Structured Finance Support (Coronavirus Economic Response Package) Act 2020

The Fund and the Special Account. The Fund is established by s 10 and consists of two components: the Structured Finance Support (Coronavirus Economic Response) Fund Special Account (the Account) and the investments of the Fund (s 10(2)). The Account is a special account under the PGPA Act, which means that money credited to it (including the initial $15 billion and any investment returns) can be debited for the purposes set out in s 14 without requiring a further appropriation each time. The Act does not create a separate legal entity; the Fund is simply a notional pool of assets managed by the Commonwealth.

Authorised debt security. This is the core investment vehicle. It must meet four conditions in s 12(4): (a) issued by a trustee of a trust or a body corporate that is a special purpose vehicle; (b) expressed in Australian dollars; (c) relates to one or more amounts of credit (using the definition from the National Credit Code); and (d) complies with any requirements or restrictions prescribed by rules. The definition is broad: “amount of credit” under the National Credit Code means the amount of credit actually provided under a credit contract. The issuer can be a trust (e.g., a securitisation trust) or a special purpose vehicle (SPV), which are characteristic structures for asset-backed securities and residential mortgage-backed securities. The debt security must have a clear nexus to underlying credit exposures, but there is no explicit requirement that the credit be Australian or that the security be rated.

Investment of the Fund. An investment made under s 12(1) is taken to be an investment of the Fund (s 12(2)). The Minister can also authorise reinvestment of proceeds upon maturity in the same kind of security with the same entity (s 12(3)). The PGPA Act’s general investment power (s 58) does not apply to these investments (s 12(5)), meaning the Commonwealth’s normal investment rules (which typically restrict investments to low-risk, highly liquid assets) are overridden for this Fund.

Objects of the Act. Section 3 states the objects: (a) ensuring continued access to funding markets impacted by COVID-19 economic effects, and (b) mitigating impacts on competition in consumer and business lending markets. These objects constrain the exercise of the investment power: the Minister can invest only “to further an object of this Act” (s 12(1)). However, the objects are broadly stated and do not create enforceable duties; they are interpretative guides.

Constitutional limits. Section 17 restricts the exercise of the investment power to specific heads of Commonwealth legislative power: the implied nationhood power, the executive power of the Commonwealth, trade and commerce (interstate, international, or territorial), or banking (other than state banking not extending beyond the limits of the state concerned). This provision ensures the Act stays within the Commonwealth’s constitutional authority and would likely invalidate an investment that falls outside these categories.

Delegation and directions. The Minister can delegate investment decisions to an “eligible delegate”, which is defined in s 18(2) as an official of the Department of the Treasury or a listed entity prescribed by rules, who is an SES employee, an APS employee at Executive Level 2, or an equivalent level. Before delegating, the Minister must consider seniority or qualifications (s 18(3)). The delegate must comply with written directions from the Minister (s 18(4)), which may cover strategies, criteria, limits, risk/return, and governance (s 18(5)). Critically, s 18(6)(a) provides that a direction “must not have the purpose, or be likely to have the effect, of directly or indirectly requiring that a particular investment be made or not be made.” This arguably preserves a degree of discretion for the delegate, though the Minister could still set tight parameters that effectively dictate outcomes.

The Act directly affects the Commonwealth, specifically the Minister for Finance (or any successor) and officials within the Treasury and potentially prescribed listed entities (s 18(2)). These persons gain the power to invest $15 billion (and possibly more) in structured finance products. The immediate beneficiaries of the investment power are entities that can issue authorised debt securities: trustees of trusts (e.g., managed investment trusts, securitisation trusts) and special purpose vehicles engaged in securitisation. In practice, these are typically banks, non-bank lenders, mortgage originators, and other credit providers that securitise their loan portfolios. The Act is designed to provide a buyer of last resort for asset-backed securities when private investors withdraw due to pandemic uncertainty. Therefore, participants in the securitisation market - including banks, credit unions, building societies, non-bank lenders, and their SPVs - are the primary external parties who may benefit from the Fund. Secondary effects flow to borrowers: if the Fund purchases newly issued residential mortgage-backed securities or other asset-backed securities, it may support the continued availability of credit to consumers and businesses that might otherwise be rationed. The Act also potentially affects competitors in lending markets. The object in s 3(b) explicitly references “competition in consumer and business lending markets”. By supporting funding markets, the Act aims to prevent large incumbents from gaining an advantage if smaller lenders become unable to access funding. That could affect any licensed credit provider, including smaller banks and non-bank lenders. Taxpayers bear the ultimate risk: if the Fund invests in securities that default, the losses are Commonwealth losses. The $15 billion appropriation is public money, so the fiscal position is directly affected by the performance of the investments. The Act does not impose any obligations on private parties; it confers only rights and powers on the Commonwealth. However, parties dealing with the Commonwealth as counterparties under these investments are indirectly affected by the terms of those transactions, which the Act does not prescribe. Finally, the Act affects the Australian Office of Financial Management (AOFM) in a reporting capacity: the CEO of AOFM must include a report on the operation of the Act in the annual report given to the Minister under the PGPA Act (s 19).

