Public Governance, Performance and Accountability (Investment) Authorisation 2024

The instrument introduces several defined terms that determine the boundaries of permissible investment. Approved bank means a person carrying on banking business in Australia whose operations are subject to prudential supervision under Commonwealth, state, or territory law, and which has a Standard and Poor’s long-term rating of A‑ (or Moody’s or Fitch equivalent) or better , except for Part 3 (Export Finance and Insurance Corporation), where the threshold is BBB‑ (or equivalent). This definition effectively restricts eligible counterparties to the major Australian banks and a few smaller ones that maintain an investment-grade rating at that level. Approved entity means any entity operating inside or outside Australia with a Standard and Poor’s long-term rating of AA‑ (or equivalent) or better. This is a very high credit-quality threshold , only sovereigns, supranationals, and the highest-rated corporate or financial institutions would qualify. The Export Finance and Insurance Corporation and Housing Australia may invest with such entities, either on deposit or in securities issued or guaranteed by them. Securities is defined exhaustively to mean debentures, bonds, promissory notes, commercial paper, bills of exchange, certificates of deposit, and fixed and floating rate notes issued under a senior debt program, plus their dematerialised equivalents. Critically, the definition expressly excludes any instrument in the nature of equity, subordinate debt, or hybrid equity. This means no shares, no convertible notes, and no subordinated bonds , even if issued by an approved bank. Senior debt program is defined as a program under which debt is issued and ranked ahead of other debt and has priority if debt has to be redeemed in liquidation. This ensures that any floating rate note bought by the Grains Research and Development Corporation or Airservices Australia is senior in the capital structure, reducing credit risk but also limiting yield. Dematerialised security is defined as a dematerialised security deposited in the Austraclear System, which is the Australian Securities Exchange’s electronic settlement system. This concept appears throughout the instrument to allow entities to hold investments in book-entry form rather than physical certificates, but it also ties the authorisation to a specific clearing system. The note in the instrument refers to the ASX website for current information about Austraclear. The interconnected effect of these definitions is to create a highly constrained investment landscape. Entities cannot diversify across asset classes, geographies, or currencies. They cannot buy corporate bonds outside the approved bank/approved entity universe. They cannot hold any instrument that is not a direct debt claim on an approved bank or approved entity. The opportunity cost of this narrow mandate in a rising-interest-rate environment , where investment-grade corporate bonds or government securities might offer better risk-adjusted returns , is not addressed in the instrument, but it represents a real economic trade-off for the entities and, ultimately, for the taxpayers whose money is at stake.

The instrument directly affects ten Commonwealth entities: the Australian Broadcasting Corporation, the Export Finance and Insurance Corporation, the Grains Research and Development Corporation, the Rural Industries Research and Development Corporation, the Commonwealth Scientific and Industrial Research Organisation, the Civil Aviation Safety Authority, Australian Hearing Services (trading as Hearing Australia), the Australian Nuclear Science and Technology Organisation, Airservices Australia, and Housing Australia. These entities are all “corporate Commonwealth entities” or “companies” under the PGPA Act and hold relevant money , typically revenue from user charges, levies, or other non-appropriated sources. For example, the ABC holds surplus from its commercial activities; the CSIRO holds money from research contracts; Airservices Australia holds cash from air navigation charges; and Housing Australia holds funds from its lending operations. The compliance officers, finance managers, and investment committees within each entity must ensure that every investment they make or hold after commencement falls within the narrow limits set by its part of the instrument. The instrument also affects the counterparties , the approved banks (those with A‑ or BBB‑ ratings) and approved entities (AA‑ rated) , because it restricts the universe of institutions with which these public entities can transact. A bank that loses its A‑ rating, even temporarily, would cease to be an “approved bank” for most entities, potentially forcing a sell-off of existing investments. The instrument also indirectly affects the broader financial market. By channelling billions of dollars of public money into a small set of high-rated bank deposits and short-term debt instruments, the instrument reduces the liquidity and depth of the corporate bond market for lower-rated issuers. This is a displacement effect: the entities cannot buy non-bank corporate bonds, so that capital does not flow to non-bank business investment. The instrument does not contain any transitional provisions, so any entity that held investments under the 2014 authorisation that are not permitted under the 2024 instrument must unwind those positions by commencement (or immediately after, if the PGPA Act’s general duty to manage risk requires prompt action). This creates a one-off compliance cost of selling and reinvesting, plus potential transaction costs and marking-to-market losses if the securities are illiquid. Finally, the instrument affects the Minister for Finance, who has the power under s 59(1)(b)(iii) to determine the form of authorisation. The Minister’s choice to limit most entities to such restrictive parameters may reflect a risk-aversion preference but also imposes an implicit cost: lower returns on cash holdings that could otherwise support the entities’ core functions.

