Explanatory Statement
Issued by Authority of the Minister for Agriculture, Fisheries and Forestry
and the Minister for Finance
Regional Investment Corporation Act 2018
Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026
Legislative Authority
The Regional Investment Corporation Act 2018 (the Act) establishes the Regional Investment Corporation (the Corporation). Section 8 of the Act prescribes the Corporation’s functions.
Paragraph 8(1)(a) of the Act provides that it is a function of the Corporation to administer farm business loans. Paragraph 8(1)(d) of the Act provides that it is a function of the Corporation to set and adjust interest rates applicable to loans and financial assistance. Paragraph 8(1)(g) of the Act provides that it is a function of the Corporation to administer programs prescribed by the rules. Subsection 11(1) of the Act provides that the responsible Ministers must give directions, by legislative instrument, to the Corporation about the performance of the Corporation’s functions.
The Regional Investment Corporation (Operating Mandate) Direction 2018 (the Operating Mandate), among other things, directs the Corporation in the administration of farm business loans under subsection 11(1) of the Act.
Subsection 8(5) of the Act allows the responsible Ministers to make rules prescribing programs for the purpose of paragraph 8(1)(g). Paragraph 8(5)(b) of the Act sets out some matters that the rules may prescribe. Section 54 of the Act provides that the responsible Ministers may, by legislative instrument, make rules prescribing matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The following rules prescribe loan programs for the purposes of paragraph 8(1)(g) of the Act:
- the Regional Investment Corporation (Agribusiness Natural Disaster Loans—2019 North Queensland Flood) Rule 2019 (the North Queensland Flood Rule);
- the Regional Investment Corporation (Agristarter Loans) Rule 2019 (the Agristarter Loans Rule);
- the Regional Investment Corporation (Drought Loans Expansion) Rule 2020 (the Drought Loans Expansion Rule); and
- the Regional Investment Corporation (Small Business Drought Loans) Rules 2020 (the Small Business Drought Loans Rules).
Purpose
The purpose of the Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026 (the Amendment Instrument) is to:
- specify, in the Operating Mandate, a single set of directions to the Corporation about how the Corporation is to set the interest rates for all farm business loans and loans made under prescribed programs; and
- repeal provisions from the Operating Mandate, the North Queensland Flood Rule, the Agristarter Loans Rule, the Drought Loans Expansion Rule and the Small Business Drought Loans Rules that specify directions or rules by which the Corporation sets the interest rate for loans administered by the Corporation.
Background
The legislative framework requires the Corporation to set a variable interest rate for the loans that it administers and in accordance with any directions given by the responsible Ministers to the Corporation.
The overarching objective is that the interest rate charged by the Corporation for the loans that it administers covers the Commonwealth’s borrowing costs and the Corporation’s administration costs, subject to directions by the responsible Ministers, to enable cost neutrality.
Impact and Effect
The effect of the amendments is to simplify the legislative framework by which the Corporation is required to set, and adjust as required, interest rates applicable to farm business loans and loans issued by the Corporation under prescribed programs. This will clarify the process by which interest rates are set.
Consultation
The Department of Agriculture, Fisheries and Forestry consulted the Department of the Prime Minister and Cabinet, the Treasury, the Department of Finance, and the Corporation on the Amendment Instrument.
Details/Operation
Details of the Amendment Instrument are set out in Attachment A.
The Amendment Instrument is compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment B.
The Amendment Instrument commences on the day on which it is registered. The Amendment Instrument is a legislative instrument for the purposes of the Legislation Act 2003.
Attachment A
Details of the Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026
Section 1—Name
This section provides that the name of the instrument is the Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026 (the Amendment Instrument).
Section 2—Commencement
This section provides that the Amendment Instrument commences on the day of registration. Although the Amendment Instrument commences on the day of registration, the amendments affect matters after the commencement day.
Section 3—Authority
This section provides that the Amendment Instrument is made under the Regional Investment Corporation Act 2018 (the Act).
Section 4—Schedules
This section provides that each instrument that is specified in a Schedule to this Amendment Instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to the Amendment Instrument has effect according to its terms.
Schedule 1—Amendments
Part 1—Main amendments
Regional Investment Corporation Operating Mandate Direction 2018
Item 1—Part 1 (heading)
This item amends the Regional Investment Corporation Operating Mandate Direction 2018 (the Operating Mandate) to repeal the heading “Part 1 – Preliminary” and to substitute “Part 1—Preliminary”. This amendment is to update the heading for consistency with new Part 2 inserted by item 3.
