Statement 8 (continued)
Government loans
Loans are recorded as financial assets and accordingly the amounts advanced and repaid do not normally affect the budget aggregates of fiscal balance and underlying cash balance. Loans that are concessional (lower than market interest rate) or are agreed to be written off may result in an impact on fiscal balance in some circumstances.
The Government makes loans for policy purposes. All loans contain some element of credit risk that they will not be repaid in full, although in many cases this risk is small. Table 3 summarises Government loans estimated to exceed $200 million at 30 June 2014.
| Agency | Loan amount(c) ($m) | Borrower | Interest rate | Term |
|---|---|---|---|---|
| Department of Education | ||||
| Higher Education Loan Program | 25,183 | Eligible tertiary education students | Consumer Price Index (CPI)(d) | 8.4 years* |
| Australian Office of Financial Management | ||||
| Commonwealth‑State financing arrangements — Housing and Specific Purpose Capital | 2,098 | State and Northern Territory Governments | 3.5‑6 per cent | Up to 30 June 2042 |
| Department of the Treasury | ||||
| International Monetary Fund New Arrangements to Borrow | 950 | International Monetary Fund | 0.13 per cent at 31 March 2014 | 10 years |
| Clean Energy Finance Corporation | ||||
| Clean Energy Finance Corporation | 865 | Eligible entities undertaking clean energy technology projects | 7 per cent | 5‑10 years |
| Department of Social Services | ||||
| Student Financial Supplement Scheme (SFSS) | 624 | Eligible recipients of Youth Allowance (student), Austudy and ABSTUDY | CPI | Various |
| Indigenous Business Australia | ||||
| Indigenous Home Ownership | 584 | Eligible Indigenous persons | 4.7 per cent* | 29.4 years* |
| Export Finance and Insurance Corporation | ||||
| Papua New Guinea Liquefied Natural Gas | 269 | Entities associated with the Papua New Guinea Liquefied Natural Gas project | Commercial ‑ In‑Confidence | Until 2026 |
| Development Import Finance Facility | 222 | The Republic of Indonesia acting through its Ministry of Finance | Various | Various |
| Indigenous Land Corporation | ||||
| Voyages Indigenous Tourism Australia Pty Ltd | 291 | Voyages Indigenous Tourism Australia Pty Ltd | 90 Day bank bill swap reference rate + 5 per cent | 9 years, 11 months |
| Department of Social Services | ||||
| Zero Real Interest Loans | 230 | Residential aged care providers establishing new residential aged care facilities | CPI | 12‑22 years |
| Department of Agriculture | ||||
| Farm Finance Concessional Loans | 210 | State Governments | 4.5 per cent | 5 years |
* Average
(a) The Government has decided to provide a concessional loan of up $2 billion to accelerate the delivery of the WestConnex Stage 2 project in Sydney. The loan would first be available for drawdown on 1 July 2015. Further details are provided in Budget Paper No. 2, Budget Measures 2014‑15.
(b) The Government will provide income contingent concessional loans of $1.9 billion over four years from 2014‑15 as part of its election commitment to establish the Trade Support Loans programme. Under the programme, eligible apprentices will be eligible to receive financial assistance of up to $20,000 over a four year apprenticeship. Apprentices will be required to commence repaying the loans when their income exceeds a minimum repayment threshold, consistent with arrangements applying to university students under the Higher Education Loan Program (HELP), and apprentices who successfully complete their training will receive a 20 per cent discount on the amount to be repaid. Further information on this measure is provided in Budget Paper 2, Budget Measures 2014‑15.
(c) Loan amount is the estimated loan programme amounts outstanding as at 30 June 2014 in $ million.
(d) From 1 June 2016, debts will be indexed by a rate equivalent to the yields on 10 year Australian Government bonds, capped at 6.0 per cent per annum.
Higher Education Loan Program
The Higher Education Loan Program (HELP) is an income contingent loan programme that assists eligible tertiary education students with the cost of their fees and overseas study expenses. As at 30 June 2014, the fair value of loans outstanding is estimated to be $25.2 billion. The fair value takes into account the concessionality of HELP loans and makes an allowance for debt not expected to be repaid.
Debts are currently indexed annually by the Consumer Price Index. From 1 June 2016, debts will be indexed by a rate equivalent to the yields on 10 year Australian Government bonds, capped at 6 per cent per annum. Further details on this decision can be found in Budget Paper No. 2, Budget Measures 2014‑15.
The repayment term depends on individual circumstances including the amount borrowed and each debtor's income. There were 1,823,288 HELP debtors as at 30 June 2013. The term of a HELP loan can only be determined for people who have fully repaid their debt. As at the end of June 2013, the average duration of HELP loans was 8.4 years.