Duty to exercise power only to further the objects. The Minister’s investment power under s 12(1) is expressly conditioned: the Minister may invest only “to further an object of this Act”. This creates a legal constraint, though it is not sentence-structured as a duty with a private right of action. It is a limit on power. The same constraint implicitly applies to any delegate.

Duty to follow directions. Delegates must comply with any written directions of the Minister (s 18(4)). Those directions cannot require or prohibit a particular investment (s 18(6)(a)) and must not be inconsistent with the Act or a legislative instrument (s 18(6)(b)). The Minister has no duty to give directions; the power is discretionary.

Duty to consider constitutional limits. The Minister must not exercise the investment power outside the heads of power listed in s 17. This is a constitutional limitation rather than a duty, but it constrains the lawful scope of investments.

Duty to obtain Finance Minister’s agreement for additional credits. Before determining that additional amounts be credited to the Account under s 13(2), the Minister must obtain the agreement of the Finance Minister (s 13(5)). This is a procedural pre-condition.

Duty to report. The annual report prepared by the AOFM CEO must include a report on the operation of the Act during the year (s 19). This is a statutory reporting obligation. The Act does not specify the content of that report beyond what the PGPA Act requires for annual reports.

Rights of the Commonwealth. The Commonwealth has the right to invest in authorised debt securities and other prescribed investments, and to receive income, return of capital, and disposal proceeds (s 13(1)). The Commonwealth also has the right to reinvest proceeds (s 12(3)). The Minister has the right to delegate powers (s 18). The Commonwealth also has the right to reduce the balance of the Account by ministerial direction (s 15).

Rights of the Minister. The Minister has the right to make rules by legislative instrument (s 20), subject to the constraints in s 20(2) (no offences etc.). The Minister also has the right to give directions to delegates (s 18(4)) and to determine additional credits (s 13(2)). The Minister can direct that the Account balance be reduced (s 15).

No private rights created. The Act does not confer any rights on private individuals or entities to compel investments, to seek review of decisions, or to claim damages. It is a machinery Act that empowers the Executive.

The Act creates no criminal offences, civil penalties, or enforcement mechanisms for non-compliance by private parties. The only penalties that could arise would flow from the general law or from other statutes. For example, if an official delegated investment decisions acts beyond power or contrary to directions, that could attract consequences under the PGPA Act (such as breach of duties of officials under s 27 of that Act, which may lead to misconduct findings or civil proceedings for recovery). However, the Act itself is silent on penalties. The rules-making power is explicitly prohibited from creating offences or civil penalties (s 20(2)(a)). Enforcement of the Act’s limitations is primarily through the public law doctrines of ultra vires: if the Minister or a delegate makes an investment that is not an authorised debt security or that does not further the objects, or that falls outside the constitutional heads of power, the investment could be challenged in judicial review proceedings. The direction power in s 18 is also subject to a statutory constraint under s 18(6)(a) that a direction must not require or prohibit a particular investment. If the Minister issued a direction breaching this subsection, a court could declare it invalid. Similarly, rules made under s 20 are legislative instruments subject to disallowance and judicial review. The Act provides no standalone right of review for affected parties, but a person with standing (such as a competitor lender or a taxpayer) could potentially seek judicial review of an investment decision if it is claimed to be beyond power. The $15 billion credit to the Account is a ministerial determination that is not subject to merits review. The reduction of the Account balance under s 15 is done by direction that is expressly not a legislative instrument (s 15(2)), thus avoiding disallowance. This reduces parliamentary scrutiny over how the capital is eventually returned. The annual report requirement (s 19) is the main transparency mechanism, but it is retrospective and aggregated. There is no provision for the Auditor-General or the Parliamentary Budget Office to examine individual investments. The PGPA Act does provide for the Auditor-General to audit entities, but the Fund is not a separate entity. The AOFM will report on the Act’s operations. Overall, the enforcement regime is light: the Act relies on the discipline of the political process and the general law rather than specific penalties.

Public Governance, Performance and Accountability Act 2013 (PGPA Act). This is the most significant interaction. The Account is a special account under the PGPA Act (s 11(2)), meaning it is subject to the PGPA Act’s framework for special accounts including purposes, crediting, debiting, and reporting. However, s 12(5) expressly disapplies s 58 of the PGPA Act (investment by the Commonwealth) for investments of the Fund. This is critical because s 58 normally restricts Commonwealth investment to authorised investments (typically low-risk). The disapplication allows the Minister to invest in higher-risk asset-backed securities. The PGPA Act’s general duties on officials (e.g., duty to use resources efficiently, effectively, economically) still apply to the Minister and delegates. The annual report requirement under s 19 operates through the PGPA Act’s reporting regime.

