Explanatory Statement
Issued by the authority of the Treasurer
Commonwealth Inscribed Stock Act 1911
Direction relating to Commonwealth Borrowing
General outline
The Direction directs certain officials of the Australian Office of Financial Management, to whom the Treasurer’s powers under section 3A of the Commonwealth Inscribed Stock Act 1911 (CIS Act) have been delegated (delegates), as to the purposes for which the Commonwealth may borrow and the maximum total face value of Commonwealth Government Securities (CGS) that may be on issue.
Legislative authority and date of effect
The Treasurer, acting under section 51JA of the CIS Act, signed the Direction on 11 December 2013. The Direction commenced on the day it was signed by the Treasurer.
Background
Subsection 51JA(2) of the CIS Act requires the Treasurer to issue a Direction that specifies the maximum total face value of CGS that may be on issue under the CIS Act and the Loans Securities Act 1919. The former Treasurer’s Direction of 9 August 2012 limited the maximum total face value of CGS on issue to $300 billion. This Direction increases this maximum to $500 billion.
A maximum total face value of CGS on issue of $500 billion provides headroom to finance government operations and provides certainty to financial markets that the Government will be able to issue additional debt, should unforseen events mean the economic and fiscal outlook deteriorates.
Subsection 51JA(3) of the CIS Act provides that delegates must comply with a direction in force under s 51JA(2) and any other direction given, by signed instrument, to the delegate by the Treasurer.
Details of the Direction
The Direction revokes the former Treasurer’s Direction made on 9 August 2012 and limits the maximum total face value of CGS that may be on issue to $500 billion.
The Direction also directs that the Commonwealth may borrow money to meet budgetary needs, and for policy purposes.
Consultation
This Direction will have no direct or substantial indirect effect on business or restrict competition. Accordingly, there was no formal public consultation process in the drafting of this Direction.
Status of Direction
This Direction is not subject to disallowance or sunsetting under the Legislative Instruments Act 2003.