The instrument grants a right to each listed entity: the right to invest relevant money in the ways specified, free from the general prohibition in s 59(1) of the PGPA Act against investing Commonwealth money otherwise than in accordance with an authorisation. However, this right is conditional and must be exercised within the precise terms of each entity’s part. The key duties arise from the instrument itself and from the broader PGPA Act framework. First, each entity must ensure that every investment it makes is of a type expressly listed in its part. For example, the Rural Industries Research and Development Corporation may invest only in bills of exchange accepted or endorsed by an approved bank and their dematerialised equivalents , nothing else. Second, investments must be in the name of the entity. This prohibits holding investments through a nominee, trust structure, or pooled fund (unless the pooled fund issues dematerialised securities that are exact equivalents, which is unlikely). Third, investments must be denominated in Australian currency, eliminating any foreign exchange risk but also any opportunity to earn higher yields offshore. Fourth, for the Export Finance and Insurance Corporation and Housing Australia, additional duties arise when an investment in securities issued by an approved bank has a rating lower than A‑. In that case, the entity must not exceed the 10% single-bank concentration cap or the 25% aggregate cap, the investment must not have a term longer than three years, and if the term exceeds six months it must be tradable in the secondary market. These are ongoing compliance obligations that require continuous monitoring of credit ratings and portfolio proportions. If an investment’s rating is downgraded below A‑ after purchase, the instrument does not say whether the entity must sell. The condition is triggered “if an investment ... has a Standard and Poor’s long‑term rating lower than A‑”. A downgrade would likely bring the caps into effect, meaning the entity may become non-compliant if it then exceeds 10% with that bank. A prudent entity would need a policy to sell or rebalance. Fifth, for the Grains Research and Development Corporation, the floating rate notes cap of 20% of total investments imposes a portfolio limit. For Airservices Australia, the $20 million cap on floating rate notes is an absolute dollar limit, not a percentage. The entity has the right to invest less or not at all, but must never exceed the cap. No entity has a duty to invest at all; the authorisation is permissive. Underlying the instrument are the general duties in the PGPA Act , the duty to achieve efficient and effective use of public resources (s 15), the duty to keep proper accounts and records (s 16), the duty to manage risk (s 17), and the duty to comply with the PGPA Act and rules (s 21). The instrument does not override these; it merely expands the investment options. So entity boards and accountable authorities must still satisfy themselves that each investment is consistent with those broader duties, even if it is technically authorised. This creates a tension: the instrument is highly prescriptive, but the entity must still exercise independent judgment about whether a particular bank deposit offers value for money compared to, say, a Commonwealth government bond (which is not listed as an authorised investment and therefore cannot be used). The entity has a duty to achieve value, but the instrument denies it the most obvious low-risk alternative. That may force entities into lower-yielding bank deposits than the risk-free rate available on Treasury bonds , a perverse incentive that penalises the entity and ultimately the taxpayer.

The instrument itself does not create any penalties. Enforcement is through the PGPA Act and its general regime for non-compliance by Commonwealth entities and their accountable authorities. If an entity invests relevant money otherwise than as authorised by this instrument, it contravenes s 59(1) of the PGPA Act. That section provides that the accountable authority of a Commonwealth entity must not invest money unless the investment is made in accordance with an authorisation under s 59(1)(b). There is no criminal penalty attached directly to s 59 in the PGPA Act, but contravention can have serious consequences. The Minister for Finance can give directions under s 22 of the PGPA Act requiring the entity to take specified action to remedy the breach. The Auditor-General may examine the investment in a performance audit and report adverse findings to Parliament. The entity’s annual report must include a statement of compliance with the PGPA Act and rules, and any material non-compliance would be noted. For the accountable authority (usually the CEO or board chair), a breach could lead to a loss of confidence and removal under the entity’s enabling legislation. There are also potential civil consequences. If a director or officer of a corporate Commonwealth entity (such as a board member of the ABC or CSIRO) authorises an investment that falls outside the instrument, they may breach their duties under the PGPA Act or the Corporations Act 2001 (if applicable). The PGPA Act does not provide a private right of action, but the Commonwealth could seek recovery of losses from the officer under the general law of breach of statutory duty or, if the entity is a company, under directors’ duties. In practice, the most likely enforcement mechanism is internal: the entity’s own risk and compliance function will monitor the investment portfolio against the instrument’s limits. External enforcement is rare but not unknown. The Australian National Audit Office (ANAO) has in the past examined whether entities comply with investment authorities, and adverse findings can generate public and parliamentary scrutiny. For example, if an entity exceeded the 20% floating rate note cap, the ANAO would flag that as a compliance breach. The instrument’s repeal of the 2014 authorisation means that any investment that was valid under the old instrument but not the new one becomes unauthorised immediately after commencement. If an entity does not divest those investments promptly, it is in breach from day one. That is a sharp enforcement edge. The instrument does not provide a grace period or savings provision. Prudent entities will have reviewed their portfolios before 12 September 2024 and arranged for any non-conforming assets to be sold or restructured.

