Chapter 1Introduction
1.1On 31 July 2025, the Senate referred the Pacific Banking Guarantee Bill 2025 (thebill) to the Senate Economics Legislation Committee (the committee) for inquiry and report by 21 August 2025. The bill was first introduced in the House of Representatives during the 47th Parliament and was subsequently reintroduced in the 48th Parliament on 24 July 2025.
Purpose of the bill
1.2The bill authorises the Commonwealth to appropriate money to support an Australian headquartered bank to continue its banking operations in Pacific region countries.
1.3In particular, the bill provides that the ‘Consolidated Revenue Fund is appropriated for the purpose of meeting any liabilities that the Commonwealth may incur under a Pacific banking guarantee’. Further, the bill stipulates that a Pacific banking guarantee is:
(a)a guarantee the Commonwealth grants to an [Authorised deposit-taking institution (ADI)] under section 60 of the Public Governance, Performance and Accountability Act 2013;
(b)related to the ADI’s banking business in the Pacific region (including conducted through its subsidiaries); and
(c)with an ADI that is headquartered in Australia.
1.4In introducing the bill, the Assistant Treasurer and Minister for Financial Services, Dr Daniel Mulino MP, stated that the bill will ‘help secure access to banking services across the Pacific’ and ‘help ensure our entire region can stay connected to the global financial system’.
Background
1.5Many Pacific region countries face serious challenges in maintaining an active banking presence. As outlined in the bill’s Explanatory Memorandum:
The Pacific region has experienced some of the fastest declines in cross-border banking services globally, reducing the ability to conduct trade and receive aid financial flows. Remaining connected to the global financial system is one of the highest priorities for Pacific nations.
1.6In general, Pacific region countries often lack the scale to make it commercially attractive for foreign banks to offer their banking and financial services. Pacific region countries—defined by the bill as including the islands of the Pacific, Papua New Guinea and Timor-Leste—collectively have a population of around 13.7 million.
1.7One in four people in the Pacific region live below the poverty line.
Australia’s development efforts in the Pacific
1.8Australia has significant existing aid initiatives in the Pacific. For instance, in 2025–26, 42 per cent of Australia’s international aid budget is allocated to Pacific countries ($2.16 billion). In the Indo-Pacific region, Australia’s international development policy aims to blend ‘aid functions with defence and security in response to non-democratic-state-actor interest’.
1.9Additionally, the Australian Government’s Pacific Australia Labour Mobility scheme aims to fill labour gaps in ‘rural and regional Australia and nationally for agriculture and select agriculture-related food product manufacturing sectors by offering employers access to a pool of workers’ from several Pacific countries.
2024 Pacific Banking Forum
1.10In July 2024, the United States and Australia jointly hosted the Pacific Banking Forum in Brisbane. The forum’s outcome statement outlined the United States’ and Australia’s joint commitment to ‘work with Pacific Island countries (PICs) and public, private and multilateral sector partners in the region to address the decline of correspondent banking relationships (CBRs) in the Pacific’.
1.11Immediately following the forum, the Australian Government announced additional funding to help address the decline of banking in the Pacific, including:
$2.9 million to the World Bank to support the development of inclusive and secure digital identity infrastructure across Pacific Island Countries.
$1.7 million to the Asian Development Bank to enhance regional compliance with anti‑money laundering and counter‑terrorism financing requirements.
$1.7 million for the Attorney‑General’s Department to assist with criminal justice and law enforcement capacity in the region.
Remittances in the Pacific
1.12Australian banks have a ‘significant presence’ in Pacific region countries and, in many cases, form a ‘crucial part’ of those countries’ financial systems. The Explanatory Memorandum states that the ‘ongoing presence of Australian banks in the Pacific is also an important enabler of financial inclusion and the reliable flow of remittances’.
1.13For low- and middle-income countries, remittances are the ‘largest source of external financial flows globally’.For instance, remittances comprised 40 per cent of Tonga’s GDP in 2023.
Structure of the bill
1.14Sections 1 to 4 set out the bill’s short title; commencement date, being the day of Royal Assent; definitions; and the extra-territorial application of the bill, meaning it would extend to ‘acts, omissions, matters and things outside of Australia’.
