Senate Economics Legislation Committee, , 2:07:40 to 2:55:26
Discussion focuses on the delivery of social housing and the impact of construction costs on supply.
Topics: Infrastructure, Social services, Government spending
Speakers: Ben Rimmer, Hon Tim Ayres, Andrew Bragg, Hon Richard Colbeck, Barbara Pocock, Deborah O'Neill, Dr Amanda Hosking, Dr Nerida Hunter, Lisa Darmanin, Nicholas Dowie, Rebecca Wilson, Scott Langford, Senator Fatima Payman, Speaker 15, Tyron Whitten
Um, Minister, I want to just go to the large picture of your housing policy, your government's policies. We've heard this week that investor lending has increased in housing has increased really significantly by 24% the last 12 months. In the last quarter, $43 billion spent by investors uh buying houses. We've seen house prices go through the roof in my city. It's now over a million dollars to buy a house. Mortgages are up by 70,000 in recent times. Uh uh in the last year, people are borrowing more and more money. We see rents running at two and a half times over the last 5 years of your government, the rate of wage increases. We've got um 30% uh that the average renter is paying 30% of their income. It puts them in any definition of housing stress uh for their rents. Incredible. If you know any young person, any person out trying to find a rental property and facing the kind of rents they have, we see people in real dire circumstances. And yet today, there are people who really are benefiting from your housing policies. But it's not the average punter out there trying to buy a house, their first home or a renter. It's the big banks. CBA this morning uh announcing 5.4 billion in profit in the last half year. A&Z 1.9 billion in the last quarter. Your policies are actually making the housing crisis a crisis of the dimensions we've never seen certainly in my lifetime before. How can you defend your housing policies given every single one of these indicators where the only people who are doing well are big banks?
>> Well, that's um an even more relentlessly negative um construction of the position than your usual approach. It's not >> I've stated I I allowed you to ask the question. 9 in 10 to answer it. uh pressure in the housing market particularly particularly for first home buyers. Uh and um we have made uh as a government significant progress uh against the backdrop of a decade of uh of inaction at the very best is is is the very best you could say um of what uh the the previous decade had characterized. 570,000 homes have been built since we came to government. Uh 220 of those during the National Housing Accord period. Building approvals, that is new homes coming into the market have improved for three years in a row uh with home starts up by 11% uh on the previous on the same time last year. Construction costs uh fundamental to getting the housing supply chain moving have fallen from a half century high under the coalition of increases of 17.3% down to below inflation at 1.8%. Very significant for getting uh housing construction moving. 220,000 first home buyers have bought a home with Labour's 5% home deposit scheme. Uh I I understand the sort of uh uh armchair criticism of that scheme made by boomers who don't need it um who own homes, some of whom own investment homes. But 220,000 people who would otherwise not have been able to access a home have access to home uh under that scheme. 25,000 social and affordable homes under construction or in the planning process. 5,000 completed. 5,000 completed under the previous decade of the sort of Abbott to Morrison arc of inactivity. 373 homes completed over a decade nearly a decade. Uh over the short period that we have been working through this, 5,000 completed, lots more to go. Another 20,000 to come under that scheme. 1 million Australians received a 50% increase in Commonwealth rent assistance. People still under pressure, but a significant change might look like a small change to people who have homes, you know, and comfortable incomes, but a 50% increase in Commonwealth rent assistance is a very significant contribution indeed. And because of the prime minister's work at national cabinet, there are stronger renter protections at the state level that the states are busily uh working away at. Now, we have a plan uh that is about setting an ambitious national target to build 1.2 million homes. There are some people in the political system, you wouldn't want them with you in a foxhole uh when things really matter because they'd try and persuade you uh not to go over the top. They would tell you it's too hard and would winge and moan and carp and carry on. uh instead of actually getting behind a national effort that is going to be hard, that is not all about what the Commonwealth does, but is about us accepting uh that it involves national effort from the private sector, from the investment community, from the states and territories, from the building industry itself for all of us to do better. That is what the government's plan is. Uh it is a wellresourced very significant uh allocation from the budget unparalleled in our history. Um it's not perfect but it is a big effort. It is a big effort. Uh it is uh unparalleled in our history and it's a very strong record of achievement. There are still uh there are still challenges in the housing market. Otherwise you'd pull up stumps and not worry about it. still problems and we're determined to keep on with it.
