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Senate Committees

Scrutiny of Bills Digest No. 4 of 1998

SENATE STANDING COMMITTEE FOR THE SCRUTINY OF BILLS

ALERT DIGEST No. 4 of 1998

1 April 1998

ISSN 1329-668X

MEMBERS OF THE COMMITTEE

Senator B Cooney (Chairman)

Senator W Crane (Deputy Chairman)

Senator J Ferris

Senator S Macdonald

Senator A Murray

Senator J Quirke

TERMS OF REFERENCE

Extract from Standing Order 24

(1)

(a) At the commencement of each Parliament, a Standing Committee for the Scrutiny of Bills shall be appointed to report, in respect of the clauses of bills introduced into the Senate, and in respect of Acts of the Parliament, whether such bills or Acts, by express words or otherwise:

(i) trespass unduly on personal rights and liberties;

(ii) make rights, liberties or obligations unduly dependent upon insufficiently defined administrative powers;

(iii) make rights, liberties or obligations unduly dependent upon non-reviewable decisions;

(iv) inappropriately delegate legislative powers; or

(v) insufficiently subject the exercise of legislative power to parliamentary scrutiny.

(b) The Committee, for the purpose of reporting upon the clauses of a bill when the bill has been introduced into the Senate, may consider any proposed law or other document or information available to it, notwithstanding that such proposed law, document or information has not been presented to the Senate.

CONTENTS

Australian Hearing Services Reform Bill 1998

Australian Prudential Regulation Authority Bill 1998

Authorised Deposit-taking Institutions Supervisory Levy Imposition Bill 1998

Authorised Non-operating Holding Companies Supervisory Levy Imposition Bill 1998

Commonwealth Rehabilitation Service Reform Bill 1998

Employee Protection (Wage Guarantee) Bill 1998

Financial Institutions Supervisory Levies Collection Bill 1998

Financial Sector Reform (Amendments and Transitional Provisions) Bill 1998

Financial Sector (Shareholdings) Bill 1998

Food Labelling Bill 1998

General Insurance Supervisory Levy Imposition Bill 1998

Life Insurance Supervisory Levy Imposition Bill 1998

Payment Systems (Regulation) Bill 1998

Retirement Savings Account Providers Supervisory Levy Imposition Bill 1998

Social Security and Veterans' Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998

Student and Youth Assistance Amendment Bill 1998

Superannuation Supervisory Levy Imposition Bill 1998

Australian Hearing Services Reform Bill 1998

This bill was introduced into the House of Representatives on 25 March 1998 by the Parliamentary Secretary to the Minister for Health and Family Services. [Portfolio responsibility: Health and Family Services]

The bill proposes to repeal the Australian Hearing Services Act 1991 and provides for a number of transitional provisions to facilitate the restructuring of the Australian Hearing Services Authority as a Commonwealth company.

Commencement

Subclause 2(2) and Schedule 1

By virtue of subclause 2(2) of the Bill, the amendments proposed in Schedule 1 will commence at a time which is at the discretion of the Minister. These amendments propose the repeal of the Australian Hearing Services Act 1991, and a minor amendment to the Hearing Services Administration Act 1997. While discretionary commencement is something that attracts the attention of the Committee, it is apparent from other provisions of the Bill that these amendments ought not come into force until those other provisions have first been implemented.

In these circumstances, the committee makes no further comment on this provision.

Insufficient parliamentary scrutiny

Clause 24

Clause 24 of the Bill provides that no instrument made under the Bill (with the exception of any regulations made under section 25) is a legislative instrument for the purposes of the Legislative Instruments Act 1998. Such a clause is clearly not necessary in relation to instruments which are administrative in nature, and so must relate to instruments which are legislative in nature. The Committee notes that the intention underlying the proposed Legislative Instruments Act is that all such instruments should be scrutinised by the Parliament. Accordingly, the Committee seeks the advice of the Minister on the reasons for excluding such instruments from scrutiny.

Pending the Minister's advice, the committee draws Senators' attention to this provision, as they may be considered to insufficiently subject the exercise of legislative power to parliamentary scrutiny, in breach of principle 1(a)(v) of the committee's terms of reference.

Australian Prudential Regulation Authority Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to establish the Australian Prudential Regulation Authority (APRA) which will be an independent prudential operator of banks and other deposit-taking institutions, life and general insurance companies, superannuation funds and retirement income amounts.

The committee has no comment on this bill.

Authorised Deposit-taking Institutions Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on authorised deposit-taking institutions regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection functions.

