Appendix C: Statement of Risks (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 the 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 C2 summarises changes to Government loans and new loans that have arisen since the 2014‑15 Budget, estimated to exceed $200 million at 30 June 2015.

Table C2: Summary of material changes to Australian Government loans exceeding $200 million since the 2014‑15 Budget^(a)

Agency	Loan amount(b) ($m)	Borrower	Interest rate	Term	Status
Department of Education
Higher Education Loan Programme	30,622	Eligible tertiary education students	Consumer Price Index (CPI)	8.5 years*	Modified
Australian Office of Financial Management
Commonwealth‑State financing arrangements — Housing and Specific Purpose Capital	2,033	State and Northern Territory governments	3.5‑6 per cent	Up to 30 June 2042	Modified
Department of the Treasury
International Monetary Fund New Arrangements to Borrow	916	International Monetary Fund	0.05 per cent at 31 October 2014	10 years	Modified
Department of Infrastructure and Regional Development
Concessional Loan for Asbestos removal in the ACT — Mr Fluffy loose fill asbestos remediation	750	Australian Capital Territory Government	Commonwealth Government borrowing rate(c)	10 years(c)	New
Clean Energy Finance Corporation
Clean Energy Finance Corporation	735	Eligible entities undertaking clean energy technology projects	7 per cent	5‑10 years	Modified
Indigenous Business Australia
Indigenous Home Ownership	679	Eligible Indigenous persons	4.7 per cent*	29.4 years*	Modified
Department of Social Services
Student Financial Supplement Scheme	554	Eligible recipients of Youth Allowance (student), Austudy and ABSTUDY	CPI	Various	Modified
Department of Agriculture
Farm Finance Concessional Loans	420	State governments	4.5 per cent	5 years	Modified
Indigenous Land Corporation
Voyages Indigenous Tourism Australia Pty Ltd	319	Voyages Indigenous Tourism Australia Pty Ltd	90 Day bank bill swap reference rate + 5 per cent	9 years, 11 months	Modified
Export Finance and Insurance Corporation
Papua New Guinea Liquefied Natural Gas	284	Entities associated with the Papua New Guinea Liquefied Natural Gas project	Commercial- In‑Confidence	Until 2026	Modified
Development Import Finance Facility	282	The Republic of Indonesia acting through its Ministry of Finance	Various	Various	Modified
Department of Agriculture
Drought Concessional Loans	270	State governments	4.0 per cent	5 years	New
Department of Social Services
Zero Real Interest Loans	246	Residential aged care providers establishing new residential aged care facilities	CPI	12‑22 years	Modified

* Average

(a) Loans appearing in Budget Paper No. 1, Budget Strategy and Outlook 2014‑15, Statement 8, but not listed in the table above are substantially unchanged.

(b) Loan amount is the estimated loan programme amounts outstanding as at 30 June 2015 in $ million.

(c) The final terms of the loan are currently being settled and repayment and interest arrangements are subject to change.

Higher Education Loan Programme

The Higher Education Loan Programme (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 2015, the fair value of loans outstanding is estimated to be $30.6 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 indexed annually by the Consumer Price Index. The repayment term depends on individual circumstances including the amount borrowed and each debtor's income. There were 1,997,973 HELP debtors as at 30 June 2014. The term of a HELP loan can only be determined for people who have fully repaid their debt. As at the end of June 2014, the average duration of HELP loans was 8.5 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 2015, the estimated amortised value of the advances is $2.0 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 2015, loans outstanding are expected to total $916 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$7.4 billion at 31 October 2014).

Concessional Loan for Asbestos removal in the ACT — Mr Fluffy loose fill asbestos remediation

The Commonwealth Government has agreed to provide the ACT Government with a concessional loan of up to $1 billion to deliver a programme to buy‑back and demolish houses in the ACT affected by Mr Fluffy loose fill asbestos.

This facility will allow the ACT to borrow up to $1 billion at the Commonwealth's interest rate for a period of 10 years.

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 2015, loans outstanding are estimated to total $735 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.

Indigenous Home Ownership

Indigenous Business Australia 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 were $598 million. The average interest rate is set at 4.7 per cent per annum, and as at 30 June 2014 the average loan term was 29.4 years.

Student Financial Supplement Scheme

The Student Financial Supplement Scheme 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 2015, loans outstanding are estimated to total $553.2 million.

Farm Finance Concessional Loans

The Farm Finance Concessional Loans Scheme provides up to $420 million over two years to 2014‑15 for the provision of concessional loans to eligible farm businesses experiencing financial difficulties, but considered commercially viable in the long term. Loans will be issued for the purpose of productivity enhancements and debt refinancing.

Loans are made to state governments that, through state delivery agents, on‑lend to eligible farm 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 are provided for a term of five years, with an exceptional circumstances clause in some jurisdictions, which allows a maximum two‑year extension to the loan, on commercial terms.

Indigenous Land Corporation

The Indigenous Land Corporation (ILC) purchased Ayers Rock Resort (ARR) 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. An additional $26.9 million in accrued interest on the intercompany loan and other advances (between the ILC and VITA) have occurred since the purchase of ARR, with the total amount owing now at $318.9 million.

Export Finance and Insurance Company

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 2015, the loan amount outstanding is estimated to total $284 million.

The Development Import Finance Facility (DIFF), administered by the Export Finance and Insurance Corporation 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 2015, loans outstanding are estimated to total $282 million.

Drought Concessional Loans

The Drought Concessional Loans Scheme provides up to $270 million until 30 June 2015 for loans to drought‑affected farm businesses for debt restructuring, operating expenses, and drought recovery and preparedness activities. The variable interest rate is set at 0.5 per cent below the Farm Finance Concessional Loan rate.

Loans are made to state governments that, through state delivery agents, on lend to eligible farm businesses. Currently the interest rate is at 4.0 per cent, but is reviewed on a six‑monthly basis and revised in accordance with changes to the Farm Finance Concessional Loan rate. Loans are provided for a term of five years, with an exceptional circumstances clause, which allows a maximum two‑year extension to the loan, on commercial terms.

Zero Real Interest Loans

The Zero Real Interest Loans Programme provides loans to assist aged care providers to build or extend residential aged care services in areas of high need. Loans provided under the Programme attract an interest rate equivalent to the Consumer Price Index. Four funding rounds were completed with the final funding round completed in 2013. No further new loan offers will be available under the Programme. As at 30 June 2015, the total amount owed to the Commonwealth is estimated to be $246.4 million.