CTH Emergency Response Fund Bill for Natural Disasters Receives Assent

Tuesday 5 November 2019 @ 12.05 p.m. | Legal Research

On 28 October, the Emergency Response Fund Act 2019 (Cth) (‘the Principal Act’) and  Emergency Response Fund (Consequential Amendments) Bill 2019 (Cth) (‘the Amending Act’) received assent as Act 90 and 91 of 2019 respectively. The Principal and Amending Bills were originally introduced into the House of Representatives by Mr. David Littleproud, the Minister for Water Resources, Drought, Rural Finance, Natural Disaster and Emergency Management (‘the Minister’) on 11 September 2019.  Both Bills were introduced to the Senate on 18 September. On 17 October, the Senate agreed to both Bills subject to amendments, the amendments were agreed to by the House of Representatives and the Bills were passed by both Houses on 17 October.

The purpose of the Principal Act is to give effect to the Government’s decision to establish the Emergency Response Fund (‘ERF’) which is intended to provide an additional source of support for emergency response and recovery following Australian natural disasters. The Amending Act introduces various consequential amendments to other pieces of legislation to ensure the Principal Act’s effective operation and coherence with existing legislation.

Emergency Response Fund

Part 2 of the Principal Act establishes the ERF which consists of the ERF Special Account and the investments of the ERF. With regards to the source of the funds, upon commencement, the Principal Act requires the transfer of the balance and investments of the ERF Special Account to the ERF Special Account. Further, the Principal Act will allow responsible Ministers to determine by writing that additional and specified amounts are to be credited to the ERF Special Fund in a lump sum or in specified installments.

The main purposes of the ERF Special Account include:

  1. Transferring amounts to the Home Affairs Emergency Response Fund Special Account in order to pay amounts payable to the Commonwealth under an arrangement
  2. Transferring amounts to the Home Affairs Emergency Response Fund Special Account in order to make grants
  3. Transferring amounts to the COAG Reform Fund for the purpose of making grants to the States and Territories

Further, the ERF Special Account may be debited in relation to costs and other obligations incurred by the Future Fund Board (‘the Board’) in managing the ERF. The Board is an independent body comprising individuals selected for their expertise in investing in financial assets, managing investments and corporate governance. Under section 17, it is the obligation of the Board to take all reasonable steps to ensure that the balance of the ERF Special Account is sufficient for the purposes listed above.

Arrangements, Grants and the Home Affairs ERF Special Account

Part 3 of the Principal Act states that the Emergency Management Minister may, on behalf of the Commonwealth make either an arrangement or a grant of financial assistance with a person or body concerning a natural disaster. The person or body must be carrying out a project, providing a service or adopting technology directed towards recovery, post-disaster resilience, preparedness for future disaster, reduction of risk of future disaster or long-term sustainability. Notably, when the Bills were introduced, they focused on response and recovery to current natural disasters. The inclusion of projects, services and technology relating the future disaster prevention and risk mitigation was a result of proposed amendments by the Senate.

For the purpose of transparency and accountability, Section 26 of the Principal Act requires the publication of up-to-date information relating to arrangements and grants on the Home Affairs Department’s website including the name of the body or person, the purpose of the arrangement or grant and the details of Commonwealth payments under the arrangement or grant.

Part 3 of the Principal Act also establishes the Home Affairs ERF Special Account. The purpose of the Home Affairs ERF Special Account is to pay amounts payable by the Commonwealth under an arrangement and to make grants. The Home Affairs ERF Special Account will be subject to half-yearly assessment by the Emergency Management Minister to ensure that the balance of the account does not exceed the amount sufficient to satisfy its purposes. Any excess funds will be debited from the Home Affairs ERF Special Account and credited to the ERF Special Account. Furthermore, the Principal Act imposes an annual limit to amounts transferred from the ERF Special Account to the Home Affairs ERF Special Account or the COAG Reform Fund. The total amount debited from the ERF Special Account for the purposes of responding to a natural disaster during a financial year must not exceed $150 million. The total amount debited from the ERF Special Account for the purposes of future disaster prevention and management during a financial year must not exceed $50 million.

Investment & Reporting Obligations

Part 4 of the Principal Act outlines how investment of the ERF is to be handled and managed. The Board will be responsible for deciding how to invest the ERF and requires the Board to formulate written policies for the investment strategies, performance benchmarks and risk management of the fund. Investments of the ERF will consist of financial assets, and will be held in the name of the Board.

Furthermore, the Board is bound by the ERF Investment Mandate (‘the Mandate’) given to it by the responsible Ministers. The Ministers must consider:

1.       Need to maximise the return earned on the ERF over the long term, consistent with international best practice for institutional investment

2.       Need to support the Commonwealth’s ability to pay amounts under arrangements and make grants.

Section 41 prevents Ministers from giving directions which require the Board to invest in a particular asset, acquire a particular derivative or allocate financial assets to a particular entity, business or activity. Further, the Ministers must provide a draft of the direction to the Board and may make submissions. However, once the Mandate has been formally given, the Board must take all reasonable steps to comply with it.

Part 5 of the Act imposes reporting obligations to ensure that the responsible Ministers are kept informed of the Board’s operation under the Principal Act. Section 55 enables the Finance Minister to require a report on the performance of the Board’s functions and allows the Minister to publish the report. The Board’s compliance with a Minister’s request for a report is mandatory.

Response to the Acts

The Acts have received both support and criticism. Prior to the Bills being passed, Independent member, Zali Steggall supported the initiative but expressed concern that the Bills went to “the symptoms of a much greater problem” and failed to adequately address climate change. Another concern expressed by critics and major interest groups is the sourcing of funds from the Education Investment Fund, effectively abolishing the EIF. The Group of Eight in their submission stated “it is our universities who conduct research to support those affected by (…) natural disasters” and that “while the Emergency Response Fund is an important endeavour, using EIF monies to establish it is not appropriate.” On the other hand, the Minister affirmed the positive steps made by the ERF stating in a media release “We won’t only rebuild, we’ll build stronger communities (…) This is a sustainable way to fund rebuilding from bushfire, flood or cyclone.”

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