Commencement

Subclause 2(2)

Subclause 2(2) of the Bill provides that commencement may be delayed for up to 24 months after assent. This is a substantially greater period than the 6 months referred to in Office of Parliamentary Counsel Drafting Instruction No 2 of 1989. However, paragraph 4.4 of the Explanatory Memorandum indicates that the additional time for proclamation is necessary as banking institutions are expected to be subject to the requirements for non-callable deposits during 1998-99, while other deposit-taking institutions are currently subject to State prudential arrangements and supervisory levies.

In these circumstances, the committee makes no further comment on this bill.

Authorised Non-operating Holding Companies Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on authorised non-operating holding companies regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection.

The committee has no comment on this bill.

Commonwealth Rehabilitation Service Reform Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Minister for Family Services. [Portfolio responsibility: Health and Family Services]

The bill proposes to provide transitional arrangements to facilitate the restructuring of the Commonwealth Rehabilitation Service as a Commonwealth company and makes consequential amendments to eight other Acts.

Insufficient parliamentary scrutiny

Clause 18

Clause 18 of the Bill provides that no instrument made under the Bill (with the exception of any regulations made under section 19) is a legislative instrument for the purposes of the Legislative Instruments Act 1998. Such a clause is clearly not necessary in relation to instruments which are administrative in nature, and so must relate to instruments which are legislative in nature. The Committee notes that the intention underlying the proposed Legislative Instruments Act is that all such instruments should be scrutinised by the Parliament. Accordingly, the Committee seeks the advice of the Minister on the reason for excluding such instruments from scrutiny.

Pending the Minister's advice, the committee draws Senators' attention to this provision, as it may be considered to insufficiently subject the exercise of legislative power to parliamentary scrutiny, in breach of principle 1(a)(v) of the committee's terms of reference.

Employee Protection (Wage Guarantee) Bill 1998

This bill was introduced into the House of Representatives on 23 March 1998 by Mrs Crosio as a Private Member's bill.

The bill proposes to protect workers in the event of their employer's insolvency by:

establishing a scheme of wage protection insurance;
requiring employers to insure their workforces under the scheme; and
providing for the determination and enforcement of claims under the scheme.

The committee has no comment on this bill.

Financial Institutions Supervisory Levies Collection Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to enable the collection of the levies on financial institutions regulated by the Australian Prudential Regulation Authority (APRA).

The committee has no comment on this bill.

Financial Sector Reform (Amendments and Transitional Provisions) Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to amend the following Acts:

Australian Securities Commission Act 1989 to:

- change the name of the Australian Securities Commission to the Australian Securities and Investments Commission (ASIC);

- provide the ASIC with additional functions, particularly in relation to the consumer protection and market integrity aspects of insurance and superannuation regulation; and

- make consequential amendments;

Banking Act 1959 to extend the coverage of the Act so that the banking and deposit-taking sector will be administered by the Australian Prudential Regulation Authority (APRA);
Financial Corporations Act 1974 to require that authorised deposit-taking institutions provide certain data to both the Reserve Bank of Australia and the APRA;
Insurance Acquisitions and Takeovers Act 1991 to facilitate integration with the proposed Financial Sector (Shareholdings) Act 1998 and transfer regulatory responsibility to the APRA;
Insurance Act 1973, Insurance (Agents and Brokers) Act 1984 and Insurance Contracts Act 1984 to transfer regulatory responsibility to the APRA;
Life Insurance Act 1995, Retirement Savings Accounts Act 1997 and Superannuation Industry (Supervision) Act 1993 to separate responsibility for the administration of the Acts between the ASIC and the APRA;
Reserve Bank Act 1959 to:

- establish the Payments System Board to operate as the policy making board in relation to the payments system;

- reduce the Reserve Bank Board from 11 to nine members; and

- make consequential amendments;

Superannuation (Resolution of Complaints) Act 1993 to transfer regulatory responsibility to the ASIC; and

repeals six Acts and makes consequential and transitional amendments to other Acts.

Commencement

Subclause 2(4)

Subclause 2(4) of the Bill provides that commencement of Item 86 of Schedule 2 (which repeals Division 3 of Part II of the Banking Act) may be delayed for up to 24 months after assent. This is considerably longer than the 6 months referred to in Office of Parliamentary Counsel Drafting Instruction No 2 of 1989. The Explanatory Memorandum merely observes that the removal of the requirement for banks to hold non-callable deposits with the Reserve Bank “will take effect from a date specified by proclamation (capped at 24 months)”. By inference, the extended time is required for the same reasons as noted above in relation to the Authorised Deposit-taking Institutions Supervisory Levy Imposition Bill 1998.

