Now lawBusiness & Trade Introduced in the House of Representatives, 24 Jul 2025

Government can now pay out on Pacific bank guarantees

Banks are pulling out of Pacific island nations. That makes it hard to send money home or pay for trade. This short law sets money aside so the federal government can back the promises it gives Australian banks to stay.

Official name: Pacific Banking Guarantee Bill 2025

Who it affects

• Australian banks in the Pacific: They can get a government guarantee over parts of their Pacific business. They pay a fee for it.
• Pacific Island workers in Australia: Keeping banks in the region helps them keep sending money home to their families.
• People in Pacific nations, Papua New Guinea and Timor-Leste: The aim is that they can still use banks and send and receive money overseas.
• Australian taxpayers: If a guarantee is ever called on, the money comes from the government's main account. The government says this is very unlikely.

Banks are leaving the Pacific

Pacific nations rely on banks to link them to the rest of the world. These links pay for trade. They bring in money from other countries to help. They also let workers send money home. Money sent home by workers is called remittances.

The Treasury is the federal department that runs the government's money. It says the Pacific has seen some of the fastest falls in banking links to other countries anywhere. The Parliamentary Library works for all MPs and takes no side. Its guide to the bill says the region is losing these links at twice the world rate.

The reason is that banking there earns little money. The markets are small. The cost of following rules against dirty money keeps going up.

Australian banks are a big part of banking in many Pacific countries. The government wants them to stay. It can offer a bank a guarantee. That is a promise to cover some losses. To get one, the bank must sign a firm deal with the federal government to stay in the region.

What the law does

The law is very short. Its main job is to give Parliament's permission for the government to spend money.

It lets the government pay any debts it owes under a Pacific banking guarantee from the Consolidated Revenue Fund. That is the federal government's main bank account, where tax money goes.

This is a standing permission to spend. That means the money is always there when needed. It does not have to wait for the yearly budget bills. The Treasury says this matters because a guarantee could be called on fast. Paying late would hurt Australia's good name.

Which guarantees count

A Pacific banking guarantee has to pass three tests. First, it is given for the federal government under section 60 of the Public Governance, Performance and Accountability Act 2013. That law lets the Finance Minister give guarantees.

Second, it is about the bank's business in the Pacific. That includes branches or companies the bank owns there. Third, the bank's head office is in Australia.

The bank must be allowed to take people's savings under the Banking Act 1959, the main national law for banks. This covers banks, building societies and credit unions. Building societies and credit unions are small banks owned by their customers.

The Pacific region includes the Pacific islands, Papua New Guinea and Timor-Leste. The law also covers things that happen outside Australia.

The Treasury says the guarantees will cover low-risk parts of a bank's business. Each guarantee will have its own dollar limit and time limit. Most are expected to last 10 years.

How much money

The law sets no dollar limit and no end date. The most that could ever be paid is the total of all the guarantees the government signs.

The Library's guide points to a separate rule about a guarantee for the bank ANZ. It caps that guarantee at $2 billion over 10 years.

Banks must pay the federal government a fee for a guarantee, at least once a year. The Assistant Treasurer is a junior minister who helps the Treasurer. He told Parliament this means it is not a handout.

Start date

The law started the day after the Governor-General signed it. The Governor-General stands in for the King.

The same bill was dropped when Parliament ended for the 2025 election. The Treasurer is the minister in charge of the nation's money. The Treasurer, Jim Chalmers, brought this new copy into the House of Representatives on 24 July 2025. That is the lower house of Parliament, where the government sits. The House passed it on 30 July 2025. The Senate, Parliament's second house, passed it on 2 September 2025.

The Governor-General signed it on 5 September 2025. It is now Act No. 44 of 2025.

Its journey through Parliament

Official sources

• Bill page on aph.gov.au
• Text of the bill
• Explanatory memorandum
• Bills Digest

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