on Future Fund Board in performing investment functions

181.          This clause would require the Future Fund Board, in exercising its Future Drought Fund investment function, to seek to maximise the return on the Future Drought 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 Future Drought Fund.

Clause 43 – Limitation on Future Drought Fund Investment Mandate

182.          Clause 43 would provide that the responsible Ministers must not direct the Future Fund Board to use the assets of the Future Drought 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 Future Drought Fund to support a particular business entity, activity or business.

Clause 44 – Future Fund Board to be consulted on Future Drought Fund Investment Mandate

183.          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 a Future Drought Fund Investment Mandate direction under subclause 41(1).

184.          Subclause 44(1) would require the responsible Ministers to send a draft of a direction under subsection 41(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 Future Drought 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. The responsible Ministers would be required to consider any submission received from the Future Fund Board within the specified time limit.

185.          Subclause 44(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 Future Drought Fund. 

Clause 45 – Compliance with Future Drought Fund Investment Mandate

186.          This clause would deal with compliance of the Future Fund Board with the Future Drought Fund Investment Mandate.

187.          Subclause 45(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 Future Drought Fund are in accordance with the Future Drought Fund Investment Mandate issued by the responsible Ministers. Since the Future Drought 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 Future Drought Fund investments comply with the Future Drought Fund Investment Mandate.

188.          Subclause 45(2) would provide that if the Future Fund Board becomes aware of a breach of the Future Drought 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 Future Drought Fund into compliance with the Future Drought Fund Investment Mandate.

189.          Similarly, subclauses 45(3) and 45(4) would provide that if the Government identifies areas where the Future Fund Board is not complying with the Future Drought 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 Future Drought Fund Investment Mandate.

190.          Subclause 45(5) would provide that any transactions undertaken by the Future Fund Board and subsequently deemed not to have complied with the Future Drought 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.

191.          Subclause 45(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 46 – Future Fund Board must not trigger the takeover provisions of the Corporations Act 2001

192.          Clause 46 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.

193.          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.

194.          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 46(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 Future Drought Fund investment functions.

195.          Subclause 46(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.

196.          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 47 – Borrowing

197.          Clause 47 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.

198.          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.

199.          Subclause 47(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 66 of the Bill.

Clause 48 – Future Drought Fund investment policies

200.          Clause 48 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 Future Drought Fund, including risk management, performance assessment and benchmarks.

201.          Subclauses 48(1) and 48(7) require the Future Fund Board to formulate and comply with policies and any additional matters specified in the rules. A note at the end of subclause 48(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.

202.          Subclause 48(2) would provide that the policies that the Future Fund Board develops must be consistent with the Future Drought Fund Investment Mandate.

203.          Subclauses 48(3) and 48(4) would require the Future Fund Board to publish such policies on the internet.

204.          Subclauses 48(5) and 48(6) would require the Future Fund Board to conduct reviews of these policies periodically, and when the responsible Ministers change the Future Drought 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.

205.          Subclause 48(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 subsection 48(1). However, subclause 48(7) would require the Future Fund Board to take all reasonable steps to comply with the policies it develops under subsection 48(1).

206.          Subclause 48(9) would be included to assist readers, as a policy formulated under subsection 48(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 49 – Derivatives

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

208.          Clause 49 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.

209.          Subclause 49(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.

210.          Subclause 49(2) would provide that the acquisition of derivatives under this clause cannot be inconsistent with the requirement under section 48 of the Bill for the Future Fund Board to formulate a policy on its investment strategy and take all reasonable steps to comply with that policy.

211.          Subclauses 49(3) and 49(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 Future Drought Fund.

212.          Similar to other investments, derivatives could be realised by the Future Fund Board under subclause 40(3) of the Bill.

Clause 50 – Additional financial assets

213.          Clause 50 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 Future Drought Fund and would therefore be subject to all the restrictions and requirements for investments of the Future Drought Fund.

Clause 51 – Securities lending arrangements

214.          Clause 51 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 Future Drought Fund Special Account or become an investment of the Future Drought Fund.

Clause 52 – Investment managers

215.          Clause 52 would deal with the use of investment managers by the Future Fund Board for purposes in connection with the Future Drought Fund.

216.          Subclause 52(1) would enable the Future Fund Board to engage one or more investment managers. An ‘investment manager’ would be defined broadly in clause 5 of the Bill to include custodians, transition managers and other investment managers. However, the Agency would be excluded from this definition as it is generally expected that investment activities, such as acquiring derivatives or investing money, will be outsourced.

217.          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.

218.          Subclause 52(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.

219.          Subclauses 52(3) and 52(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 Future Drought Fund to the Future Fund Board and the Agency. 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 53 – Refund of franking credits

220.          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.

221.          Clause 53 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 Future Drought Fund, any refund received is credited to the Future Drought 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 54 – Realisation of non‑financial assets

222.          Clause 54 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 Future Drought 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.

223.          The clause would require a non-financial asset to be treated as a financial asset up to the time it is realised. Subclause 54(1) would ensure that the asset is considered an investment of the Future Drought Fund and that relevant provisions relating to investments of the Future Drought Fund apply to that asset for the time it is held by the Future Fund Board.