>> So, Minister, how can you justify your government's bigger spend, over 12 billion on capital gains tax discounts, bigger than the spend you're making on rent assistance, which you mention, uh, social housing and homelessness services? There's been a big conversation in recent weeks about that single appalling statistic. And it I I I'm not going to argue with you about previous governments and their failures. Both major parties after the last 40 years have failed housing in Australia. There's very few people who are watching this who wouldn't agree with that statement. But why is your government spending more on massive tax breaks which put that investor alongside that first home buyer every Saturday morning
I suppose, yeah, it's a it's a it's a thing about, uh, uh, measurement and effort and statistics. You say very few people watching this, uh, wouldn't agree with your statement. I mean, I think the truth is, if we're going to be fair to about statistics, very few people are watching this at all. Um, is the truth is the truth.
>> people are watching the housing crisis
and feeling it pain. But but but uh drawing an equivalence between their decade of utter inaction uh no effort like precisely zero effort zero meetings of housing ministers. Um 373 social and affordable homes is zero like zero uh uh compared to the need that is out Uh this is a very substantial effort. Um it's not immune to criticism. We're not the kind of you know like it's not uh not the previous government here that that had shouted people if they criticized them. There's there's all sorts of things that need to improve but this is a very substantial effort. Minister uh it has been very capably capably led and it does involve cooperation across the system and what what is I think an unhelpful argument is trying to identify one element of the system and say that is going to resolve all these problems. So, I know that's the armchair sort of dinner party argument, but the but this this involves increasing supply, supporting people to get a leg up into the housing system. uh uh uh demand measures, supply measures, overwhelmingly supply measures, cooperation with the states and territories, institutional work with uh labor market uh uh with the uh with the investment community, uh with uh the housing industry, uh with the states and territories to get this thing unstuck. Uh and we're making
question, Minister, um I know I I can
come back to you, but I'm going to try and keep to 10 minutes.
>> So I asked you how can you justify your priorities to with this massive tax break which over overshadows these other uh really significant issues, homelessness programs, social housing, uh and rent assistance. And you you point if I may finish, you point backwards to that mob. That excuse has a time limit on it and it's probably 5 years and you're past it. So I I have further questions in relation to social housing stock that I'll come back to.
>> Well, I I spent 80% of my answer talking about our record and our plans which are substantial and has been substantial. Uh I spent 15% of it that's true talking about their miserable record and 5% reflecting on the critique uh that the the sort of armchair critique uh that is advanced by some people in this place. We are getting on with the job. The biggest ever effort in this area uh and that involves setting a target and fighting to get there. uh that is better than uh what happened previously which is doing nothing and then resting on the laurels of other people's achievements.
>> Okay. Um I'm going to go to Senator Walker.
>> Thank you. I've just got a few questions. Um as a South Australian, I'm very excited about the announcement um in South Australia as part of our 100,000 homes policy. I'm wondering if you can step through what that policy is going to mean for South Australians trying to get into the housing market.
>> Thank you, Senator. I might start, but Mr. Dowi may uh wish to add further information. So, uh the prime minister and Premier and uh ministers announced uh this deal um a little over uh a week ago. Uh the total arrangement is for an investment of $81 million into new housing supply for first home buyers in uh South Australia. Uh there are nearly 7,000 homes uh for first home buyers produced through this arrangement, 6,877 to be precise. Um but in it's important to recognize there's actually a wider number of homes than that supported uh for for the market in general. So there's um nearly 17,000 homes supported in general. Uh some of that uh is um been facilitated through investment in water infrastructure in the north of Adelaide and um Concordia. Uh there's loan funding from the Commonwealth to that end. Uh some of it is uh developments in Playford. Again, there's lo loan funding uh for that and the Playford development is expected to hit the market very quickly uh and be constructed within just under 24 months from now. Uh there's other programs uh that will be supported by grant funding um uh and uh the so the overall arrangement will uh will really make a significant boost uh and first home buyers will get uh the first opportunity for these homes. It's not a permanent um opportunity for a first-time home buyer but uh if a house is developed through this program uh then uh it will be offered to first-time home buyers exclusively uh for a period I believe it's 3 months um uh in in this arrangement. So, uh, first- time buyers get a chance of getting access to a pretty affordable home, uh, without competition from other people in the market, uh, to really give an additional leg up to, uh, to that cohort.
