EXPLANATORY STATEMENT
STATUTORY RULES 1982 NO. 28
Issued by the Authority of the Treasurer
PRIMARY INDUSTRY BANK REGULATIONS (AMENDMENT)
Section 11 of the Primary Industry Bank Act 1977 (the Act) provides, inter alia, that the Governor-General may make regulations, not inconsistent with Part II of the Act, prescribing all matters that are required or permitted by that Part to be prescribed or are necessary or convenient to be prescribed for carrying out or giving effect to the Part.
Sub-section 7(1) of the Act provides that the Treasurer may, from time to time, on behalf of the Commonwealth, make grants or loans to the Primary Industry Bank of Australia on such terms and conditions as are determined by the Treasurer and agreed to by the Bank.
Since the Bank’s establishment in July 1978, funds of $101 million have been deposited with it by the Commonwealth in terms of sub-section 7(1) to enable loans made by banks and other lenders and refinanced by the Bank to be at interest rates that are lower than would otherwise be practicable. The source of these funds was the Income Equalisation
Deposits Trust Account. Authority for making loans to the Bank from the Trust Account is provided by sub-section 8(2) of the Act. After scheduled repayments, the amount currently outstanding with the Bank from the Trust Account is $80.4 million.
Sub-section 8(3) of the Act provides that a loan to the Bank from the Income Equalisation Deposits Trust Account in accordance with sub-section 8(2) shall not be made except in accordance with regulations that:
(a) prescribe maximum limits with respect to the amounts that may from time to time be lent to the Bank; and
(b) prescribe rates of interest to be payable by the Bank in respect of such loans.
Currently, $101 million is the maximum limit so prescribed. This relates to:-
• a deposit of $30 million placed with the Bank in 1978-79 at an interest rate of 5 per cent per annum;
• a deposit of $45 million placed with the Bank in 1979-80 at an interest rate of 5 per cent per annum; and
• a deposit of $26 million placed with the Bank in 1980-81 at an interest rate of 7 per cent per annum.
Consistent with that, the regulations currently prescribe 5 per cent per annum as the interest rate payable by the Bank in respect of loans made before 1 July 1980 and 7 per cent per annum as the rate payable in respect of other loans. The Government has proposed that additional financial assistance now be made available to the Bank in the form of further deposits of up to $60 million from the Income Equalisation Deposits Trust Account at an interest rate of 9.5 per cent per annum (the rate that is now paid by the Commonwealth to eligible primary producers on Income Equalisation Deposits). The amount of $60 million would be a maximum limit available to be drawn by the Bank on a needs basis over the remainder of 1981-82. Any undrawn portion would lapse on 30 June 1982. Drawings would be by agreement between the Bank and the Commonwealth on the basis of an assessment of the Bank’s needs at the time. The Bank has agreed to this offer and to the terms of the determination. In addition, the Commonwealth has proposed, and the Bank has agreed, that the interest rates on the three deposits currently outstanding should also be raised to 9.5 per cent per annum, bringing to the same level the interest rates received on all advances from and paid on all deposits in the Trust Account.
The proposed Regulation amends Regulation 3 of the Primary Industry Bank Regulations by increasing from $101 million to $140.4 million the maximum limit to apply for the time being for the purposes of paragraph 8(3)(a) of the Act. It also amends Regulation 3 to prescribe 9.5 per cent as the rate of interest payable in respect of all Commonwealth deposits. Consistent with legal advice on the wording of sub-section 8(3), the figure of $140.4 million is expressed in the proposed Regulation as a maximum limit to apply to the aggregate of loans outstanding from time to time and, accordingly, it has been adjusted to take account of repayments of $20.6 million by the Bank in respect of deposits made under the existing limit of $101 million.
It is not intended at this stage to prescribe in regulations (as provided for by sub-section 8(4) of the Act) the other terms and conditions to which the Commonwealth’s assistance to the Bank is or, in the case of any drawings against the proposed new limit, will be subject.
The Treasury
CANBERRA ACT