Northern Territory Second Reading Speeches

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HOUSING AMENDMENT BILL (NO. 2) 2005

Information :
Bill presented and read a first time.

Mr McADAM (Housing): Madam Speaker, I move that the bill be now read a second time.

The Housing Amendment Bill (No 2) 2005 is an important bill that will greatly increase our ability to keep all the HomeNorth home loan schemes responsive to the needs of Territorians. Honourable members will recall, on 23 March this year, we passed an amendment to the Housing Act allowing the administration of the HomeNorth scheme to be more flexible. Previously, any changes to the HomeNorth scheme, whether by amending an existing scheme or introducing a new one, could only be done through regulation. This is a slow and cumbersome process and seriously restricts our ability to respond quickly and effectively to shifting housing market conditions and the changing needs of our population.

The amendments removed the requirements for change to be made through regulation. Instead, the Chief Executive Officer, Housing, with endorsement from the Minister for Housing, was then able to approve and amend housing purchase assistance schemes. This meant that the schemes are now governed by business rules rather than regulations, allowing us to make more strategic and timely changes to HomeNorth as market conditions dictate. This brought the management of HomeNorth products into line with commercial lending sector standards, including that of the Territory Insurance Office. Under the new arrangement, we are able to respond quickly and effectively to market changes, allowing both the maximum purchase price and the household incomes to be increased on 1 July 2005. The loans that are governed under the Housing Loans Act and its associated regulations were not covered by this previous amendment. This was simply an administrative matter and this further amendment to the Housing Act aims to complete this process.

It is important that we ensure that people who took out HomeNorth loans in the past, that is under the old scheme, may have the benefit of future improvements to the administration of HomeNorth loans, and it is for this reason the amendment bill repeals the remaining loan schemes that were not covered by the previous amendment. This will allow us to manage all HomeNorth loans under relevant business rules and to incorporate important new features into existing loans. For instance, we can allow Territory Housing to purchase an additional share in a property where the borrower is in financial difficulty, or to give borrowers the ability to access funds that they have paid over and above the minimum repayments to assist with such things as home improvements. These are features of the new products which may be extended to existing borrowers as a result of these amendments. I commend the bill to honourable members.

Debate adjourned.

Continued from 13 October 2005.

Dr LIM (Greatorex): Madam Speaker, I raise some concerns that I have with this amendment. I read carefully the minister's second reading speech where he expressed that the intent of this amendment was to allow the HomeNorth loan scheme to become more responsive to market movements in housing prices and the demands or the needs of Territorians who are involved in purchasing property with the assistance of HomeNorth.

I commend the motive. It is good that Territory Housing or the HomeNorth loan scheme should be structured to assist Territorians in any way so that they can achieve home ownership, and to allow the Territory to move towards a higher rate of home ownership. However, this amendment appears to remove the minister from any decision-making by delegating to the chief executive officer the minister's responsibility in establishing the HomeNorth loan scheme and its rates in their entirety. If I am wrong, I ask the minister to tell me that I am wrong in that assumption that I am making.

I am concerned about some points that I would like to ask the minister to elaborate on for me if possible. Is it possible, without coming back to parliament or putting it into the government Gazette, for example, to increase the amounts available for home loans via a HomeNorth scheme, or decrease the interest rate at any time that the minister or the CEO sees fit? Maybe a month before an election, perhaps, that would be a very attractive measure to adopt at a critical time when government's political fortunes are flagging. You could support it or prop it up with such a move. Normally, you go through a due process where the minister would have to explain it, and then it would be eventually gazetted and, that way, it becomes a very transparent process. What this amendment proposes to do, it appears to me - and again I keep saying that I could be wrong on this - that that open, transparent process would not be followed. Maybe it is not the intent of the government, and that is fine. However, whether it is the intent or not, I believe the legislation should not leave a loophole so large that that sort of unintended consequence could be allowed.

I would like the minister to explain clearly whether this process will still remain open and transparent; that people in the Territory can see openly in a government Gazette what is going to take place in terms of changes to the HomeNorth loan scheme.

I ask another question: would HomeNorth be able to offer, without any public disclosure, different packages to different people? Is that possible? If the chief executive officer decides, due to market pressures, he has to respond to the market pressure and offer an individual, group or organisation a house; will he be able to do it with a particular package that is geared to the particular group, person, or organisation? That, to me, may be a possibility again according to what I have read in the amendment. I ask the minister to assure me that we make sure this is all open and transparent. This appears, to me, that it can be done by one person without reference to anybody, and this is what has to be demonstrated to the public, whether to us in parliament, or by gazettal. It is not an open and transparent process.