1.15Section 5 gives effect to the bill’s proposed special (standing) appropriation for the purpose of meeting a Pacific banking guarantee obligation. An appropriation must be in place for the Commonwealth to make a payment from the Consolidated Revenue Fund. The Explanatory Memorandum notes that a standing appropriation would allow for funds to be drawn quickly from consolidated revenue, which may be necessary for the Commonwealth to discharge a liability under a Pacific banking guarantee.
Financial and regulatory impact
1.16The Explanatory Memorandum states that ‘[d]ue to commercial sensitivities, the financial impact of this measure is not for publication’.
1.17The Explanatory Memorandum states that the compliance cost impact of the bill is nil.
Legislative scrutiny
1.18This section outlines legislative scrutiny of the bill undertaken during the 47thParliament by:
the Senate Standing Committee for the Scrutiny of Bills; and
the Parliamentary Joint Committee on Human Rights.
Senate Standing Committee for the Scrutiny of Bills
1.19In considering the bill, the Senate Standing Committee for the Scrutiny of Bills (the scrutiny committee) expressed concern regarding limited opportunity for parliamentary oversight of the bill’s proposed standing appropriation. The scrutiny committee explained that, in general:
Standing appropriations enable entities to spend money from the Consolidated Revenue Fund on an ongoing basis, usually for indefinite amounts and duration. Unlike annual appropriations which require the executive to periodically request the Parliament to appropriate money for a particular purpose, once a standing appropriation is enacted any expenditure under it does not require regular parliamentary approval and therefore escapes direct parliamentary control. The amount of expenditure authorised by a standing appropriation may grow significantly over time, but without any mechanism for review included in the bill alongside the appropriation it is difficult for the Parliament to assess whether a standing appropriation remains appropriate.
1.20Given the difficulty of parliamentary oversight of standing appropriations, the scrutiny committee considered that ‘robust justification’ is needed for why a standing appropriation should be established or expanded. The scrutiny committee noted that the bill’s Explanatory Memorandum:
…provided some explanation as to what the standing appropriation is for. However, no explanation has been provided as to why such an appropriation should not be included in the annual appropriation bills and whether any mechanisms have been considered to provide parliamentary oversight.
1.21Additionally, the scrutiny committee said its concerns were ‘heightened’ as the bill’s proposed standing appropriation ‘is not limited by monetary value or time’. The scrutiny committee noted that the Explanatory Memorandum provided justification for not specifying the maximum amount of the proposed appropriation. However, the scrutiny committee also noted that it was ‘unclear if any other mechanisms have been considered to provide parliamentary oversight of the amount of money expended’ under the standing appropriation proposed by the bill.
1.22Similarly, the scrutiny committee noted that the Explanatory Memorandum stated the bill’s proposed standing appropriation is not time-limited as ‘the duration of the guarantee entered into may vary, and to allow flexibility to pay any guarantee obligations in a timely manner, but that it is expected that this will be for a 10-year period’. Despite this explanation, the scrutiny committee considered it ‘unclear…why this expected time-limit cannot be included in the bill itself’.
Parliamentary Joint Committee on Human Rights
1.23In the 47th Parliament, the Parliamentary Joint Committee on Human Rights reported that it had no comment on the Pacific Banking Guarantee Bill 2025.
Human rights implications
1.24The Explanatory Memorandum states that the bill 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’. The Explanatory Memorandum adds that the bill ‘does not engage any of the applicable rights or freedoms’.
Conduct of the inquiry
1.25The committee advertised the inquiry on its webpage and wrote to relevant stakeholders to invite them to make a submission by 7 August 2025. The committee received 5 submissions, as listed at Appendix 1.
1.26The committee held a held a public hearing in Melbourne on Tuesday, 12 August 2025. The witnesses who appeared at the hearing are listed at Appendix2.
Acknowledgements
1.27The committee thanks the individuals and organisations who contributed to the committee’s inquiry, particularly those who made written submissions or gave evidence at the committee’s public hearing.