National Consumer Credit Protection Act 2009 (National Credit Code). The Act incorporates the definitions of “amount of credit” and “credit” from the National Credit Code (s 5). This links the securities in which the Fund may invest to the concept of credit under the Code. However, the Act does not import the Code’s regulatory obligations (e.g., responsible lending, licensing). The issuer of an authorised debt security does not need to be a credit licensee under the Code simply because the security relates to credit; the Code applies to credit providers, not to SPVs that issue securities backed by credit.

Appropriation Acts. The initial $15 billion credit to the Account on commencement is presumably sourced from an appropriation under the Coronavirus Economic Response Package (Appropriation) Act or similar. The Act itself does not appropriate money; it establishes a special account. The note to s 11(2) explains that an Appropriation Act may provide for debits against an appropriation to be credited to the special account. The $15 billion is required to be credited “on the day this Act commences” (s 13(1)(a)) - the Act commenced on 25 March 2020. This suggests a parallel appropriation Act was enacted.

Constitutional law (s 17). The Act explicitly limits investment powers to specific constitutional heads: nationhood, executive power, trade and commerce, and banking. This prevents the Commonwealth from investing in securities that, for example, relate solely to intrastate trade or state banking. Any investment must be capable of being supported by at least one of these heads.

Legislative Instruments Act 2003 (now Legislation Act 2003). Rules made under s 20 are legislative instruments and subject to tabling, disallowance, and sunsetting. The Minister’s directions are not legislative instruments (s 18(4) note? Actually s 18(4) doesn’t say; but s 15(2) says a direction under s 15 is not a legislative instrument. Directions under s 18 could be administrative instruments and not subject to disallowance).

Competition and Consumer Act 2010. The object in s 3(b) about mitigating impacts on competition suggests a policy connection to competition law, but the Act does not amend or rely on the Competition and Consumer Act. It is not a competition law instrument.

Other COVID-19 response Acts. This Act was part of the Coronavirus Economic Response Package, which included multiple other Acts (e.g., the Coronavirus Economic Response Package Omnibus Act 2020). This Act stands alone but shares the policy context.

The source text is the Act as originally enacted on 24 March 2020, with commencement on 25 March 2020. The Act does not appear to have been amended based on the sole provision shown (the commencement table lists only the original provision). There is no indication of any amending Acts in the provided text. The Act is a short, temporary-purpose Act that may have been intended for a finite period, though the Act itself does not contain a sunset clause. In the absence of any amendment information in the source, we can state that the Act as provided shows no amendment history. An analyst should note that the Act may have been amended subsequently, but the source provided is the original enactment. The Act’s continuing operation would depend on whether it has been repealed or amended by later legislation not included. The user provided the Act as originally enacted only. Therefore, the amendment history from the source is nil. A cautious statement: “Based solely on the text provided, the Act does not contain any record of amendments; the commencement table lists only the original enactment. For current amendment status, one would need to check the Federal Register of Legislation.” This is honest and source-grounded.

The Act does not refer to any litigation or court cases. It is a short, ministerial-investment enabling Act. Given its nature (a temporary market intervention in 2020), it is plausible that few or no cases have been decided under it. However, we cannot invent. The source is silent. We can state that the Act makes no provision for appeals or judicial review rights, and that no cases are referenced within the text. A diligent practitioner would search the AustLII database for “Structured Finance Support (Coronavirus Economic Response Package) Act 2020” to see if any judicial consideration exists. For the purposes of this deep dive, grounded in the source, we report no litigation information is present in the Act.

The constitutional limitation is not a mere formality. Section 17 restricts investments to specific heads of power. If the Fund invests in a security that relates to credit used wholly for intrastate commerce and not connected to banking or trade among states, it might be invalid. The Minister and delegates must ensure every investment can be justified under at least one listed power. This could narrow the effective scope significantly.

The Minister can reduce the Account balance without parliamentary scrutiny. Section 15 allows the Minister to direct that a specified amount be debited from the Account on a specified day. That direction is not a legislative instrument, so it is not disallowable. This means the Minister can effectively return capital to the Consolidated Revenue Fund without a vote. This could be used to avoid reporting on losses.

No requirement for a positive investment return. The Act does not require that investments be made on commercial terms or that the Fund achieve a positive return. The only constraint is that investments must further the objects. The Minister could accept below-market returns to achieve policy goals. This creates a risk that taxpayers subsidise private sector participants at non-market rates.