In these circumstances, the committee makes no further comment on this provision.

Non-availability of merits review

Schedule 2, Items 29-40

Items 29 to 40 of Schedule 2 to the Bill propose substantial changes to section 9 of the Banking Act 1959, and add new sections 9A, 9B and 9C to that Act. The effect of these amendments will be to give to the newly established Australian Prudential Regulation Authority (APRA) the power, currently exercised by the Governor-General, to issue and revoke the authority to carry on banking business in Australia. The exercise of such a power clearly has considerable commercial implications, yet the Bill seems to make no provision for AAT review of APRA decisions. Accordingly, the Committee seeks the advice of the Treasurer on the reason for excluding such decisions from independent review on the merits.

Pending the Treasurer's advice, the committee draws Senators' attention to this provision, as it may be considered to make rights, liberties or obligations unduly dependent on non-reviewable decisions, in breach of principle 1(a)(iii) of the committee's terms of reference.

Insufficient parliamentary scrutiny

Schedule 2, Items 49

Item 49 of Schedule 2 to the Bill inserts a proposed new section 11AF in the Banking Act 1959. This section will permit APRA to make prudential standards for authorised deposit-taking institutions. These standards appear to be legislative in character. However, there seems to be no provision for parliamentary scrutiny. The Committee notes that the intention underlying the proposed Legislative Instruments Act is that all such instruments should be scrutinised by the Parliament. Accordingly, the Committee seeks the advice of the Minister on the reason for omitting such instruments from scrutiny.

Abrogation of the right against self-incrimination

Schedule 2, Items 65 and 128

Items 65 and 128 of Schedule 2 to the Bill will insert proposed new subsections 16B(5) and (6) and 62(3) and (4) in the Banking Act 1959. These subsections will remove the privilege against self-incrimination for persons charged with some offences under the Act. While mindful of the need to scrutinise such provisions, the Committee notes that they are in a form which the Committee has previously been prepared to accept.

In these circumstances, the committee makes no further comment on these provisions.

Financial Sector (Shareholdings) Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to regulate the ownership and acquisitions of prudentially regulated financial institutions.

Non-availability of merits review

Subclause 14(1)

Subclause 14(1) of the Bill grants to the Treasurer the discretion to determine whether an applicant may hold a stake of more than 15% in a financial sector company. However, the Bill seems to make no provision for review on the merits by the Administrative Appeals Tribunal of any exercise of that discretion. Accordingly, the Committee seeks the advice of the Treasurer on the reason for excluding such decisions from independent review on the merits.

Non-availability of merits review

Clauses 23 and 31

Clause 23 of the Bill will permit the Treasurer to declare that a person has practical control of a financial sector company. On the making of such a declaration, clause 24(1) requires the person to give up that control. By virtue of clause 24(3), a failure to give up that control is a criminal offence.

Clause 31 of the Bill will permit the Treasurer to issue a direction to a stakeholder to reduce his or her stake in a financial sector company if “it would be concluded” (by an unspecified person or persons) that the stakeholder was seeking to avoid other provisions in the Bill. A failure to comply with such a direction issued by the Treasurer is, again, a criminal offence.

Since the commission of each of these offences depends, initially, on the exercise of a discretion by the Treasurer, it may be considered that the Treasurer can, in effect, create criminal liability in another person. Accordingly, the Committee seeks the advice of the Treasurer on whether the exercise of discretions which may create criminal liability should be subject to independent review on the merits.

Pending the Treasurer's advice, the committee draws Senators' attention to these provisions, as they may be considered to make rights, liberties or obligations unduly dependent on non-reviewable decisions, in breach of principle 1(a)(iii) of the committee's terms of reference.

Food Labelling Bill 1998

This bill was introduced into the Senate on 24 March 1998 by Senator Woodley as a Private Senator's bill.

The bill proposes to make it compulsory for food to be labelled with a table of product contents, detailing each ingredient, its percentage by volume in the product and its country of origin.

The committee has no comment on this bill.

General Insurance Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on the general insurance industry regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection.

The committee has no comment on this bill.

Life Insurance Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on the life insurance industry regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection.

The committee has no comment on this bill.

Payment Systems (Regulation) Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to provide that the Reserve Bank has the power to designate payment systems; to impose access regimes; make standards; arbitrate disputes; and give directions to participants in designated systems.