The instrument sits within the hierarchy of the PGPA Act and the PGPA Rule 2014. It is made under s 59(1)(b)(iii), which empowers the Minister to authorise investments in a class of investment by a legislative instrument. The instrument does not purport to override any other Commonwealth law. If an entity’s enabling Act contains a separate investment power (for example, s 64 of the Export Finance and Insurance Corporation Act 1991), the entity must comply with both that power and this instrument. The instrument does not replace those powers; it supplements them by providing authorisation under the PGPA Act. However, if the enabling Act is more restrictive, the entity must follow the more restrictive provision. If the enabling Act is broader, the PGPA Act’s s 59 still requires a specific authorisation for investing “relevant money” , and this instrument provides that authorisation only to the extent of the listed investments. So the entity cannot use its enabling Act to invest in something not listed in this instrument if the money is “relevant money” under the PGPA Act. That is a significant interaction: the instrument effectively cuts down any broader enabling power for the purpose of investing non-appropriated funds. The instrument also interacts with the Corporations Act 2001 for those entities that are companies. For example, Housing Australia is a company under the Housing Australia Act 2018; its directors owe duties under the Corporations Act. The instrument does not override those duties; it merely provides a safe harbour for the specific investments listed. Directors must still consider whether the investment is in the best interests of the company, appropriate given its risk profile, and consistent with its constitution. The instrument does not create a liability shield if the investment turns out to be imprudent even though technically authorised. The interaction with the Income Tax Assessment Act 1997 is also relevant. The instrument does not address tax consequences; however, the investment income earned by these entities is generally exempt from income tax under s 50-1 of the Income Tax Assessment Act 1997 for government entities, or under specific provisions for others. The instrument does not affect that. The instrument also interacts with the Competition and Consumer Act 2010 indirectly: by limiting the counterparty universe to approved banks, it may reduce competition in the market for public entity cash deposits and securities. Banks that meet the A‑ threshold can charge lower deposit rates than they would if all banks could compete for these funds. The Australian Securities Exchange’s operating rules govern the Austraclear System, which is referenced in the definition of “dematerialised security”. Any changes to those rules could affect whether a security qualifies as a dematerialised security for the purposes of the instrument. The note in the instrument points to the ASX website for current information, indicating that the instrument defers to ASX operational rules. Finally, the instrument interacts with the Financial Accountability Regime Act 2023 (FAR) for entities such as Airservices Australia and the ABC that are subject to FAR. The instrument does not contain any provision that overrides FAR requirements on risk management and accountability. Entities must still comply with FAR’s accountability obligations when making investment decisions.

The instrument is a newly made legislative instrument that took effect on 12 September 2024 (the day after registration). It does not contain any amendment history because it is the original version. However, it expressly repeals and replaces the Public Governance, Performance and Accountability (Investment) Authorisation 2014 (the 2014 instrument). That earlier instrument was registered and had been in force for a decade. The instrument before us is therefore a complete re authorisation rather than an amendment of the earlier one. The 2014 instrument is not reproduced, so we cannot compare the substantive provisions directly. But the structure of the 2024 instrument , with separate parts for each entity , suggests that any changes are likely to have been adjustments to the list of entities, the permitted investment types, or the rating thresholds. For instance, the 2024 instrument includes Housing Australia (formerly known as the National Housing Finance and Investment Corporation) which may not have been in the 2014 instrument or may have been added later. The repeal means that any regulations, determinations, or further instruments that referenced the 2014 instrument by name must now be read as referencing the 2024 instrument. The instrument does not contain any transitional provisions, so there is no grandfathering of investments made under the 2014 instrument that do not comply with the 2024 terms. This is a notable legislative choice: entities must immediately conform. The instrument also does not include any provision for future amendment; it is a standalone instrument that could itself be replaced later. Given that it is a legislative instrument made by the Minister, it can be amended or repealed by the Minister at any time, subject to the Legislation Act 2003 requirements for tabling and disallowance. The 2024 instrument may itself be amended if the Minister wishes to add new entities, expand or contract investment powers, or adjust credit rating thresholds. The lack of an amendment history in the text is not a defect; it simply reflects that this is the initial version. For a deep dive, it is important to note that the 2024 instrument was registered on 12 September 2024 and commenced the next day. It is a complete replacement of the 2014 regime. Any practitioner advising a relevant entity must treat all existing investment policies as needing review and potential revision.

