Investment by Commonwealth entities (RMG 301)

Under sections 58 and 59 of the PGPA Act, and supporting rules in sections 22 and 22A of the Public Governance Performance and Accountability Rule 2014 (PGPA Rule), an investment is an arrangement that involves a Commonwealth entity purchasing an asset for the primary purpose of earning income or a profitable return.

The investment powers under sections 58 and 59 are not intended to provide primary legislative support to programs or policies carried out by Commonwealth entities. A specific legislative framework is more appropriate and often legally required in these cases. 

The primary purposes of NCEs are to carry out Commonwealth objectives, which are not profit-oriented.

Unless specifically authorised (for example, by enabling legislation), NCEs do not invest relevant money. Cash and debt management is generally conducted at the whole-of-government level by the Australian Office of Financial Management. 

Authorised investments

Section 58 of the PGPA Act allows the Finance Minister and the Treasurer to invest relevant money, on behalf of the Commonwealth, in any authorised investment.

The PGPA Act limits the Finance Minister and the Treasurer to the authorised investments listed in subsection 58(8)(a) of the PGPA Act (the Treasurer also has an additional power which is outlined below).

These authorised investments are:

• securities of, or securities guaranteed by, the Commonwealth, a State or a Territory, or
• a deposit with a bank, including a deposit evidenced by a certificate of deposit (noting that ‘a deposit with a bank’ does not include medium-term notes and fixed or floating rate notes, money market trusts or cash management trusts, and bills of exchange that do not comply with the rules), or
• any other form of investment prescribed by the PGPA Rule.

Other forms of investment prescribed in section 22 of the PGPA Rule include a:

• bill of exchange that is accepted or endorsed only by a bank
• professionally managed money market trust (if the Finance Minister or Treasurer is satisfied of certain conditions)
• dematerialised security that is the equivalent of an investment referred as the bill of exchange or the securities or a deposit with a bank, both referred to above. 

The Treasurer is also authorised, under subsection 58(8)(b) of the PGPA Act, to invest in debt instruments with an investment grade credit rating that:

• are issued or guaranteed by the government of a foreign country, or
• are issued or guaranteed by a financial institution whose members consist of foreign countries (which may also include Australia), or
• are denominated in Australian currency.

The Treasurer has delegated these investment powers to the Australian Office of Financial Management. These investments are not covered by this RMG.

The authorised investments that the Finance Minister can approve are conservative and low risk in nature. This aligns with the policy intent that investment under section 58 of the PGPA Act involves relevant money held by NCEs that is primarily for the delivery of functions and programs on behalf of the Government and people of Australia, rather than for investing for profitable return. 

The Finance Minister will only delegate investment powers to accountable authorities of NCEs where the investment activity appropriately supports the NCE’s functions. The policy intent is to provide NCEs with a better rate of return on invested money than would be achievable with money held in a day-to-day transactional bank account. The policy intent is not to provide authority to NCEs to undertake complex or higher risk investments which could result in losses of money which NCEs require to deliver their functions.

The Finance Minister has, to-date, delegated the power to invest under section 58 of the PGPA Act to certain accountable authorities of NCEs through the Finance Minister’s delegation of PGPA Act powers. The Public Governance, Performance and Accountability (Finance Minister to Accountable Authorities of Non-Corporate Commonwealth Entities) Delegation 2022 is available in the right-hand menu of PGPA legislation, associated instruments and policies.

Finance Minister’s delegation of the power to invest

The Finance Minister may approve an authorised investment on behalf of the Commonwealth by delegating the investment power under section 58 of the PGPA Act to the relevant accountable authority of an NCE.

The Finance Minister’s delegation of power to invest is made to specified accountable authorities listed in the Finance Minister’s delegation. The relevant money used for investment will usually be held in a special account administered by the specified accountable authority. The accountable authority may then invest in authorised investments only from relevant money identified for the purpose.

An accountable authority that is delegated the power to invest under section 58 may subdelegate the Finance Minister’s delegation of power to invest to an official of an NCE under section 110 of the PGPA Act.

Seeking the Finance Minister’s approval to invest

Accountable authorities of NCEs must seek the Finance Minister’s approval to invest in authorised investments under section 58 of the PGPA Act. Approval should be sought through correspondence from the relevant responsible minister (for the entity that wishes to invest) to the Finance Minister. 

Correspondence from the responsible minister should set out: 

• that the relevant entity seeks the Finance Minister’s approval to invest and the delegation of investment power under section 58 of the PGPA Act,
• why the Finance Minister's delegation of investment power is necessary or appropriate,
• the name of the special account involved (where relevant), and
• that the special account involved will require exemption from Directions (those dealing with the consolidation of Commonwealth cash and interest) under the Finance Minister’s Banking Delegation for section 53 of the PGPA Act.

If an accountable authority is considering seeking a delegation from the Finance Minister to invest, officials from the relevant entity should discuss the issue with Finance officials first.

While CCEs generally do not have core functions involving investment, there are some exceptions.

Some CCEs, such as the Reserve Bank of Australia and the Coal Mining Industry (Long Service Leave Funding) Corporation, are either not subject to section 59, or have investment powers under their enabling legislation as part of their suite of powers related to their functions.

Some entities (such as the National Gallery of Australia) have investment powers under their enabling legislation in addition to section 59.

Before considering investment under section 59 of the PGPA Act, a CCE should review its enabling legislation for any investment provisions and any interactions with section 59 of the PGPA Act.

Investment under section 59

The PGPA Act restricts investments to the forms listed in section 59 (along with the additional form of investment in section 22A of the PGPA Rule). The forms of investment are conservative and low risk in nature. This aligns with the policy intent that investment under section 59 of the PGPA Act involves relevant money held by CCEs that is primarily for the delivery of the functions and purposes of the entity, rather than investing for profitable return. 

The policy intent is to provide CCEs with a better rate of return on invested money, that is not immediately required for the entity’s purposes, than would be achievable with money held in a day-to-day transactional bank account. The policy intent is not to provide authority to CCEs to undertake complex or higher risk investments which could result in losses of money which CCEs require to deliver their functions.

For CCEs that are prescribed as a government business enterprise under section 5 of the PGPA Rule, subparagraph 59(1)(b)(v) of the PGPA Act provides a direct power for investment as long as the money is invested in a manner consistent with sound commercial practice. Sound commercial practice is not defined in the PGPA Act and should be given its usual interpretation in the context of the entity’s operations and purpose. This form of investment is limited to CCEs prescribed as a government business enterprise.

Finance Minister’s power to authorise investment

The Finance Minister may authorise, in writing, investment of relevant money for which the entity is responsible, that is not immediately required for the purposes of the entity, in any form of investment. This authorisation is made under subparagraph 59(1)(b)(iii) of the PGPA Act.

Although section 59 of the PGPA Act does not limit the types of investments the Finance Minister may authorise, in practice the Finance Minister has not authorised types of investments that differ substantially from those ordinarily permitted under the PGPA Act. Authorised investments are typically conservative and low-risk, reflecting the policy intent of section 59.

When accountable authorities invest under sections 58 and 59 of the PGPA Act, they must ensure that they maintain sufficient records to monitor and manage any investment and comply with obligations under the PGPA Act. This includes, including reporting obligations such as those in the Public Governance, Performance and Accountability (Financial Reporting) Rule 2015.

For further information, see RMG-125 Commonwealth Entities Financial Statements Guide.  

Monitoring of investment performance is also a useful tool to support decision-making about on the treatment of current investments and the focus of future investment. Performance information may include a combination of qualitative and quantitative data. 

For further information, see the Commonwealth Performance Framework.