Another question I would like the minister to answer: could the government, without reference to proper regulatory process, bail more and more people out if they have difficulties with their loans? For instance, the government is already an equity partner in the purchase of a home, which also has loaned money through the HomeNorth loan scheme to an individual. If an individual struggles to pay the mortgage, can the government suddenly come behind the contract and say: 'Okay, we will take another 10% or 20% equity in your residence', and that will help you reduce your mortgage payments and therefore makes it all easy. Then, the government's debt starts to increase further and further and never, in the life of the resident or home owner, would the home loan be paid off. How is the government going to do this without making sure that we all, in the Territory, know that it is happening, with the case of a particular home that has been purchased by a Territorian who is struggling to pay? Is the government going to use this amendment to continue to prop people up, people who, under any other normal circumstances, could not afford to purchase a home, but had committed at a time when money was readily available, and suddenly now find circumstances have changed.

While the HomeNorth loan scheme's products have been brought into line with commercial lending sector standards, we then start to hear a few bells ringing. The TIO finances our HomeNorth loan scheme. Are we now preparing the TIO HomeNorth portfolios as part of a sale when we get rid of TIO as well? Does that mean that if TIO gets sold, that this TIO housing portfolio will be transferred to HomeNorth? These are bells that are ringing very loudly for me, and while it is not mentioned at all in the minister's second reading speech, I believe it is beholden on the minister and government to respond to these concerns.

I have two final points. The minister said that the bill repeals all remaining loan schemes that were not covered by the previous amendment. The government says it gave people who took up loans in the past access to future improvements; it could also go the other way, I suspect. We will not know until it has happened, as there is no requirement for operations to be done by regulation. That is the problem. It just allows things to happen without an open and transparent process. Those questions need to be readdressed by government when they pass this bill. I am not sure, I have not spoken with industry myself, but, in the minister's second reading speech, it says nothing about his consultation with private enterprise or with real estate industry. I suspect that they will be unhappy about this. They are completely uninformed about this altogether. This is something that has to do with the CEO, HomeNorth loan scheme, whatever they currently are, and TIO.

It appears to me that this is a bungling of a TIO portfolio that is part of the whole TIO review which is going to end up being sold off, herein lies another problem. I seek the minister's explanation to those points I have raised, and I hope he has some satisfactory answers.

Mr McADAM (Housing): Madam Speaker, I thank the member for Greatorex. I just want to respond to a couple of issues to begin with. This matter is in no way related to your perceptions in respect to the future of TIO. You will be very much aware that this government is presently undertaking the exercise in regards to TIO and in no way can you under any circumstances relate this particular amendment to the sale of TIO.

The other matter that you raised also is in respect of the real estate industry. My understanding is that the HomeNorth Extra scheme and the HomeNorth scheme prior is a scheme that is very well accepted, and acknowledged, right across the industry, because it caters to a niche market. It caters to those people who may not have the capacity or the finance to go into a higher market; as you would be aware there are certain rules, conditions and regulations which apply to the HomeNorth Extra scheme. So, instead of trawling up these red herrings about the real estate industry, it is incumbent upon you to be responsible. If you are going to get up in this House and say things, then you should say it with a degree of certainty. So just let me say that to you to begin with.

You also raised some other issues. I understand that you have not received a briefing in regards to this exercise. In a way I wish you had because it would have been simpler and you would have seen the merits of these amendments. Effectively, the amendments I refer to relate to bringing the Housing Loans Act into a more commercially business-regulated environment which will give the capacity through the CEO to be able to do certain actions and before anything occurs, the matter must always go back to Cabinet. That is the condition. If there needs to be a change in regards to market conditions, or to any of the existing regulations, then the CEO will obviously advise me of it and I would have to go back to Cabinet to seek any changes. I hope that addresses your particular issue there.

Effectively, there are no real changes. Essentially, these new amendments bring it into line with good business practice. You also referred to, and I do not know whether you actually meant this, or whether I misinterpreted you, but you seemed to suggest in some way that there might be some capacity for the CEO to be able to go off and act under his own steam in regard to the changing of these regulations. I hope that you did not mean it that way; you would be very much aware that there are certain compliances. I just want to give you that assurance that the Territory Housing people and the CEO have both been very professional in regards to this whole exercise, and that the HomeNorth Extra scheme is applauded right across Australia.