Commonwealth‑State Financing Arrangements — Housing and Specific Purpose Capital
From 1945 to 1989, the Australian Government made concessional advances to the State and Northern Territory Governments under Commonwealth‑State financing arrangements for housing and for specific purpose capital. The advances are concessional fixed rate loans to be repaid over 53 years, with the last loans maturing in 2042. Annual payments, comprising both interest and principal repayment, are made by the States and the Northern Territory. As at 30 June 2014, the estimated amortised value of the advances is $2.1 billion.
The Australian Office of Financial Management manages the receipt of interest and principal repayments from the State and Northern Territory Governments.
International Monetary Fund New Arrangements to Borrow
Australia has made a line of credit available to the International Monetary Fund (IMF) under its new arrangements to borrow (NAB) since 1998. In line with G20 Leaders' commitments, Australia has joined with other countries to increase its credit line under an expanded NAB. The NAB is a contingent loan to help ensure that the IMF has the resources available to maintain stability and support recovery in the global economy. The funds are drawn upon by the IMF as needed to supplement the IMF's usual quota resources and will be repaid in full with interest. As at 30 June 2014, loans outstanding are estimated to total $950 million.
The value of Australia's NAB credit arrangement is Special Drawing Rights (SDR, the IMF's unit of account) 4.4 billion (estimated value A$7.3 billion at 31 March 2014).
Clean Energy Finance Corporation
The Clean Energy Finance Corporation (CEFC) has developed a portfolio of loans and investments across the spectrum of clean energy technologies that in aggregate has an acceptable but not excessive level of risk relative to the sector as required under the Clean Energy Finance Corporation Investment Mandate Directions 2012 (Investment Mandate). As at 30 June 2014, loans outstanding are estimated to total $865 million.
The CEFC's portfolio consists of predominantly senior ranking, secured loans, typically secured against assets such as buildings or council rates, or against energy generating assets such as wind or solar farms or biogas facilities.
The Government has announced its intention to abolish the CEFC. Legislation to abolish the CEFC and transfer the CEFC's existing assets and liabilities to the Commonwealth is currently before Parliament.
The CEFC has predominantly made loans as a co‑financier either jointly or in consortiums with private sector financial institutions. Interest rates vary with an average expected return of approximately 7 per cent. Loans have various maturity dates, typically in the range of 5‑10 years.
Student Financial Supplement Scheme
The Student Financial Supplement Scheme (SFSS) was a programme whereby student income support recipients could trade one dollar of entitlement for two dollars provided as an income contingent loan. The programme closed for new recipients on 1 January 2004. The outstanding debt relates to debtors who received loans prior to 2004. As at 30 June 2014, loans outstanding are estimated to total $624 million.
Indigenous Home Ownership
Indigenous Business Australia (IBA) delivers flexible loans with concessional interest rates to improve Indigenous home ownership across Australia, including in remote Indigenous communities. As at 30 June 2014, loans outstanding are estimated to total $584 million.
Export Finance and Insurance Corporation
The loan in support of the Papua New Guinea Liquefied Natural Gas (PNG LNG) project involves the development, construction, operation and maintenance of a LNG liquefaction plant, gas production and processing, facilities, onshore and offshore pipelines, associated ancillary facilities and infrastructure. As at 30 June 2014, the loan amount outstanding is estimated to total $269 million.
The Development Import Finance Facility (DIFF), administered by the Export Finance and Insurance Corporation (EFIC) on behalf of the former Australian Agency for International Development (AusAID), provided concessional loans to Indonesia to deliver development benefits to that country. The DIFF was discontinued in 1996 with no further concessional loans being provided. As at 30 June 2014, loans outstanding are estimated to total $222 million.
Indigenous Land Corporation
The Indigenous Land Corporation (ILC) purchased Ayers Rock Resort for $292 million in May 2011 and immediately on‑sold it to its wholly owned subsidiary Voyages Indigenous Tourism Australia Pty Ltd (VITA) creating an intercompany loan that is partly funded by borrowings. The interest rate is set at the 90 day bank bill swap reference rate plus 5 per cent, and is reset six monthly. As at 30 June 2014, the loan amount outstanding is estimated to total $291 million.
Zero Real Interest Loans
The Zero Real Interest Loans programme provided loans with a zero real interest rate to residential aged care providers to build or expand facilities in areas of high need where investment was otherwise unlikely. Applications for these loans are now closed. As at 30 June 2014, loans outstanding are estimated to total $230 million.
Farm Finance Concessional Loans
The Farm Finance Concessional Loans Scheme provides up to $420 million over two years for the provision of concessional loans to eligible primary production businesses experiencing financial difficulties resulting from acute levels of debt. Loans will be issued for the purpose of productivity enhancements and debt refinancing. As at 30 June 2014, loans outstanding are estimated to total $210 million.
Loans are made to State governments who, through regional delivery agents, on‑lend to primary production businesses. Currently the interest rate is at 4.5 per cent, but is reviewed on a six monthly basis and revised in accordance with material changes in the five‑year Commonwealth bond rate. Loans will be given for a term of five years, with an exceptional circumstances clause in some jurisdictions, which allows a maximum two year extension to the loan at commercial rates.