>> And I think something else that South Australians are keen to understand is how you going about deciding which locations to invest in specifically. I'm wondering if you can step us through how you came to making that decision for for Playford and the surrounding areas.
>> Sure, Miss Wilson, do you want to talk to the negotiation and discussion with the states?
>> Absolutely. Thanks for the question, Senator. Uh Rebecca Wilson, acting assistant secretary of the housing industry capacity branch. Um the particular projects were proposed by South Australia and went through an assessment process by the Commonwealth where we determined both value for money and that it would meet our total program objectives. Um, so all of the projects that have been proposed thus far are in growth corridor areas where South Australia and the Commonwealth are satisfied that the homes are attractive to first home buyers and can be sold at a price that is achievable to first home buyers to meet our total program objectives. Um, and then the I guess as the director general mentioned, the other benefit of these particular programs is the number of market homes that will also be delivered. >> Um, which again was something that we strongly support additional housing being provided.
>> thanks very much. So, back to the 5% >> Um, FOI 4065. one of the documents released is uh possible Senate estimates questions on Treasury's modeling of the 5% deposit So what is this? Is this a dress rehearsal preparation you do for Senate estimates?
Um so Senator, that document that you referred to was just a um a back pocket briefing note that was put together that was um designed to um help officials respond to any questions that might have been put about the modeling that was done in relation to the scheme.
>> Surely they have their their own capacity to answer the questions.
>> Well, I think Senator just to be just to I think it's important to put the context in which this particular document was repaired in that particular Senate estimates. If you recall, that was a set in which you wrote to the department, I think about 24 or 48 hours prior to the to the hearing saying that you wanted to make sure that you wanted to discuss this. So, in that particular in that particular case, we wanted to make sure we were prepared. So, um I I did ask some folks to put together some some some material to make sure I didn't mislead you.
>> Okay. So, it's not is this a usual thing that happens inside the Treasury that you have pre-rehearsed questions and
>> Well, I think it's not unusual within the Treasury that that that officials are briefed to be able to respond to the likely questions that they may receive.
>> Sounds a bit like the the debate preparation they do in the US presidential elections.
>> I I I can't comment on that. [laughter]
>> Okay. So fine. Okay. So um who actually prepared >> Maybe maybe don't tell me names like which department did it?
>> It it would have been staff within the
>> Okay. And who was it given? Who is it? Who's this for?
>> Well, I believe that this this was back pocket briefing that would have been done for myself when um when I was answering your questions. I believe on the 6th of November for memory.
Do these things get given to the minister at the table?
>> Uh this particular one. No, this would have been prepared purely.
>> So it's for you.
>> Yeah. To make sure I didn't mislead you for any question that you might have
>> Yeah. Okay. Um so what's happening with your role as an observer, Mr. Rimmer? Are you still heading to the board meetings of Housing Australia?
>> Uh I am Senator. I was at one on Tuesday this week.
>> Okay. Uh, and so what was your role in
>> My role was to be an observer, senator.
>> Okay. And did you talk in the meeting?
>> Uh, I did a few times.
>> Okay. Um, were you asked questions?
>> Yes, senator.
>> Okay. About
about a range of matters. I mean, in general uh the board undertake their obligations consistent with the housing Australia act. the investment mandate, >> uh the policy settings for different programs. From time to time the board request um uh an opinion from me, advice from me about uh the policy settings that government has decided on particular measures uh or about wider uh whole of Australian public service governance matters um uh including policy in general in relation to specialist investment vehicles uh you know those kinds of matters. Senator,
>> and you asked about your sort of political advice or do you ask to give you know a view that might be telegraphed to you via the minister?
>> Senator, it's not my role to provide political advice to anyone.
>> So do you give I [snorts] mean you talk to the minister a lot. That was your evidence last time. So are you there to represent the minister or
>> uh Senator? I'm not there to represent anyone. I'm there to observe the board and to provide any assistance to the board that I I can. Part of that role does involve uh assessing the direction that the government is taking on a particular issue. Uh the direction that the minister wishes to take on an issue. Uh and if I can provide useful context and um support to the board in understanding that then I might from time to time do that. but it's certainly not the main purpose of the role.
>> How do you think the board's going?