These new amendments will capture around 60-odd people under the old scheme, so it brings them into the same rates as applied before. What that does, essentially, is allow all clients who have taken out HomeNorth loans that if there are difficulties with repayments then there is capacity for up to 40% of the market value - that is the purchase price of the house at the time - for that to occur via the CEO.

I advise that there have probably been in excess of a total of 2792 loans approved under HomeNorth Extra, and a total of some 2000 loans all up. My advice is - and I sought this information - that there is one person who is taking out a home loan who has defaulted. There are others who are experiencing some financial difficulties. However, I have been assured that through these particular amendments, we are able to assist people who are experiencing financial difficulties. As you know they can buy back our particular equity in 5% increments over time.

I am not too sure if I have addressed all your points, member for Greatorex, but I honestly believe that this amendment is good business practice; it brings into line those outstanding loans that might not have been eligible under existing amendments. It frees it up to be able to react to the marketplace in terms of market pressures. As I said, I do not know whether it addresses all those particular issues that you have raised, but I feel …

Dr Lim: This is a quick interjection. You might like to go into committee and I can ask you questions on a couple of the amendments.

Madam SPEAKER: Member for Greatorex, are you asking that we go into committee later? Let the minister finish his speech.

Mr McADAM: The member for Greatorex wishes to go into the committee stages. Is that correct?

Madam SPEAKER: You are asking to go into the committee stages?

Mr McADAM: No, I am not. I am just wondering what he wants to do.

Dr Lim: Let us go into committee and I will ask you a couple of questions.

Madam SPEAKER: All right, member for Greatorex. Minister, have you completed your second reading debate?

Mr McADAM: Yes, I have.

Motion agreed to; bill read a second time.

Dr Lim: May we go into committee, please?

Madam SPEAKER: We will go into committee after Question Time, member for Greatorex.

Debate suspended until after Question Time.

Continued from earlier this day.

In committee:

Clauses 1 and 2, by leave, taken together and agreed to.

Clause 3:

Dr LIM: Clause 3, which is about Part X, No 50. Mr Chairman, I would like to ask the minister to clarify this for me. Under clause 50, Scheme under repealed housing loans regulations, it says:
Section 24 of the act, as I referred to it earlier today, reads that the chief executive officer can administer section 24 under the minister's delegation. It is my understanding, from the amendment, that the chief executive officer does not require direct delegation from the minister, but in fact can act on his own behalf after this amendment goes through the House. Am I right?

Mr McADAM: The point to be made here is essentially what occurs is that the chief executive officer, under these new regulations, has more capability, more capacity to be able to manage the HomeNorth scheme, GBD, along commercial and business lines. To take that one step further: the chief executive officer is able to administer those regulations but if the chief executive officer wishes to, in any way, vary or to make any changes, he cannot do that. He has to do that via the minister and then I have to take that matter to Cabinet for approval. Any variations, any changes - for instance, the chief executive officer could not increase the cap, which I think at the moment is $1166. The chief executive officer could not increase that cap arbitrarily, nor could he, for instance, raise the loan from $260 000. He could not do that. He would have to come back via me and, of course, I would have to submit that to Cabinet for consideration.

Dr LIM: Thank you, minister. It gives me a lot of comfort to know that. Could you also say that he cannot alter the interest rates without coming through you to Cabinet?

Mr McADAM: Of course - absolutely not. The chief executive officer has no capacity at all to vary the rates. There was the suggestion on your part a little bit earlier when you effectively implied that, for instance, there could be a government at some time in the future that could vary those rates, say, prior to an election. As you know, the scheme that we are locked into is very much set to market rates. Government is in no position whatsoever to influence interest rates. The market sets those rates, and any government that wanted in any way to interfere in that would be very foolish.

Dr LIM: Again, I take comfort in your words, minister. That is what I wanted in terms of clarification and the intent of this amendment as you explained, and I am happy with it. Thank you very much for that.

Clause 3 agreed to.

Clause 4 agreed to.

Remainder of the bill, by leave, taken as a whole and agreed to.

Bill reported without amendment; report adopted.

Mr McADAM (Housing): Madam Speaker, I move that the bill now be read a third time.

 

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