Item 2—Section 4
This item inserts into section 4 of the Operating Mandate definitions of the terms “Commonwealth borrowing costs component” and “Corporation administrative costs component”. Both terms are defined to have the meaning given by new section 4A, which is inserted by item 3 of Schedule 1 to the Amendment Instrument.
The purpose of this item is to provide defined terms for the components of the interest rate set by the Corporation in Part 2 of the Operating Mandate.
Item 3—After Part 1
This item amends the Operating Mandate after Part 1, under section 4, to insert new Part 2 “Interest rates on loans”. Part 2 includes new section 4A “Interest rates on farm business loans” and new section 4B “Interest rates on other loans”.
New subsection 4A(1) provides that the Corporation must set, and adjust as required, the interest rate on all farm business loans in accordance with section 4A.
New subsection 4A(2) provides that the interest rate for a period is the sum of the Commonwealth borrowing costs component and the Corporation administrative costs component for that period.
The Corporation and its loan programs are generally intended to be cost neutral over their life. To achieve this, interest rates are set at a level that covers only the Commonwealth’s borrowing costs to fund the Corporation to make loans, and the Corporation’s administrative costs to deliver concessional loans, subject to directions by the responsible Ministers.
The directions power provides flexibility for the responsible Ministers to adjust the Corporation’s administrative costs component of the interest rate in response to prevailing market conditions that would otherwise diminish the concessional nature of the loans or other conditions adversely affecting farmers and farm related businesses.
The heading to new subsection 4A(3) is “Commonwealth borrowing costs component for period 1 February to 31 July”.
Subsection 4A(3) sets out the method for working out the Commonwealth borrowing costs component of the interest rate for a 6-month period (the relevant period) beginning on a 1 February. The method statement comprises 4 steps.
Step 1 is to calculate the average of the daily 10-year Australian Government bond rate for the most recent 6-month period beginning on 1 May. The daily average is to be worked out to 2 decimal places, rounding up if the third decimal place is 5 or more.
In 2026, the daily Australian Government 10-year bond rate data is publicly available on the Reserve Bank of Australia website.
Step 2 is to compare the figure calculated at Step 1 with the Commonwealth borrowing costs component for the most recent 6-month period beginning on 1 August. If the difference between the two figures is more than 0.1%, the Commonwealth borrowing costs component for the relevant period will be determined in accordance with Step 3. If the difference is less than or equal to 0.1%, the Commonwealth borrowing costs component for the relevant period will be determined in accordance with Step 4.
Step 3 applies if there is more than 0.1% difference between the figure calculated at Step 1 and the Commonwealth borrowing costs component of the interest rate for the most recent 6‑month period beginning on 1 August. If Step 3 applies, the average of the daily 10-year Australian Government bond rate calculated at Step 1 is the Commonwealth borrowing cost component for the relevant period. This means that the Commonwealth borrowing costs component of the interest rate for the relevant period must be adjusted by the Corporation and will change as compared to the most recent period beginning 1 August.
Step 4 applies if the difference between the figure calculated at Step 1 and the Commonwealth borrowing costs component of the interest rate for the most recent 6-month period beginning on 1 August is less than or equal to 0.1%. If Step 4 applies, the Commonwealth borrowing costs component for the most recent period beginning on 1 August is the Commonwealth borrowing costs component for the relevant period. This means there would be no change to the Commonwealth borrowing costs component of the interest rate for the relevant period beginning on 1 February as compared to the most recent period beginning 1 August.
The heading to new subsection 4A(4) is “Commonwealth borrowing costs component for period 1 August to 31 January”.
Subsection 4A(4) sets out the Commonwealth borrowing costs component of the interest rate for a 6-month period beginning on a 1 August (the relevant period). The method statement comprises 4 steps.
Step 1 is to calculate the average of the daily 10-year Australian Government bond rate for the most recent 6-month period beginning on 1 November. The daily average is to be worked out to 2 decimal places, rounding up if the third decimal place is 5 or more.
