EXPLANATORY STATEMENT
Issued by the Authority of the Minister for Finance
Financial Framework (Supplementary Powers) Act 1997
Financial Framework (Supplementary Powers) Amendment
(Agriculture and Water Resources Measures No. 4) Regulation 2016
The Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) confers on the Commonwealth, in certain circumstances, powers to make arrangements under which money can be spent; or to make grants of financial assistance; and to form, or otherwise be involved in, companies. The arrangements, grants, programs and companies (or classes of arrangements or grants in relation to which the powers are conferred) are specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the Principal Regulations). The FF(SP) Act applies to Ministers and the accountable authorities of non‑corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.
Section 65 of the FF(SP) Act provides that the Governor-General may make regulations prescribing matters required or permitted by that Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to that Act.
Section 32B of the FF(SP) Act authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Principal Regulations. Section 32B also authorises the Commonwealth to make, vary and administer arrangements for the purposes of programs specified in the Principal Regulations. Schedule 1AA and Schedule 1AB to the Principal Regulations specify the arrangements, grants and programs.
Schedule 1 to the Regulation amends the Principal Regulations to establish legislative authority in Schedule 1AB for the Government to fund Dairy Recovery Concessional Loans. The Department of Agriculture and Water Resources is responsible for this activity.
The Dairy Recovery Concessional Loans aim to assist commercially viable dairy farm businesses through the short‑term crisis caused by the April and May 2016 decisions of Murray Goulburn and Fonterra to reduce farm gate milk prices. These concessional loans will allow eligible dairy farm businesses to restructure existing eligible debt (including debt to a milk processor) and/or new debt, including for operating expenses or for productivity enhancement activities.
The Dairy Recovery Concessional Loans were announced jointly on 25 May 2016 by the Deputy Prime Minister and Minister for Agriculture and Water Resources, the Hon Barnaby Joyce MP, and the Minister for Human Services, the Hon Alan Tudge MP, as part of the Government’s Dairy Support Package.
Details of the Regulation are set out at Attachment A. A Statement of Compatibility with Human Rights is at Attachment B.
The Regulation is a legislative instrument for the purposes of the Legislation Act 2003. The Regulation commences on the day after registration on the Federal Register of Legislation.
Consultation
In accordance with section 17 of the Legislation Act 2003, consultation has taken place with the Department of Agriculture and Water Resources.
A regulation impact statement is not required as the Regulation only applies to non‑corporate Commonwealth entities and does not adversely affect the private sector.
Details of the Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulation 2016
Section 1 – Name
This section provides that the title of the Regulation is the Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulation 2016.
Section 2 – Commencement
This section provides that the Regulation commences on the day after it is registered on the Federal Register of Legislation.
Section 3 – Authority
This section provides that the Regulation is made under the Financial Framework (Supplementary Powers) Act 1997.
Section 4 – Schedules
This section provides that the Financial Framework (Supplementary Powers) Regulations 1997 are amended as set out in the Schedules to the Regulation.
Schedule 1 – Amendments
Item 1 – In the appropriate position in Part 2 of Schedule 1AB (table)
This item adds a new table item to Part 2 of Schedule 1AB to establish legislative authority for government spending on an activity that is administered by the Department of Agriculture and Water Resources.
New table item 6 establishes legislative authority for government spending in relation to Dairy Recovery Concessional Loans.
The Dairy Recovery Concessional Loans were announced jointly on 25 May 2016 by the Deputy Prime Minister and Minister for Agriculture and Water Resources, the Hon Barnaby Joyce MP, and the Minister for Human Services, the Hon Alan Tudge MP, as part of the Government’s Dairy Support Package.
The Government has committed to make Dairy Recovery Concessional Loans available over 2016–17 and 2017–18, funded from $500 million allocated to the Government’s concessional loans schemes over that time period through the Agricultural Competitiveness White Paper.
Dairy Recovery Concessional Loans aim to assist commercially viable dairy farm businesses through the short-term crisis caused by the April and May 2016 decisions of Murray Goulburn and Fonterra to reduce farm gate milk prices. These decisions have had a severe impact on some dairy farm businesses. These concessional loans will allow eligible dairy farm businesses to restructure existing eligible debt (including debt to a milk processor) and/or new debt, including for operating expenses or for productivity enhancement activities.