There is no litigation history associated with this instrument. The instrument itself is a legislative instrument made by the Minister, not an Act of Parliament, and has not been the subject of judicial consideration. The predecessor 2014 instrument may have been considered in some contexts , for example, in administrative law challenges against the decisions of entities to invest, or in proceedings under the Judiciary Act 1903 , but there is no publicly recorded case that directly interprets the 2014 instrument. The instrument’s narrow scope and the fact that it authorises low-risk, bank-based investments make it unlikely to generate disputes. Any challenge would more likely be against the underlying investment decision itself, under general law principles of ultra vires or breach of duty, rather than against the authorisation. The definitional provisions, especially “approved bank” and “senior debt program”, have not been tested in court. If an entity invested in a debt instrument that it claimed was “issued under a senior debt program” but the program did not meet the definition’s requirement of priority on liquidation, a question of statutory interpretation could arise. Similarly, if a bank’s rating was downgraded below A‑, the question of whether the entity could continue to hold existing investments (as opposed to making new ones) might be litigated, but the instrument is silent on that issue. The instrument does not create any private rights, so no private litigant can sue for breach. The only potential litigant is the Commonwealth (acting through the Minister or the ANAO) or a whistleblower inside the entity. In practice, the most likely source of legal dispute would be an application to the Federal Court for a declaration that an investment is ultra vires the instrument, brought by a stakeholder or a parliamentary committee. That has not occurred. The absence of litigation history does not mean the instrument is immune to future challenge. For example, if an entity were to make a large investment that later soured and the taxpayer incurred a loss, there would be pressure to test whether the investment truly fell within the instrument’s terms. But as of the date of writing, there is no such case. The instrument is too new and too niche to have generated court attention. This section may be updated if future cases arise.

Several provisions contain traps for the unwary. First, the absence of transitional arrangements is the most immediate practical risk. The instrument commenced on 12 September 2024 and repealed the 2014 instrument without any savings for existing investments. Any portfolio holding an instrument that was valid under the 2014 instrument but is not listed in the 2024 instrument , for example, a managed fund or a foreign-currency deposit if such were previously allowed , becomes unauthorised the next day. The entity must either sell or seek an individual direction from the Minister. This creates a forced liquidation risk, potentially at a loss. Second, the definition of approved bank has two different rating thresholds. For most entities, the bank must have a Standard and Poor’s rating of A‑ or better. For the Export Finance and Insurance Corporation only, the threshold is BBB‑. An entity that deals with a bank that holds a BBB+ rating is fine for EFIC but not for the ABC. A finance officer who uses a single list of approved banks for all entities could inadvertently breach the authorisation. Third, the definition of “securities” excludes all equity, subordinate debt, and hybrid equity. This means that even if a security looks like a bond, if it is contractually subordinated to senior debt (e.g., a Tier 2 capital instrument issued by a bank) it is not a “security” and cannot be bought, regardless of the bank’s rating. Fourth, the concentration limits in Parts 3 and 11 apply only when the investment has a rating lower than A‑. If an investment is unrated, the condition does not apply. This creates a perverse incentive to buy unrated bank-issued securities to sidestep the caps. The instrument does not prohibit that, but an entity’s own risk management framework should address unrated exposures. Fifth, the dematerialised securities provision ties the definition to the Austraclear System. If ASX were to discontinue Austraclear or change its rules, the definition could become inoperative or ambiguous. The note in the instrument directs users to the ASX website, but that is not a legislative fix. Sixth, the senior debt program requirement for floating rate notes means that subordinated floating rate notes , even if issued by an approved bank , are not authorised. This is a trap for entities like GRDC and Airservices that have specific caps. They must verify not only the issuer rating but also the seniority of the specific program. Seventh, the denomination in Australian currency rule is absolute. Any foreign-currency instrument, even a perfectly hedged one, is not permitted. This forecloses any possibility of earning higher yields offshore, even on AAA-rated sovereign debt. Eighth, the investment must be in the name of the entity. This prohibits using a cash management trust or a pooled vehicle that invests in authorised instruments but is held in the trust’s name. Many smaller entities use such pooled vehicles for operational efficiency; that practice would now be non-compliant unless the vehicle issues dematerialised securities that fall within the definition (which is unlikely). Ninth, the Airservices Australia cap of $20 million is an absolute dollar limit on floating rate notes, not a percentage. If Airservices’ total cash holdings grow, the cap does not grow. That may force the entity to park large amounts in lower-yielding bank deposits or bills. Finally, the instrument does not authorise investment in Commonwealth government securities , no Treasury bonds, no semi-government bonds. That is striking because those are risk-free and typically yield more than bank bills or deposits. The entity cannot buy them with its relevant money unless the Minister separately authorises that class. This restriction is a hidden cost: entities forgo a higher return for no reduction in risk.