>> Uh I think the board is uh effective. I think uh it's no secret, Senator, that the board uh has had its moments um you know in the past. Uh some of those moments have become public in various forums. Uh I think the board is on a an upward trajectory. Uh I think uh the uh acting chair is doing a fine job in coraling uh board member uh engagement and focus on delivering government policy objectives uh in accordance with the legislation and the other policy frameworks.
>> Okay. And Mr. Tangey was appointed as the acting chair in about November. Is that right?
>> That's right, Senator.
>> Okay. And what about the arrangements for appointing a permanent chair? Is that something that's done by the board or by the treasury?
>> Uh that's something that's done uh by uh the minister.
>> The minister does that. Okay.
>> Yeah. Following appropriate consultation within government as uh is normally the case.
>> Okay. So is there a panel of people to is there a selection panel?
>> Uh the uh there is no selection panel established as yet on on this program.
Okay. Well, are you going to appoint a chair?
>> Uh, yes, senator.
>> Okay. When
>> uh that's a matter for government.
>> Okay. So you would advise that there would be I a recruitment agency or some sort of a service provider to assist in appointing a chair or at least a panel of
>> Senator as you know uh in accordance with uh recently agreed government policy there are three pathways for appointments of this kind uh there's a direct appointment uh there's a closed uh selection ction process uh and uh there's an open uh an open advertised selection process and uh the decision about which of those paths to pursue is one for the minister senator
>> and you don't have any sense of when that might be?
>> I have a sense that the the minister wishes that matter to be resolved quickly and appropriately. I I believe Mr. Tangi's uh acting appointment uh expires in July of this year. So clearly there's a a time limit established by that uh by that fact.
when a decision is made on the appointment process, will that be publicly disclosed?
>> I mean in the normal course of events, appointments are tend to be disclosed uh uh at the point of their announcement.
>> Okay.
>> Uh or otherwise through some Senate estimates process or FOI process. uh otherw uh in other circumstances
>> but your evidence is that the minister hasn't decided whether to have a targeted process an open process whatever
>> to my knowledge senator the minister hasn't currently decided made a formal decision about that matter I think that's right
>> okay that's very helpful the the issue the governance issues that were canvased in the intersection report >> has Has the acting chair now been briefed on those issues? Because last time we heard evidence that he had not
>> Uh Senator, the the acting chair is aware in general terms of the uh the context of that report which is now nearly I believe over two years old
>> So sorry is that a yes or no?
Senator, my answer is my answer. The the the acting chair has been briefed.
>> He has been briefed
>> about a range of matters about past Housing Australia governance and performance
>> because the last estimates he hadn't been briefed on that report. >> So he now has been.
>> Senator, you're blurring with respect, you're blurring two uh two concepts. Um >> uh the acting chair has not been briefed in detail by the people who did that report about that report.
>> Understand
>> the the acting chair has been briefed uh by me and by my colleagues uh about uh the the general uh circumstances around Housing Australia before he joined the board. He's also been a member of the board for nearly a year I believe. uh and so he has some awareness of the general board uh situation through that process.
>> And what about this deote report? >> Who commissioned that deote report?
>> Senator, >> I think what you're referring to is a report that was done uh for housing Australia. It was commissioned by Housing Australia staff as part of part of a what we call line two risk um function. So we run a threeline risk model. Second line often undertakes work where we would engage people or sometimes perform internally a an assurance type review. Um it was commissioned prior to my time but my understanding um is that we asked Deote who supplied a someone to be effectively within the organization and did some work produced a report um as part of a normal ongoing second line assurance process.
>> Okay. So these issues the last question on this line then is so these issues about board governance one commissioned by Housing Australia one commissioned by the Treasury they're
>> Senator with with respect I'm not sure that you could characterize the Deote report as a report about board governance. Uh unless I'm incorrect about that. Uh but both of those processes are now well in the past.
>> Okay.
>> Thank you. Um Senator Payman.
>> Thank you chair. Good morning. Um in February last year, the government announced a ban on the purchase of um established dwellings by foreign investors uh in Australia between 1st of April 2025 and 31st of March 2027. Um how many established dwellings were owned by foreign investors on 1st of April 2025?
>> Senator, that's a matter that falls within the responsibilities of other people within Treasury. I don't think officials at the room today have answers to that line line of questioning. Um I believe it's in uh which group is it in? >> We'll we'll try and provide if you put the question on notice, we'll we'll find you an answer, but I'm I'm sorry we can't uh provide you an answer to that question right now.
