Thursday, 5 December 2013
Commonwealth Inscribed Stock Amendment Bill 2013; In Committee
I move the following amendment to be added at the end of the motion, as has been read out:
But in its place the Senate agrees to the request for an amendment and amendments circulated in my name:
(1) Title, page 1 (lines 1 and 2), omit "amend the Commonwealth Inscribed Stock Act 1911, and for related purposes", substitute "remove the limit on stock and securities on issue, and for other purposes".
(2) Schedule 1, items 1 and 2, page 3 (lines 5 to 11), omit the items, substitute:
1 Section 5
Repeal the section.
2 Subsection 51JA(2)
Omit ", disregarding stock and securities of the kind mentioned in subsection 5(2),".
3 After subsection 51JA(2)
(2A) In working out the total face value of stock and securities for the purposes of subsection (2), disregard:
(a) stock and securities issued in relation to money borrowed under the Loan (Temporary Revenue Deficits) Act 1953; and
(b) stock and securities loaned by the Treasurer under a securities lending arrangement under section 5BA of the Loans Securities Act 1919, or held by or on behalf of the Treasurer for the purpose of such an arrangement; and
(c) stock and securities invested under subsection 39(2) of the Financial Management and Accountability Act 1997; and
(d) stock and securities on issue as at the start of 13 July 2008, other than Treasury Fixed Coupon Bonds.
Note: The time referred to in paragraph (d) is when item 4 of Schedule 1 to the Commonwealth Securities and Investment Legislation Amendment Act 2008 commenced.
4 At the end of section 51JA
(5) For the purposes of this section:
(a) the face value of a Treasury Indexed Bond is taken to be its face value at the time it was issued; and
(b) the loan of stock or a security is taken to include an arrangement under which it is sold and repurchased.
(3) Page 3 (after line 11), at the end of the Bill, add:
Schedule 2—Amendment of the Charter of Budget Honesty Act 1998
1 At the end of clause 2 of Schedule 1
Additional statements about Commonwealth stock and securities
(7) In certain cases where the face value of Commonwealth stock and securities on issue has increased by $50 billion or more since a previous report or statement under the Charter of Budget Honesty, the Treasurer is to table a statement setting out reasons for the increase (see Part 9).
2 Subclause 3(1) of Schedule 1
Commonwealth stock and securities means stock and securities on issue under the Commonwealth Inscribed Stock Act 1911 (the CIS Act) or the Loans Securities Act 1919 (disregarding stock and securities of the kind mentioned in subsection 51JA(2A) of the CIS Act).
debt statement, for a report under Part 5 or 7, means a statement that includes:
(a) the following information about Commonwealth stock and securities on issue, at the time of the report and for the financial year to which the report relates and the following 3 financial years:
(i) the value of the stock and securities (including their market and face value, and their value as a proportion of gross domestic product);
(ii) the total expected interest expenses relating to the stock and securities; and
(b) a breakdown, by maturity and timing of interest payments, of Commonwealth stock and securities on issue at the time of the report.
3 At the end of subclause 12(1) of Schedule 1
; (f) a debt statement.
4 At the end of subclause 16(1) of Schedule 1
; and (c) contain a debt statement.
5 At the end of subclause 24(1) of Schedule 1
; (e) a debt statement.
6 At the end of paragraph 26(a) of Schedule 1
(v) the information required by paragraph 24(1)(e); and
7 At the end of Schedule 1
Part 9—Additional statements about Commonwealth stock and securities
33 Additional statements about Commonwealth stock and securities
(1) This clause applies when the actual face value of Commonwealth stock and securities on issue has increased by $50 billion or more since whichever of the following last occurred:
(a) a budget economic and fiscal outlook report, a mid-year economic and fiscal outlook report or a pre-election economic and fiscal outlook report was publicly released;
(b) a statement under this clause was tabled.
(2) The Treasurer is to table in each House of the Parliament, within 3 sittings days of that House after the increase referred to in subclause (1), a statement setting out the reasons for the increase, including the extent to which any of the following contributed to the increase:
(a) lower than expected revenue;
(b) higher than expected spending;
(c) capital purchases;
(d) grants to State and Territory governments for infrastructure.
8 Application—statements under clause 33 of the Charter of Budget Honesty
Clause 33 of Schedule 1 to the Charter of Budget Honesty Act 1998 applies in relation to a report referred to in paragraph (1)(a) of that clause that is publicly released on or after the commencement of this item.
I want to make a few remarks about the amendments and what they seek to achieve. There are two things that we are doing with regard to this. One is to end the debt ceiling and remove that. The second thing is to amend the Charter of Budget Honesty. I want to go into the background of this.
Up until 2008 there was a process that federal parliament had engaged in where, through the budget process, through the appropriations process, the debt was managed. In 2008 the then Assistant Treasurer, Mr Chris Bowen, introduced legislation which effectively introduced the debt cap. I have been back over all of the speeches, statements, explanatory memoranda and so on, and whilst all of them talk about why the debt was being increased, none of them go to any explanation of why they introduced the debt ceiling as such. One can only assume that it was a decision that was made by the then government to try to reassure the community that whilst debt was being incurred it would not keep increasing debt, because the Labor government had just been elected at the end of 2007 and no doubt they thought it was a good idea to reassure the community on that front. What they did not anticipate—and no-one could have—was the financial crisis that then set in and changed everything. The Labor government had to come back twice after that to increase the debt limit that they had put in place.
In the meantime in the United States, as we know, the Tea Party had managed to get up a head of steam and it employed the tactic of blocking increases to the debt ceiling in order to create a political crisis. In the United States it is a genuine political crisis, and the reason for that is the American political system, where the congress imposes debt ceilings because it wants to limit the borrowing capacity of the separately-elected executive arm of government. So it genuinely is a debt crisis in the United States, because it is a stand-off between congress and the executive. In the Australian context it is vastly different because, as everybody appreciates, the executive is part of the parliament. Not only is it an entirely different scenario but there is also a capacity for government to use other legislation in order to meet any shortfall. The Loan (Temporary Revenue Deficits) Act 1953 would allow you to cover any shortfall. So all that has happened is that a Tea Party tactic from the United States has effectively been inserted into the Australian political system, and the result of that has been what has become political brinkmanship.
I hold Minister Cormann to account in this regard. I am very aware that he went to the United States and caught up with half a dozen of his Tea Party colleagues, and it was only when he came back from—