Clause 55 – Additional function of the Future Fund Board

224.          Clause 55 would provide that the functions of the Future Fund Board include the function of investing amounts in accordance with this Bill.

Part 5 – Reporting obligations etc.

Clause 56 – Simplified outline of this Part

225.          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 57 – Finance Minister may require Future Fund Board to prepare reports or give information

226.          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 Future Drought Fund complies with legislation and the Fund’s investment mandate.

227.          Subclause 57(4) would be included to assist readers, as a report prepared under subsection 57(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 58 – Keeping the responsible Ministers informed etc.

228.          Clause 58 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 59 – Finance Minister may give reports to other Ministers etc.

229.          Clause 59 would allow the Finance Minister to give reports, documents and other information to another Minister. This includes reports and documents under subsections 57(1) or 58(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 Drought Minister about matters relating to the Future Drought Fund, given the responsibility of the Drought Minister for making payments from the Agriculture Future Drought Resilience Special Account on behalf of the Commonwealth.

230.          It is envisaged that the Drought Minister would also cause information about a payment or grant under section 21 to be published in the Annual Report for the Agriculture Department. This could include information such as the amount of the payment or grant, and the person or body to whom the payment was made or grant paid, and any other relevant information.

Part 6 – Miscellaneous

Clause 60 – Simplified outline of this Part

231.          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 61 – Delegation by the Finance Minister

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

233.          Under subclause 61(1), the Finance Minister would be empowered to, in writing, delegate his or her functions or powers under sections 14 and 34 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.

234.          The Finance Minister’s powers under clauses 14 and 34 would relate to the determination of a specified amount to be credited to the Future Drought Fund Special Account (in the case of clause 14) or a direction that a specified amount is to be transferred from the Future Drought Fund Special Account to the Agriculture Future Drought Resilience Special Account (in the case of clause 34). Delegation of these functions to the Secretary of, or SES official in, the Finance Department would facilitate the efficient administration of these matters.

235.          Subclause 61(2) would allow the Finance Minister to delegate, in writing, any or all of the Finance Minister’s powers under clause 19 of the Bill 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 19 would relate to the transfer of funds from the Future Drought Fund Special Account to the Future Fund Special Account.

236.          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’.

237.          It is envisaged that the delegate would be accountable to the Finance Minister for his or her actions under any delegation. Subclause 61(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 62 – Delegation by the Treasurer

238.          Under subclause 62(1), the Treasurer would be empowered to, in writing, delegate his or her powers under section 14 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.

239.          Clause 14 of the Bill would relate to the determination of a specified amount to be credited to the Future Drought 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.

240.          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’.

241.          It is envisaged that the delegate would be accountable to the Treasurer for his or her actions under any delegation. Subclause 62(2) would reinforce this intention by requiring the delegate to comply with any direction of the Treasurer in exercising powers under a delegation.

Clause 63 – Delegation by the Drought Minister

242.          Under subclause 63(1) the Drought Minister would be empowered to, in writing, delegate his or her powers under Division 2 of Part 3 to the Secretary of the Agriculture 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. This broad delegation power is required to enable arrangements or grants made under clause 21 to be administered by Commonwealth officials employed in the Australian Government Community Grants Hub, managed by the Commonwealth Department of Social Services.

243.          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’.

244.          Division 2 of Part 3 of the Bill deals with making arrangements or grants of financial assistance in relation to drought resilience. Delegation of these functions to the Secretary of, or SES official in, the Agriculture Department, or a Commonwealth official employed in the Australian Government Community Grants Hub, would enable the efficient administration of these matters.

245.          It is envisaged that the delegate would be accountable to the Drought Minister for his or her actions under any delegation. Subclause 63(2) would reinforce this intention by requiring the delegate to comply with any direction of the Drought Minister in exercising powers under a delegation.

Clause 64 – Transitional – receipts relating to the Building Australia Fund

246.          This transitional clause would provide that any amount received by the Future Fund Board that relates to the BAF would be credited to the Future Drought Fund Special Account. This clause would operate after the closure of the BAF, 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 BAF could include accrued interest, fee refunds, or withholding tax refunds.

Clause 65 – Review of operation of Act

247.          Subclause 65(1) would require the responsible Ministers to cause a review of the operation of this Bill to be undertaken before the tenth anniversary of the commencement of this clause. This review mechanism is intended to provide the opportunity to consider whether the Bill is providing the outcomes envisaged. It is envisaged that this 10-year review would be used to consider the appropriateness of continuing to provide annual transfers of $100 million from the Future Drought Fund to the Agriculture Future Drought Resilience Special Account. Over 10 years, the balance of the Fund is projected to grow to $5 billion, which would, potentially, support a higher annual disbursement.

248.          Subclause 65(2) 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 a report of the review. This must occur within 15 sitting days (for each House of the Parliament) of the tenth anniversary of the commencement of clause 65.

249.          Under subclause 65(3), 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 clause 65.

Clause 66 – Rules

250.          Clause 66 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.

251.          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".

252.          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.

253.          In addition, clause 66 of the Bill would clarify that the rules made under the Bill 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).

254.          Subclause 66(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), paragraphs 8 and 13

[3] Ibid, paragraph 7