>> Okay. So, but does it fall within Treasury?
>> It falls within Treasury,
>> just not Housing.
>> Just not Housing Grant. We're not I'm I'm not briefed about that matter.
>> Okay. No worries. I'll uh find out apologies. No, that's okay. I appreciate the clarification. Thank you.
>> Oh, sorry. Um, Senator Colbear.
>> Thanks, chair. Um, [clears throat] I just want to ask some questions about the cities and suburbs and urban policy unit and the urban policy forum that now sits in Treasury, sits with you. can you give us an update on how these teams are working with infrastructure to ensure there's no duplication or or have provisions moved across?
Senator, um, in the machinery of government changes that took effect in July, responsibility for national urban policy and national cities policy came uh to housing group within Treasury. They're now part of uh, Mr. Dowi's responsibilities and M. Husking's responsibilities uh and we have accountability for those uh those policy areas as at the current time. Senate, do you want to
>> um so um Senator, we've um we've established a citizen planning working group with the Department of Infrastructure, Transport, Regional Development, Communication, Sports, and the Arts, um just to ensure that we don't do any any areas of those duplications that you've mentioned and we're meeting on a quarterly basis to ensure that the work we're doing um is aligned with border hall of government priorities, but doesn't duplicate work that's being done in that portfolio.
>> So, are the terms of reference established for that group or is it
>> Uh yes, Amanda Hing, acting assistant secretary of the housing supply planning infrastructure and analysis branch. Yes, there are terms of reference and they've been provided to this committee as part of a question on notice that was received at the last set estimates.
>> Um so it's meeting quarterly. How many meetings have there been?
>> There's been one meeting in November and there'll be another meeting in the next
couple of weeks. Senator, if I can just add to that briefly, there's also very frequent informal interaction uh between infrastructure Australia and ourselves, between the infrastructure department, senior officials and ourselves as recently as yesterday I was talking to one of the deputy secretaries over there. Uh so there's in addition to that more formal mechanism that my colleagues have outlined, uh there's very frequent informal engagement.
>> Okay. So what's the makeup of that group who who does who does the committee comprise the working group?
>> Yep. The working committee comp uh comprises SCS band ones and members of their teams from the department of industry transport regional development city sports and the art and treasury.
>> So how many members does the unit have?
Uh um I'll have to take that on notice, but I might it may depend on the nature of the meeting and the what's on the agenda um how many people attend, but I'll take that on notice.
>> Is that dependent on the meeting or are there formally members? Is is it a formal structure that's established for
um the membership um yeah the in terms of the formal membership it's at the SCS band one level or their proxy members are able to attend as needed but um as in the terms of reference it uh we there is some flexibility with additional members invited as is appropriate.
if you could give us on notice the number and the FTE roles I want to go to the urban policy forum which was established off back off the back of an announcement in the 2023 budget. Um, can you give us the meeting times 423 24 25 and has it met so far this year?
>> Um, I'll need to take on notice the meeting times for those um previous meetings as they sat in a a different
>> Do you know how many times it's met in each of those years?
>> I don't have that information with me. I'll >> Has it met this year? >> Uh, there has not been a meeting uh this
year. Has there been an a meeting since the election?
>> I'll need to take that one on notice.
>> I mean, isn't this an important forum for working on national urban policy?
>> Senator, if if I may, um, urban policy is incredibly important. The city's policy is incredibly important. uh it's an important part of my personal background uh that I bring to this role. Uh it's uh it's an important part of uh this whole agenda. It is fair to say that given the urgency of the housing supply uh challenges that are currently being experienced and that have been um uh recorded in this discussion with senators. Uh our focus is very much on delivering government election commitments uh delivering uh very tangible short-term improvements to housing supply, affordability and uh productivity. uh and uh there are some matters and I would describe urban policy uh as uh and the role of the urban policy forum as one of these that despite their long-term importance are currently uh a lesser priority when compared to the immediacy of the of the rest of the government's agenda on housing supply and affordability.