Step 2 is to compare the figure calculated at Step 1 with the Commonwealth borrowing costs component for the most recent 6-month period beginning on 1 February. If the difference between the two figures is more than 0.1%, the Commonwealth borrowing costs component for the relevant period will be determined in accordance with Step 3. If the difference is less than or equal to 0.1%, the Commonwealth borrowing costs component for the relevant period will be determined in accordance with Step 4.
Step 3 applies if there is more than 0.1% difference between the figure calculated at Step 1 and the Commonwealth borrowing costs component of the interest rate for the most recent 6-month period beginning on 1 February. If Step 3 applies, the average of the daily 10-year Australian Commonwealth bond rate calculated at Step 1 is the Commonwealth borrowing costs component for the relevant period. This means that the Commonwealth borrowing costs component of the interest rate for the relevant period must be adjusted by the Corporation and will change as compared to the most recent period beginning 1 February.
Step 4 applies if the difference between the figure calculated at Step 1 and the Commonwealth borrowing costs component of the interest rate for the most recent 6-month period beginning on 1 February is less than or equal to 0.1%. If Step 4 applies, the Commonwealth borrowing costs component for the most recent period beginning on 1 February is the Commonwealth borrowing costs component for the relevant period. This means there would be no change to the Commonwealth borrowing costs component of the interest rate for the relevant period beginning on 1 August as compared to the most recent period beginning 1 February.
The heading to new subsection 4A(5) is “Corporation administrative costs component for period 1 February to 31 July”.
Subsection 4A(5) sets out the Corporation administrative costs component of the interest rate for a 6-month period beginning on a 1 February.
Subsection 4A(5) provides that the Corporation administrative costs component of the interest rate for a 6-month period beginning on a 1 February will be the same as for the most recent 6-month period beginning on 1 August, unless the Minister for Agriculture and the Minister for Finance (the responsible Ministers) give a written direction to the Corporation under section 12 of the Act that it should be a different amount.
The heading to new subsection 4A(6) is “Corporation administrative costs component for period 1 August to 31 January”.
New subsection 4A(6) sets out the Corporation administrative costs component of the interest rate for a 6-month period beginning on a 1 August.
New subsection 4A(6) provides that the Corporation administrative costs component of the interest rate for a 6-month period beginning on a 1 August will be the same as for the most recent 6-month period beginning on 1 February, unless the responsible Ministers give a written direction to the Corporation under section 12 of the Act that it should be a different amount.
The heading to new section 4B is “Interest rates on other loans”.
Section 4B requires the Corporation to apply the interest rate that is applicable to farm business loans under section 4A to all loans made under programs prescribed by the rules for the purposes of paragraph 8(1)(g) of the Act.
The purpose of this amendment, in addition to the consequential amendments made by Part 2 of Schedule 1 to the Amendment Instrument, is to provide a single set of directions to the Corporation about how to set interest rates for farm business loans and loans under programs prescribed by the rules.
Item 4—Part 2 (heading)
This item repeals the heading to Part 2 and substitutes Part 3 “Other directions”. This amendment is consequential to item 3 above which inserts new Part 2 into the Operating Mandate.
Item 5—Section 8
This item repeals section 8 which set out how the Corporation was required to set interest rates applicable to farm business loans. This amendment is made because the interest rate for farm business loans is to be determined under new Part 2 of the Operating Mandate, inserted by item 3 of Schedule 1 to the Amendment Instrument.
Item 6—Part 3 (heading)
This item repeals the heading to Part 3 and substitutes new Part 4 “Application, saving and transitional provisions”. This amendment is consequential to item 3 of Schedule 1 to the Amendment Instrument, which inserts new Part 2.
Item 7—At the end of Part 3
This item inserts new section 23 “Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026—application and transitional provisions” at the end of (now renumbered) Part 4 of the Operating Mandate. New section 23 sets out how the interest rates are to be set after the commencement of the Amendment Instrument.
New subsection 23(1) provides that sections 4A and 4B, as inserted by Part 1 of Schedule 1 to the Amendment Instrument, apply in relation to the 6-month period beginning on 1 February 2026 and each later 6-month period.
New subsection 23(2) sets out, for the purposes of section 4A, the costs components of the interest rate to be set for the 6-month period beginning on 1 February 2026. Paragraph 23(2)(a) states that the Commonwealth borrowing costs component for the period is 4.28%. Paragraph 23(2)(b) states that the Corporation administrative costs component for the period is 0.9%.
