House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Treasurer, the Hon Wayne Swan Mp

Chapter 4 - National Partnership payments

Outline of chapter

4.1 The Commonwealth will provide National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.

Context of amendments

4.2 On 29 November 2008, the Council of Australian Governments agreed to a new framework for federal financial relations. As part of its implementation of the new framework, the Commonwealth committed to the provision of National Partnership payments to support the delivery of specified outputs or projects, to facilitate reforms or to reward those jurisdictions that deliver on nationally significant reforms.

4.3 Some existing payments for specific purposes and election commitments will become National Partnership project payments where they support national objectives and provide a financial contribution to the States to deliver specific projects - for example, the Commonwealth will continue to provide a financial contribution to the States' road and rail projects through AusLink National Partnership payments.

Summary of new law

4.4 The Bills provide for the Minister to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of National Partnership payments.

Comparison of key features of new law and current law

Detailed explanation of new law

4.5 The Bills provide for the Minister, through a written determination, to credit amounts to the COAG Reform Fund for the purpose of providing financial assistance to the States in the form of National Partnership payments [subsection 16(1)].

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The COAG Reform Fund Act 2008 established the COAG Reform Fund and specifies that it is a Special Account for the purposes of the Financial Management and Accountability Act 1997 .

4.6 The Government intends that National Partnership payments are transparent and subject to Parliamentary scrutiny.

4.7 To improve transparency, the Minister's determinations are legislative instruments and will be registered on the Federal Register of Legislative Instruments, but will not be disallowable.

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Determinations made by the Minister under subsection 16(1) would not otherwise be legislative instruments within the meaning of section 5 of the Legislative Instruments Act 2003 .

4.8 The Minister has an obligation under the Intergovernmental Agreement to make National Partnership payments in a prescribed manner. Exemption from the disallowance provisions will allow the Minister to meet this obligation.

4.9 Parliamentary scrutiny is provided by requiring that the Minister gain approval for the maximum amount he may credit to the COAG Reform Fund for the purpose of providing financial assistance in a particular financial year.

4.10 While the annual Appropriation Acts will not appropriate amounts to be paid as general purpose revenue assistance, the maximum amount that the Minister may credit to the COAG Reform Fund, and the total amount covered by drawing rights authorising debits from the Fund, under subsection 16(1) in a particular financial year will be specified in an annual Appropriation Act related to that year [subsection 16(3)].

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Subsection 16(3) provides for the annual Appropriation Acts to declare that a specified amount is a general drawing rights limit in relation to a particular financial year.

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The general drawing rights limit will operate by restricting the total amount that may be covered by drawing rights under the Financial Management and Accountability Act 1997 , and hence, the amount that can be paid out from the COAG Reform Fund in a financial year.

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Limiting the ability to issue drawing rights is an effective mechanism because the Financial Management and Accountability Act 1997 does not permit expenditure without the person making the payment having been issued with a valid drawing right.

4.11 This ensures that the Parliament's role in approving Commonwealth expenditure is preserved.

4.12 The COAG Reform Fund Act 2008 requires that the terms and conditions on which financial assistance is granted through the COAG Reform Fund are set out in a written agreement between the Commonwealth and the State.

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The Government has entered into numerous National Partnership agreements to implement its COAG reform agenda.

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In addition, existing payments to the States which conform to the provisions of these Bills, and which are not rationalised into National SPPs, will be paid as if they are National Partnership payments.

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The COAG Reform Fund Act 2008 established the COAG Reform Fund and specifies that it is a Special Account for the purposes of the Financial Management and Accountability Act 1997 .

Application and transitional provisions

4.13 This measure applies from 1 April 2009.

Consequential amendments

4.14 The Federal Financial Relations (Consequential Amendments and Transitional Arrangements) Bill 2009 provides for the Interstate Road Transport Act 1985 to be amended to allow payments from the Interstate Road Transport Account to be made through the COAG Reform Fund as these payments are National Partnership payments under the new federal financial framework.