But but the urban policy does then feed into planning policy which was where I was going to go next. Um and it's one of the great inhibitors. I mean uh I think I've been involved in this conversation going back to not long after when the government's elected and started making some of it implementing some of its policy with respect to this and it wasn't minister that was there but it might have been the finance minister was talking about planning issues. M it's it's one of the the great challenges of this whole process
>> definitely Senator
>> and urban policy is one of the found foundation elements of that isn't it? I mean, getting that part right, getting agreement about what's going to go where, um, and then making the appropriate changes to your planning processes is actually one of the things that will assist this to happen. Yes,
Senator, and I wouldn't want to misled you, planning and planning reform and getting faster approvals, uh getting more homes approved for development, uh is 100% uh part of our focus and our prioritization. Uh so to to to that extent uh I think um uh the the direction of your question is um in alignment with the work that the TA are doing.
>> Okay. Okay. So let's go to particularly to planning then. So the last communicate that I've got available to me from planning ministers meeting is a 2024 communicate. Um when was the most recent meeting of planning ministers?
uh Senator with new governance arrangements in the Commonwealth uh and machinery of government arrangements in the Commonwealth and um in addition in some states and territories uh there's a bit of a change in ministerial accountabilities and relationships on these matters. Uh the the Minister for Housing is intending to convey a meeting uh of uh what we're calling a joint ministerial meeting uh in the next couple of months uh that includes um people with coverage of planning of uh building uh really to get that full spectrum uh of uh engagement across all relevant ministerial forums. Um in addition in my role uh we we have established a national housing supply coordination senior officials meeting. Uh I play the comwalth's part in that and uh in many cases in the states and territories the senior officials at the table in that conversation are also the senior officials uh either with responsibility for planning or very close to the responsibilities with planning. So there is a lot of engagement uh with planning and planning officials. I suspect there's more needed and more to come. There's a lot of reform happening in planning as as you know Senator uh and uh it's certainly a very important part of our role.
>> So there's been no meeting of planning ministers despite the importance of planning to the overall housing exercise since February of 2024. Um no >> and it and and whose whose backside is in the seat quite frankly is you know ministers come and go. We've seen that all experience or some of us have u but the the structure of the conversation in keeping things moving is critical. So
>> might just jump in to say before the officials provide more more detail. I mean the the that's one of the reasons for example um following the election I mean I was appointed as the minister for industry uh and uh traditionally within the department of industry that function around uh building standards has has been within that area that has moved across to um to uh the minister for housing's responsibility ities because um the the architecture of the bureaucracy matters but but um ministerial responsibility does matter uh in this area. So there are um those changes are reflected in um the the arrangements that we have made at the Commonwealth level. Um there are and as uh Mr. Rimmer has outlined that some of those similar changes have been engaged at the state level as well.
>> So Senator just just to put on just to
answer your question directly you said has has the has the planning mining ministers met in August um of last year on the 8th of August to have a conversation focused on um input towards the economic reform round table. So in
two years there's been one since February 2024 there's been one meeting of planning ministers.
>> Well the most recent meeting was on the 8th of August 2025 but there's been a number of work that planning ministers have been progressing out of session by progressing the national planning reform
>> So um where would where would we publicly see advice and information in relation to that? So in 2023 sorry in February 24 there was a communicate what information is there available to anyone in relation to what's been going on
so there is information on the treasury website about progress with the national planning reform blueprint which is something that's being progressed under the opaces of planning ministers and planning ministers have actually um
>> sorry it's very hard to hear with >> my special friends outside >> sorry I I just I just couldn't hear
that. No, no, I was saying that um so planning ministers have been leading work under the national planning reform blueprint and there's been regular updates that have been published on the Treasury website about how states are progressing those particular planning reforms and what it is they're doing to um amend their planning systems to make it easier for more homes to be built faster. And there are regular updates um that are published at least twice a year on the Treasury website that takes account of the reforms that states and territories are doing in their jurisdictions to progress their commitments that were made at national cabinet but the planning minister sign
>> I'm going to have to call because we've got a hard stop of 11:55.
>> I just want to ask if you could take on notice if we can get the meetings of that last meeting and the minutes of that last meeting in August, please.
>> Thank you, Senator Colbeck. Uh, Senator Whitten would if you can take us to 11:55.
>> Thank you, Chair. I've only got a couple of questions. Um, could you please tell me uh the value of the contingent liability uh to account for defaults in the 5% first home buyer scheme, noting that it's listed in the quantifiable contingency liability in the MFO,
So over the forward estimates, the contingent liability is $35.7 million
5.7. Okay. Um it seems we're entering a rate tightening cycle. Um, have estimates been prepared for defaults for the the case of one or two further rate rises?