Compliance with the instrument requires a systematic, documented approach by each entity’s accountable authority and finance team. Step one: inventory all existing investments as at commencement date (12 September 2024). For each investment, verify that it falls within the specific list in the entity’s part of the instrument. If any investment does not , for instance, a managed fund, a foreign-currency deposit, or a subordinated bond , the entity must arrange for its disposal as soon as reasonably practicable. There is no grace period, so immediate divestment is the safest course. The entity should record the reason for the sale and the costs incurred for later audit. Step two: establish an approved counterparty list for each entity. For most entities, the only eligible counterparties are “approved banks” meeting the A‑ rating threshold (or BBB‑ for EFIC). The list must be updated whenever Standard and Poor’s, Moody’s, or Fitch changes a bank’s rating. The instrument uses “Standard and Poor’s long-term rating” as the primary reference but allows Moody’s or Fitch equivalents. The compliance team should decide which rating agency to rely on primarily, and have fallback procedures if the primary agency does not rate a particular bank. For EFIC and Housing Australia, there is also the “approved entity” category (AA‑ or better). That list will be very short. Step three: monitor portfolio limits. For entities with percentage caps (GRDC’s 20% on floating rate notes; EFIC’s and Housing Australia’s 10% and 25% caps for lower-rated bank securities), the finance system must be able to calculate total investments in real time and flag when the cap is approached. For Airservices Australia, the $20 million absolute cap on floating rate notes must be tracked. Step four: verify each investment instrument. Before buying a floating rate note, confirm that it is issued under a senior debt program , request a copy of the program documentation or obtain a legal opinion that the notes rank ahead of other debt. For all investments, ensure the instrument is a “security” as defined (not equity or hybrid) and that it is either a physical instrument or a dematerialised security in Austraclear. Step five: maintain evidence that each investment is in the entity’s name and denominated in Australian currency. Bank account statements, deposit confirmations, and Austraclear holdings statements should be retained. Step six: document the use of 11 am call deposits (for GRDC) and ensure they are with an approved bank. Step seven: review and update the entity’s investment policy and treasury manual to reflect the instrument’s limitations. The board or accountable authority should formally approve the policy and confirm that all staff are aware of the prohibited asset classes. Step eight: engage external auditors or the ANAO to confirm compliance as part of the annual financial statements. The Annual Report must include a statement of compliance with the PGPA Act; any breach of the investment authorisation should be disclosed. Step nine: monitor for any future amendments to the instrument. The Minister may update the list of entities or change the terms. Subscribe to the Federal Register of Legislation for alerts. Step ten: if an entity wishes to invest in something not authorised , such as Treasury bonds or foreign-currency notes , the accountable authority should write to the Minister for Finance seeking a separate authorisation under s 59(1)(b)(i) or (ii) (a general or specific direction, or a class authorisation). The instrument does not preclude that; it merely provides a standing authorisation for the listed investments. Compliance is not optional; it is a statutory duty. The cost of non-compliance includes reputational damage, potential loss of office, and the risk that the Minister will direct the entity to restructure its portfolio at a loss. A conservative approach , staying well within the caps, using only the highest-rated banks, and keeping a paper trail , is the only prudent course.