The key settings of the concessional loans include:
- a concessional variable interest rate, which will be adjusted biannually (on 1 February and 1 August). The initial interest rate will be set in consultation with the Minister for Finance before the opening of the scheme in 2016–17 and will be revised if necessary in accordance with material changes to the Commonwealth 10-year bond rate;
- a maximum loan term of ten years with minimum interest-only payments for years one to five and principal and interest from years six to ten;
- a maximum loan of $1 million;
- loans for up to 50 per cent of existing eligible debt;
- the farm business would have sound prospects to return to commercial viability; and
- security would be required for the loan.
Dairy Recovery Concessional Loans will be available in New South Wales, Victoria, South Australia and Tasmania and will be administered by state delivery agencies that will assess an applicant’s eligibility and manage the loan. Guidelines for each state will be available on the relevant delivery agency’s website.
The Dairy Recovery Concessional Loans will be demand-driven with capped funding. It will be the responsibility of delivery agencies to assess and make spending decisions about individual loan applications in accordance with the guidelines and contractual agreements, on a case-by-case basis.
Guidelines for the Dairy Recovery Concessional Loans will be publicly available to assist applicants with the application process. Individual loan details will not be publicly available. Information on loan amounts provided to the jurisdictions will be publicly available via delivery agency websites, AusTender and media releases.
A merits review process is not applicable to the Dairy Recovery Concessional Loans because these are payments by the Commonwealth directly to a State or Territory.
Further information in relation to the Dairy Recovery Concessional Loans can be found on the website of the Department of Agriculture and Water Resources at www.agriculture.gov.au/ag-farm-food/drought/assistance.
The Drought Concessional Loans, as announced in the Agricultural Competitiveness White Paper, are listed in the Portfolio Budget Statements 2016–17, Budget Related Paper No. 1.1, Agriculture and Water Resources Portfolio at pages 17, 29 and 67. Funding for the Dairy Recovery Concessional Loans will come from Program 1.11: Drought Concessional loan scheme – ongoing arrangements, which is part of Outcome 1: More sustainable, productive, internationally competitive and profitable Australian agricultural, food and fibre industries through policies and initiatives that promote better resource management practices, innovation, self-reliance and improved access to international markets. Details will be set out in the Portfolio Additional Estimates Statements 2016‑17, Agriculture and Water Resources Portfolio.
Noting that it is not a comprehensive statement of relevant constitutional considerations, the purpose of the item references the following powers of the Constitution:
- grants to states (section 96); and
- the territories power (section 122).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Financial Framework (Supplementary Powers) Amendment (Agriculture and Water Resources Measures No. 4) Regulation 2016
This Regulation is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
Section 32B of the Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the FF(SP) Regulations) and to make, vary and administer arrangements and grants for the purposes of programs specified in the Regulations. Schedule 1AA and Schedule 1AB to the FF(SP) Regulations specify the arrangements, grants and programs.
The FF(SP) Act applies to Ministers and the accountable authorities of non‑corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.
Schedule 1 to the Regulation amends the FF(SP) Regulations to establish legislative authority in Schedule 1AB for spending by the Government on dairy recovery concessional loans. This spending activity will be administered by the Department of Agriculture and Water Resources.
The Dairy Recovery Concessional Loans aim to assist commercially viable dairy farm businesses through the short‑term crisis caused by the April and May 2016 decisions of Murray Goulburn and Fonterra to reduce farm gate milk prices. These concessional loans will allow eligible dairy farm businesses to restructure existing eligible debt (including debt to a milk processor) and/or new debt, including for operating expenses or for productivity enhancement activities.
The Minister for Agriculture and Water Resources has portfolio responsibility this matter.
Human rights implications
The Regulation does not engage any of the applicable rights or freedoms.
Conclusion
This Regulation is compatible with human rights as it does not raise any human rights issues.
Senator the Hon Mathias Cormann
Minister for Finance