Sorry, I didn't say my name. Nerida Hunter, uh, first assistant secretary, homelessness and housing policy division. Um, we will, uh, we work with the Australian government actuary on those estimates. Um, as well as, uh, working with Housing Australia on their experience implementing those programs. we will look at um the changes of conditions the operational experience in the scheme in the context of preparing an update for budget. So the numbers I
>> my apologies.
>> I was just going to say the numbers I provided were as of my Epho.
>> So the there aren't any further um estimates for the potential rate rises.
Not that I um the we have considered the impact of the rate rises um on the repayments of participants in the 5% deposit scheme and we will consider the impact on contingent liabilities and publish that outcome in the budget
context. So it's it's important to note I mean this program over the whole life of the program before the government you know expanded it um the payouts under this scheme have been um and I think we had this discussion at the last uh estimates 0.01%. >> I mean that the which you know sits ve very sort of confidently alongside the assertion that um in terms of uh uh repayments actually um low-inccome and middle inome families when uh given a foot on the ladder on this stuff are uh you know uh absolutely uh very dedicated to discharging their responsibilities. Um so it's an unquantified liability. Um but I think any proper understanding of it um should sit alongside you know the the delivery of this thus far. It's a very very very almost infinitismly small um rate of um of uh of having to pay it out.
>> Yeah, I understand that. But I guess my um my curiosity is as interest rates rise, does that become a much bigger number? Because
>> well, they've been up and down over that period, I suppose, is what I'd say. Um uh and um yes, of course, as a as mortgage repayments uh increase um that that becomes more challenging for people whether they're on this scheme or or or um or or are not. that that is the case. Um it's not to be taken lightly, but over the whole life of the scheme, 0.01%.
>> Senator, can can I provide a little bit of context? The um the 90-day reate for this population of lenders actually performs much better uh than the general population of lenders. I think the 90 a day a rate is.3% of the 5% deposit scam portfolio. uh compared to uh 2.2% for high LTV loans uh in general. I believe there was some discussion with APPPA last night uh in this committee about this matter. Um the uh the there is good evidence about the fact that um uh there hasn't been uh a massive change in consumer behavior in the first four months of the scheme that would cause any concern. uh the repayment uh rates under this scheme over the life of the scheme as the minister has said uh are very solid. Uh there are good reasons to believe that um and I might add banks as part of the normal assessment process have to under app requirements uh model for I think it's a 3% uh interest rate variation uh before they uh determine loan suitability. So there are I I wouldn't want to leave you under any misapprehension. There are a wide range of protections in place against the risk that you're describing. Uh and there's every evidence that in fact that risk is is very low uh to negligible.
>> Yeah. Look, I'm I'm all for young people getting into housing. I hope I'm wrong. Um I'm worried about the direction of interest rates and um I just don't want to see them on the scrap heap or taxpayers footing the bill as where I'm concerned. So thank you for your answers. Thank you chair.
>> Thank you. We have two minutes. Senator O'Neil I think if you can very very quick.
>> Um Mr. Rimmer you gave some I thought very important evidence earlier on about um the 12 month lag in terms of information about what's happening in the sector. Two key things that I think Australians would be very interested in hearing about that you mentioned just as headlines were the decline in costs to build and the decline in the time to construct. Could you give just a little more detail on that?
>> Uh thank you Senator. So the accord obviously took effect from 1 July 2024. So there's uh five quarters of of real data about the performance of the housing market uh since that time. Uh in in that period uh houses are now uh nearly 1% cheaper in real terms to build uh than they were at the start of that period.9%. Uh so I think as the minister said earlier there was a period of very significant um construction cost inflation. uh that's now moderated and in fact in real terms houses are getting cheaper to build uh which is which is obviously a very important outcome in terms of making it more feasible to build more houses and to address some of the supply issues. Uh houses are also getting faster to build. Uh there's been a 10% improvement uh in uh in that outcome over that same time period. Uh, and you know, while you might, one might think 10% doesn't sound like much, that's an that's a a month off the average construction time, give or take, for a detached dwelling, which means, you know, the builder can move on to the next project faster, more houses getting built.
>> Wonderful. Thank you, Mr.
>> Thank you. The committee will now suspend and uh we will continue with this uh group after the lunch break. We'll be back at 1:00. Thank you.