WARNING:
This Digest is prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments.
This Digest was available from 14 May 1996
CONTENTS
Date introduced:8 May 1996
House: House of Representatives
Portfolio: Finance
Commencement:On Royal Assent or 1 July 1996, which
ever is the later.
To provide for the financing of a prospective deficit in the
Consolidated Revenue Fund.
The Commonwealth Public Account, which is the main bank account
of the Commonwealth, consists of the CRF, the Loan Fund and the
Trust Fund. The CRF is the main working account of the Commonwealth
and its main sources of receipts are income tax, sales tax, payroll
tax, customs duties, excise and other departmental receipts. The
main payments from the CRF are for payments to or for other levels
of government; social welfare and health benefits; defence
services; departmental expenditure on running expenses, works and
other services; and interest payments and sinking fund
contributions.
Where payments for the CRF exceed receipts such that the CRF
would be in deficit, the CRF is balanced by charging certain
payments to the Loan Fund. Usually this is done by passing a Loan
Act, which generally provides for certain expenditures, usually
defence expenditures, to be charged to the Loan Fund. The CRF is
thus reimbursed for any relevant defence expenditures which may
have been made from it. Defence expenditures tend to be chosen
because they involve large amounts of money and because the
Commonwealth does not seek Australian Loan Council approval for
borrowings of a defence nature. A Loan Act may also authorise the
use of Loan Fund monies to supplement the CRF receipts for the
purpose of covering certain other, non-defence payments.
The Trust Fund contains money held in trust for people and
authorities other than the Commonwealth Government; working
accounts covering certain factories, stores and services; other
money held in trust under the authority of Parliament to meet
future expenditure; and funds and accounts not part of the accounts
of the Minister for Finance but which, because of their enabling
legislation, are part of the Trust Fund.
The term 'current financial year' is defined by clause
3 to be the year ending 30 June 1997.
Clause 4 will authorise the Treasurer to borrow
funds, by the issue of bonds or Treasury Bills, for defence
services during the current financial year.
Clause 5 provides that funds raised under
clause 4 are only to be spent on defence services and borrowing
costs.
Clause 6 will authorise the Treasurer to
borrow, during the financial year, funds to supplement the CRF. The
amount borrowed is not to exceed the deficit in the CRF and
borrowing costs; is to be raised by the issue of bonds or Treasury
Bills and be within limits approved by the Loan Council. Funds so
borrowed are only to be used to make payments to the CRF and to
meet borrowing costs (clause 7).
A common source of confusion is the relationship between the CRF
outcome and the Budget outcome. It can occur, for example, that the
CRF may be in deficit and a Loan Act may be required to be passed
in order for the CRF to be balanced, while the Budget outcome
itself might be in surplus.(1)
There are two reasons why this situation may arise. Firstly, the
Budget outcome reflects transactions on all three Funds in the
Commonwealth Public Account, not just the CRF. Secondly, the
outcome of the CRF reflects the difference between the payments and
receipts of that Fund, whereas the Budget outcome reflects the
differences between Budget outlays and revenue.(2)
(1) D. James, An Overview of the Commonwealth Budgetary
Process, Parliamentary Research Service - Department of the
Parliamentary Library, 1993, p. 9.
(2) Ibid.
Ian Ireland Ph. 06 277 2438
13 May 1996
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
PRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
the public.
ISSN 1323-9032
© Commonwealth of Australia 1996
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
duties.
Published by the Department of the Parliamentary Library,
1996.
This page was prepared by the Parliamentary Library,
Commonwealth of Australia
Last updated: 14 May 1996
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