Emergency Response Fund

The Emergency Response Fund (ERF) was established on the commencement of the Emergency Response Fund Act 2019 (ERF Act), on 12 December 2019. On establishment, the ERF was credited with the uncommitted balance of the Education Investment Fund, which has now been closed.

The ERF allows the Government to draw up to $200 million in any given year, beyond what is already available to fund emergency response and natural disaster recovery and preparedness, where it determines the existing recovery and resilience-building programs are insufficient to provide an appropriate response to natural disasters.

Legislation

The ERF Act will give effect to the following:

  • Investment Mandate: the responsible Ministers are required to issue at least one investment mandate to the Future Fund Board of Guardians (Future Fund Board).
  • Crediting amounts to the ERF: the responsible Ministers may, by writing, credit the ERF Special Account with a specified amount or with specified instalments.
  • Debiting amounts from the ERF: from 2019-2020, disbursements (debits) from the ERF can be made subject to the following limits:
    • $150 million available each financial year to fund emergency response and recovery following natural disasters in Australia that have a significant or catastrophic impact; and
    • $50 million each financial year to build resilience to, prepare for or reduce the risk of future natural disasters, and build the long-term sustainability of communities that are at risk of being affected by a future natural disaster.

Investment Mandate

The responsible Ministers must give the Future Fund Board at least one written direction about the performance of the ERF investment functions. Before formally issuing an investment mandate direction, the responsible Ministers must invite the Future Fund Board to make a submission on the draft investment mandate. Should there be a submission, it must be tabled together with the investment mandate in both Houses of the Parliament. 

The Emergency Response Fund Investment Mandate Direction 2020 was issued on 4 February 2020. It requires the Future Fund Board to adopt a benchmark return of the Consumer Price Index + 2.0 per cent to 3.0 per cent per annum, net of investment fees over the long term.

In targeting this benchmark return, the Future Fund Board must determine an acceptable but not excessive level of risk for the fund, including having regard to the plausible capital loss from investment returns over the forward three year period. The Government acknowledges that targeting the long-term benchmark return implies accepting the risk of capital losses, in adverse markets, that may be 15-20 per cent of the portfolio over a three year period.

Investment Performance and Financials

Financial performance since inception to 31 March 2020

(Equals) Cash Balance 3,996
  $ 'millions1
Total Credits  3,978
(Plus) Net Actual Earnings2 18
(Equals) Total Credits and Earnings 3,996
(Less) Debits (drawings)3 -

Notes:
1. Data may not sum due to rounding. 
2. Earnings are net of investment and administration fees incurred by the Board.
3. This amount represents debits made for policy purposes under the relevant Act.

Quarterly investment performance

As the ERF has only partial return data, performance data will be reported in the next financial year. Since inception, ERF has recorded a return of 0.4%.

Annual investment performance

Not yet available.

Credits to the Emergency Response Fund

The following table provides a history of credits to the ERF with links to the associated documentation.

Summary of Credits
Date Source of Funds $million (AUD) Documentation
12 December 2019 Uncommitted balance of the Education Investment Fund 3,978 Emergency Response Fund Act 2019
Total Transfers   3,978  

Debits (Disbursements) from the Emergency Response Fund

From 2019-2020, and for each subsequent financial year, up to $150 million per financial year may be debited from the ERF Special Account and credited to the Home Affairs ERF Special Account and/or the COAG Reform Fund for the purpose of making payments under arrangements to recovery or post-disaster resilience following a natural disaster. Additionally, up to $50 million per financial year may be debited from the ERF Special Account and credited to the Home Affairs ERF Special Account and/or the COAG Reform Fund for the purpose of making payments under arrangements to increase resilience, preparedness or the long-term sustainability of a community or to reduce the risk of a natural disaster.


Did you find this content useful?