The purpose of this amendment is to set the Corporation borrowing costs component and Corporation administrative costs component of the interest rate for all loans administered by the Corporation from 1 February 2026.
Part 2—Consequential amendments
Regional Investment Corporation (Agribusiness Natural Disaster Loans—2019 North Queensland Flood) Rule 2019
Item 8—Paragraph 10(3)(b)
This item omits the words “at the rate mentioned in subsection (4)” from paragraph 10(3)(b) of the Regional Investment Corporation (Agribusiness Natural Disaster Loans—2019 North Queensland Flood) Rule 2019 (North Queensland Flood Rule).
This and other amendments to the North Queensland Flood Rule made by the Amendment Instrument, are made because Part 2 of the Operating Mandate now deals with the interest rate for loans made under the program prescribed by the North Queensland Flood Rule (the Agribusiness Natural Disaster Loans (2019 North Queensland Flood) Program).
Item 9—At the end of subsection 10(3)
This item adds a note at the end of subsection 10(3) of the North Queensland Flood Rule. The purpose of the note is to inform the reader that the interest rate applying to loans under the North Queensland Flood Rule is dealt with by Part 2 of the Operating Mandate.
Item 10—Subsection 10(4)
This item repeals subsection 10(4) of the North Queensland Flood Rule which provided that, for the purposes of paragraph 10(3)(b), the Corporation must set a variable interest rate for the remaining 8 years of a loan and notify loan recipients of changes to that rate, in accordance with section 8 of the Operating Mandate.
The purpose of this amendment is to remove the reference to section 8 of the Operating Mandate. Section 8 of the Operating Mandate is repealed by item 5 of Schedule 1 to the Amendment Instrument.
As a result of new section 4B of the Operating Mandate as inserted by item 3 of Schedule 1 to the Amendment Instrument, it is no longer necessary for the North Queensland Flood Rule to prescribe rules for the Corporation in relation to the interest rate to be set on loans made under the Agribusiness Natural Disaster Loans (2019 North Queensland Flood) Program.
Item 11—At the end of the instrument
This item adds new Part 5 “Application, saving and transitional provisions” at the end of the North Queensland Flood Rule. The item also adds new section 19 “Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026—application provision” under new Part 5.
New section 19 provides that the amendments made to the North Queensland Flood Rule by Part 2 of Schedule 1 to the Amendment Instrument apply in relation to the 6-month period beginning on 1 February 2026 and each later 6-month period.
Regional Investment Corporation (Agristarter Loans) Rule 2019
Item 12—Paragraph 10(3)(c)
This item repeals paragraph 10(3)(c) of the Regional Investment Corporation (Agristarter Loans) Rule 2019 (Agristarter Loans Rule), which provided that interest is payable on loans under the program at the rate mentioned in subsection 10(4) of the Agristarter Loans Rule.
This and other amendments to the Agristarter Loans Rule made by the Amendment Instrument, are made because Part 2 of the Operating Mandate now deals with the interest rates for loans made under the program prescribed by the Agristarter Loans Rule (the Agristarter Loans Program).
Item 13—At the end of subsection 10(3)
This item adds a note at the end of subsection 10(3) of the Agristarter Loans Rule. The purpose of the note is to inform the reader that the interest rate applying to loans under the Agristarter Loans Rule is dealt with by Part 2 of the Operating Mandate.
Item 14—Subsection 10(4)
This item repeals subsection 10(4) of the Agristarter Loans Rule which provided that, for the purposes of the paragraph 10(3)(b), the Corporation must set the interest rate payable for the remaining 8 years of the loan, and notify loan recipients of changes to that rate, in accordance with section 8 of the Operating Mandate.
The purpose of this amendment is to remove the reference to section 8 of the Operating Mandate, which is repealed by item 5 of Schedule 1 to the Amendment Instrument.
As a result of new section 4B of the Operating Mandate as inserted by item 3 of Schedule 1 to the Amendment Instrument, it is no longer necessary for the Agristarter Loans Rule to prescribe rules for the Corporation in relation to the interest rate to be set on loans made under the Agristarter Loans Program.
Item 15—At the end of the instrument
This item adds new Part 5 “Application, saving and transitional provisions” at the end of the Agristarter Loans Rule. The item also adds new section 19 “Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026—application provision” under new Part 5.
New section 19 provides that the amendments made to the Agristarter Loans Rule by Part 2 of Schedule 1 to the Amendment Instrument apply in relation to the 6-month period beginning on 1 February 2026 and each later 6-month period.
