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
Overview
The Primary Industry Bank Regulations (Amendment) 1982 were enacted to address the need for additional financial assistance for the Primary Industry Bank of Australia (PIBA), which was established to provide financial support to primary producers. This amendment to the Primary Industry Bank Regulations 1978 was issued by the Treasurer under the authority of the Primary Industry Bank Act 1977. The amendment aimed to increase the maximum amount of loans that could be made from the Income Equalisation Deposits Trust Account to PIBA, as well as adjust the interest rates on existing loans to align with the rates paid by the Commonwealth to eligible primary producers. The policy objective was to provide financial support to the primary industry sector by enabling PIBA to offer lower interest rates on loans to primary producers, thereby improving their access to credit.
Scope and Application
The Primary Industry Bank Regulations (Amendment) Statutory Rules 1982 No. 28, made under the authority of the Treasurer, amends the Primary Industry Bank Regulations to increase the maximum limit for loans from the Income Equalisation Deposits Trust Account to the Primary Industry Bank of Australia from $101 million to $140.4 million. This amendment is made to accommodate additional financial assistance to the Bank, with a proposed additional deposit of up to $60 million at an interest rate of 9.5 per cent per annum, which would be available on a needs basis for the remainder of 1981-82. The regulations also adjust the interest rates on existing deposits to 9.5 per cent, aligning them with the current rates paid by the Commonwealth to eligible primary producers. This change applies to the Commonwealth, the Primary Industry Bank of Australia, and the transactions involving loans and interest rates prescribed under the Primary Industry Bank Act 1977. The amendment does not extend beyond the existing regulatory framework and does not propose to prescribe other terms and conditions of the Commonwealth’s assistance to the Bank at this stage.
Key Provisions
The Primary Industry Bank Regulations (Amendment) Statutory Rules 1982 No. 28, issued under the authority of the Treasurer, amend the Primary Industry Bank Regulations to enhance the financial support available to the Primary Industry Bank of Australia (the Bank). Section 11 of the Primary Industry Bank Act 1977 empowers the Governor-General to make regulations that are necessary or convenient for implementing Part II of the Act, including those regarding loans and deposits. Specifically, sub-section 7(1) of the Act allows the Treasurer to provide grants or loans to the Bank on terms agreed upon, while sub-section 8(2) authorises loans from the Income Equalisation Deposits Trust Account. The regulations now under amendment, prescribed under sub-section 8(3), currently limit the maximum loan amount to $101 million and set interest rates at 5 per cent for loans made before 1 July 1980 and 7 per cent for other loans.
The proposed amendment, detailed in Regulation 3, raises the maximum loan limit from $101 million to $140.4 million. This increase accounts for repayments already made, ensuring that the new limit reflects current financial needs. Furthermore, the amendment sets a uniform interest rate of 9.5 per cent for all Commonwealth deposits, aligning the interest rates on existing and new loans. This change applies to the three deposits currently outstanding as well as any future deposits under the new limit, which is available on a needs basis for the remainder of 1981-82. Any undrawn portion of the new limit will lapse on 30 June 1982.
The obligations imposed by these regulations include adherence to the newly prescribed maximum loan limit and interest rates. The Bank must ensure that any drawdowns do not exceed the $140.4 million limit and that interest on all loans, both existing and new, is calculated at 9.5 per cent per annum. Additionally, the Bank must work with the Commonwealth to assess its needs and agree on the terms of any drawdowns against the new limit. Failure to comply with these regulatory requirements could result in financial mismanagement and potential breaches of the agreement between the Bank and the Commonwealth.
Under the Primary Industry Bank Act 1977, any breach of the regulations could lead to civil or criminal consequences. While specific penalties are not detailed in the explanatory statement, breaches of financial regulations typically carry significant penalties, including fines and potential criminal charges for wilful or negligent non-compliance. The exact penalties would depend on the nature and severity of the breach, but they underscore the importance of adhering to the terms set out in the amended regulations.