Insufficient scrutiny by Parliament of legislative power

Subclause 9(3) and clause 18

Subclause 9(3) of the Bill will permit the Reserve Bank to issue notices declaring that the Act will not apply to specified facilities. Clause 18 will permit the Bank to make standards for designated payment systems. In each case, the provisions appear to grant the bank a legislative power, with no corresponding provision for Parliamentary scrutiny of the exercise of that power. Accordingly, the Committee seeks the advice of the Treasurer as to the reasons for not subjecting the exercise of these powers to Parliamentary scrutiny.

Pending the Treasurer's advice, the committee draws Senators' attention to these provisions, as they may be considered to trespass unduly on personal rights and liberties, in breach of principle 1(a)(i) of the committee's terms of reference.

Non-availability of merits review

Clauses 21 and 24

Clauses 21 and 24 will allow the Reserve Bank to issue directions to various financial institutions. Failure to comply with these directions will be a criminal offence. Such provisions appear to permit the Bank to, in effect, create criminal liability – something which is appropriately the domain of Parliament. Accordingly, the Committee seeks the advice of the Treasurer on whether the exercise of discretions which may create criminal liability should be subject to independent review on the merits.

Non-availability of merits review

Clauses 23 and 25

Clause 23 of the Bill will permit the Reserve Bank to authorise a corporation to be a holder of the stored value of a class of purchased payment facilities. Clause 25 of the Bill permits the Bank to exempt a corporation from the need to have such an authority. In neither case is the exercise of this discretion subject to review on the merits by the Administrative Appeals Tribunal. Accordingly, the Committee seeks the advice of the Treasurer on whether the exercise of such discretions should be subject to independent review on the merits.

Retirement Savings Account Providers Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on providers of retirement savings accounts regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection.

The committee has no comment on this bill.

Social Security and Veterans' Affairs Legislation Amendment (Pension Bonus Scheme) Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Minister representing the Minister for Social Security. [Portfolio responsibility: Social Security]

The bill proposes to amend the following Acts:

Social Security Act 1991 to enable persons who have qualified for an age pension but deferred receipt of the payment to be entitled to the pension bonus;
Veterans' Entitlements Act 1986 to enable persons who are eligible for certain designated pensions but have deferred claiming those payments to be entitled to the pension bonus; and
Income Tax Assessment Act 1997 to make lump sum payments of pension bonus exempt from income tax.

The committee has no comment on this bill.

Student and Youth Assistance Amendment Bill 1998

This bill was introduced into the House of Representatives on 25 March 1998 by the Minister for Employment, Education, Training and Youth Affairs. [Portfolio responsibility: Schools, Vocational Education and Training]

The bill proposes to amend the Student and Youth Assistance Act 1973 relating to the AUSTUDY/ABSTUDY Financial Supplement (FS) Scheme to:

enable the Secretary to allow a person to repay benefits after the “cut off” dates when the benefit was paid in certain circumstances;
require the Secretary to decide whether a person who applies for AUSTUDY or ABSTUDY is eligible for FS at the same time;
ensure that a student may apply for FS only while an eligible student;
introduce a 14 day cooling off period for FS applications;
provide that payments of FS are to stop if a person in receipt of FS is found to be eligible for a reduced amount of FS and has already been paid that amount;
provide for the consequences flowing from when a student remains eligible for the FS but is entitled to access a reduced maximum amount;
provide that a corporation (providing funds for FS) is not responsible for any amount paid to a deceased student before notice is given is the corporation;
provide that if a person repays an FS debt in full during the contract period, they are entitled to a 15 per cent discount, whether the debt is repaid as a single lump sum or as a number of partial payments;
maintain the parity between HECS and FS prescribed amounts and to align procedures for indexing HECS and FS prescribed amounts;
deal with what happens to wrongly paid FS where FS payments to students are to stop because students have already been paid their maximum entitlement;
provide that FS payments are to stop in certain circumstances; and
makes administrative and consequential amendments.

The committee has no comment on this bill.

Superannuation Supervisory Levy Imposition Bill 1998

This bill was introduced into the House of Representatives on 26 March 1998 by the Treasurer. [Portfolio responsibility: Treasury]

One of a package of bills to effect the introduction of the new regulatory framework for the financial system, this bill proposes to impose a levy on non-excluded superannuation funds regulated by the Australian Prudential Regulation Authority (APRA). The levy is one of several being imposed to fund the APRA and the cost to the Australian Securities and Investments Commission of undertaking consumer protection.

The committee has no comment on this bill.