Delegation to “equivalent level” positions creates ambiguity. S 18(2)(c) allows delegation to a person occupying an office or position at an equivalent level to SES or EL2. This could include contractors or secondees, as long as the position is equivalent. The Minister must have regard to whether the person has appropriate qualifications or expertise (s 18(3)(b) for non-specified positions), but the test is subjective. There is no requirement for the delegate to be an Australian Public Service employee.

The rules power is broad but cannot do certain things. Rules can prescribe other kinds of investments (s 12(1)(b)) and requirements for authorised debt securities (s 12(4)(d)). They cannot create offences or impose taxes. However, they could prescribe onerous requirements that effectively exclude some issuers. There is no requirement for the rules to be made within a certain timeframe; the Act applies immediately even without rules.

No limit on the size of investments beyond the Account balance. The Account is initially credited with $15 billion, and additional amounts can be determined (s 13(2)). The Minister could in theory credit many billions more, with the Finance Minister’s agreement. There is no cap in the Act. The Fiscal risk is open-ended.

The objects do not require the Fund to support small lenders specifically. The object in s 3(b) refers to mitigating impacts on competition, but investments could be made in securities issued by the largest banks, which might reduce competition if smaller players cannot issue comparable securities. There is no requirement to prioritise smaller or non-bank lenders.

No cooling-off period or withdrawal right for issuers. The Act does not give an issuer the right to withdraw or amend terms after the Minister agrees to invest. Standard commercial terms will be negotiated but are not statutorily mandated.

Reporting is via AOFM, not the Treasurer. The annual report is prepared by the CEO of the Australian Office of Financial Management, not the Minister (s 19). This is an unusual delegation of reporting responsibility, but it makes sense given AOFM manages similar market operations.

No private entity is required to do anything under this Act. Compliance obligations rest solely on the Minister (and delegates). The following approach ensures compliance:

1. Before making an investment:

   • Confirm that the security meets the definition of “authorised debt security” in s 12(4): it must be issued by a trustee of a trust or a body corporate that is a special purpose vehicle; it must be denominated in Australian dollars; it must relate to one or more amounts of credit (as defined in the National Credit Code). If the security is not an authorised debt security, it must be of a kind prescribed by rules under s 12(1)(b) and comply with any restrictions in those rules.
   • Ensure the investment furthers an object of the Act (s 3). This requires a documented assessment that the investment will help maintain access to funding markets affected by COVID-19 or mitigate impacts on competition.
   • Ensure the investment is supported by at least one of the constitutional heads in s 17. If the credit underlying the security is used for intrastate trade that is not banking, the investment may be invalid. Legal advice should confirm the constitutional basis.
   • Obtain the Finance Minister’s agreement if the investment requires additional moneys to be credited (s 13(5)). For initial investments funded from the $15 billion credit, this is not needed - only for additional credits.

2. Delegation process:

   • If the Minister delegates investment decisions, the delegate must be an eligible delegate: an SES employee, an Executive Level 2 APS employee, or a person at an equivalent level (s 18(2)). The Minister must record the basis for concluding the person has appropriate seniority or qualifications.
   • The Minister must issue written directions to the delegate (s 18(4)). Directions must not require or prohibit a particular investment (s 18(6)(a)). The directions should address strategies, criteria, limits, risk/return, and governance (s 18(5)). They should be documented and accessible.
   • The delegate must comply with those directions.

3. Account management:

   • Credits to the Account must be recorded in accordance with the PGPA Act. The initial $15 billion (s 13(1)(a)) and investment returns (s 13(1)(b),(c),(d)) must be credited.
   • Debits may only be for the purposes listed in s 14: costs of making investments, other costs exclusively in connection with the Fund, or reducing the balance under s 15.
   • If the Minister wishes to direct a reduction of the Account, the direction must be in writing, specify an amount and a day on or after the direction is made (s 15(1)). A copy must be given to the Finance Minister (s 15(3)). The direction is not subject to disallowance, but it must still be lawful.

4. Reporting:

   • The CEO of AOFM must include in the annual report a report on the operation of the Act during the period (s 19). This report should cover investments made, returns, costs, and any other relevant information. The Act does not specify content, but to meet the reporting obligation, the report should be sufficiently detailed to allow assessment.

5. Rules and instruments:

   • If any investment is made in a non-standard security, rules must have been made first (s 12(1)(b)). The Minister must ensure rules are made by legislative instrument before such investments are authorised.
   • Any direction under s 18 or s 15 should be carefully documented to show compliance with statutory constraints.

6. Review and oversight:

   • Although the Act does not require internal review, good governance would include a record of the basis for each investment decision, including how the objects and constitutional limits are satisfied. This protects against later legal challenge.

Private sector issuers seeking to access the Fund need not comply with the Act, but they must offer an authorised debt security that meets any additional requirements in the rules. They should ensure their security is expressed in AUD, relates to credit, and is issued by an appropriate trust or SPV. They should engage with the Treasury or AOFM to understand the application process, which the Act does not prescribe.