Regional Investment Corporation (Drought Loans Expansion) Rule 2020
Item 16—Section 4 (at the end of the definition of expanded drought loan)
This item adds a note at the end of section 4 of the Regional Investment Corporation (Drought Loans Expansion) Rule 2020 (the Drought Loans Expansion Rule).
The purpose of the note is to inform the reader that the interest rate applying to loans under the Drought Loans Expansion Rule is dealt with by Part 2 of the Operating Mandate.
This amendment, and other amendments to the Drought Loans Expansion Rule made by the Amendment Instrument, is made because Part 2 of the Operating Mandate now deals with the interest rates for loans made under the Drought Loans Expansion Rule.
Item 17—Section 17
This item repeals section 17 of the Drought Loans Expansion Rule, which provided that the Corporation must determine the interest rates on all expanded drought loans in accordance with the agreed methodology described in section 29.
Item 18—Section 29
This item repeals section 29 of the Drought Loans Expansion Rule which provided the Board of the Corporation with the function of agreeing with the responsible Ministers on a methodology for setting variable interest rates for expanded drought loans and ensuring the Corporation performs certain steps in relation to this. Section 29 is repealed because the interest rate for these loans is now dealt with by Part 2 of the Operating Mandate.
Item 19—At the end of Part 4
This item adds new section 33 “Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026—application provision” at the end of Part 4 of the Drought Loans Expansion Rule.
New section 33 provides that the amendments made to the Drought Loans Expansion Rule by Part 2 of Schedule 1 to the Amendment Instrument apply in relation to the 6-month period beginning on 1 February 2026 and each later 6-month period.
Regional Investment Corporation (Small Business Drought Loans) Rules 2020
Item 20—Section 4 (at the end of the definition of small business drought loan)
This item adds a note at the end of section 4 of the Regional Investment Corporation (Small Business Drought Loans) Rules 2020 (Small Business Drought Loans Rules). The purpose of the note is to inform the reader that the interest rate applying to loans under the Small Business Drought Loans Rules is dealt with by Part 2 of the Operating Mandate.
This and other amendments to the Small Business Drought Loans Rules made by the Amendment Instrument are made because Part 2 of the Operating Mandate now deals with the interest rates for loans made under Small Business Drought Loans Rules.
Item 21—Section 13
This item repeals section 13 of the Small Business Drought Loans Rules which provided that the Corporation must determine the interest rates on all loans under the program in accordance with the agreed methodology described in section 25.
Item 22—Section 25
This item repeals section 25 of Division 2 of the Small Business Drought Loans Rules which provided the Board of the Corporation with the function of agreeing with the responsible Ministers on a methodology for setting variable interest rates for small business drought loans and ensuring the Corporation performs certain steps in relation to this. Section 25 is repealed because the interest rate for these loans is now dealt with by Part 2 of the Operating Mandate.
Item 23—At the end of Part 4
This item adds new section 29 “Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026—application provision” at the end of Part 4 of the Small Business Drought Loans Rules.
New section 29 provides that the amendments made to the Small Business Drought Loans Rules by Part 2 of Schedule 1 to the Amendment Instrument apply in relation to the 6-month period beginning on 1 February 2026 and each later 6-month period.
Attachment B
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026
This Legislative Instrument 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
The purpose of the Regional Investment Corporation Legislation Amendment (Interest Rates) Instrument 2026 (the Amendment Instrument) is to:
- specify, in the Regional Investment Corporation (Operating Mandate) Direction 2018 (Operating Mandate), a single set of directions to the Regional Investment Corporation (the Corporation) about how the Corporation is to set the interest rates for all farm business loans and loans made under prescribed programs; and
- repeal provisions from the Operating Mandate, the Regional Investment Corporation (Agribusiness Natural Disaster Loans—2019 North Queensland Flood) Rule 2019; the Regional Investment Corporation (Agristarter Loans) Rule 2019; the Regional Investment Corporation (Drought Loans Expansion) Rule 2020; and the Regional Investment Corporation (Small Business Drought Loans) Rules 2020 that specify directions or rules by which the Corporation sets the interest rate for loans administered by the Corporation.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon. Julie Collins
Minister for Agriculture, Fisheries and Forestry
Senator the Hon. Katy Gallagher
Minister for Finance