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 Government loans estimated to exceed $200 million at 30 June 2016.

*Average

# To be determined after sufficient numbers of compulsory repayments commence.

(a) Loans appearing in Budget Paper No. 1, Budget Strategy and Outlook 2015‑16, 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 2016 in $ million.

Higher Education Loan Programme

The Higher Education Loan Programme (HELP) is an income contingent loan program that assists eligible tertiary education students with the cost of their fees. As at 30 June 2016, the fair value of debt outstanding is estimated to be $37.3 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 2,223,041 HELP debtors as at 30 June 2015. The repayment term of a HELP debt can only be determined for people who have fully repaid their debt. As at the end of June 2015, the average time taken to repay HELP debts was 8.7 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 2016, the estimated amortised value of the advances is $1.96 billion.

The Australian Office of Financial Management manages the receipt of interest and principal repayments from the State and Northern Territory Governments.

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

On 27 January 2015, the Australian Government provided the ACT Government with a $1.0 billion concessional loan to deliver a program to buy‑back and demolish houses in the ACT affected by Mr Fluffy loose fill asbestos.

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, as required by the Clean Energy Finance Corporation Act 2012. This portfolio has an acceptable but not excessive level of risk relative to the sector, as required under the Clean Energy Finance Corporation Investment Mandate Direction 2015 (Investment Mandate). Loans contracted and outstanding totalled a net $955 million as at 30 September 2015, and are expected to total $874 million at year's end of 30 June 2016.

The CEFC's portfolio consists of predominantly senior ranking, secured loans, and secured project finance facilities, typically secured against energy generating assets such as wind or solar farms or biogas facilities or other assets such as building or council rates.

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 5.5 per cent. Loans have various maturity dates, typically in the range of 5‑10 years.

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. It is expected that loans will total $870 million as at 30 June 2016.

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$8.6 billion at 29 October 2015).

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. The average interest rate is currently 4.4 per cent per annum, with an average loan term of 28.9 years.

Student Financial Supplement Scheme

The Student Financial Supplement Scheme (SFSS) was a program 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 2016 loans outstanding are estimated to total $483.2 million.

Trade Support Loans Programme

The Trade Support Loans programme is an income contingent, concessional loan programme that assists eligible Australian apprentices by providing financial support of up to $20,000 to assist with the costs of living, learning and completing an apprenticeship.

Eligible Australian apprentices can access up to $8,000 in their first year, $6,000 in the second, $4,000 in the third and $2,000 in the fourth year. The lifetime limit of $20,000 will be indexed on 1 July 2017 and each year after on 1 July to maintain its real value.

Upon successful completion of an apprenticeship, Australian apprentices will be entitled to a 20 per cent discount on the loan. The loans become repayable at the same thresholds as the Higher Education Loan Programme (HELP), which is $54,126 in 2015‑16.

Papua New Guinea Liquefied Natural Gas

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 2016, the loan amount outstanding is estimated to total $339.7 million.

Drought Concessional Loans

The Drought Concessional Loans Scheme has been in place since June 2014 and in 2014—15, operated in all States and Territories except Tasmania and the ACT. The scheme provides loans to drought affected farm businesses for debt restructuring, operating expenses and drought recovery and preparedness activities. In 2015—16, the government will provide up to $150 million for Drought Concessional Loans until 30 June 2016 and the scheme has been offered to all States and Territories except the ACT. Loans have a maximum loan term of five years with interest only payments required during the loan term. The variable interest rate will remain 0.5 per cent below the Farm Finance Concessional Loan rate.

Loans are made to the State and Northern Territory governments that, through State delivery agencies, on lend to eligible farm businesses.

From 1 August 2015, the interest rate is 3.05 per cent and will continue to be reviewed on a six—monthly basis and revised in accordance with changes to the Farm Finance Concessional Loans interest rate. Loans have a maximum term of five years, with an extenuating circumstances clause in some jurisdictions, which allows a maximum two year extension to the loan at commercial rates.

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 round of offers completed in 2013. No further new loan offers will be available under the programme. As at 30 June 2016, the total amount owed to the Commonwealth is estimated to be $310.6 million.

Development Import Finance Facility

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 2016, loans outstanding are estimated to total $279.9 million.

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 (Voyages) 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 Voyages) has been incurred since the purchase of ARR. In 2015‑16 external borrowings will need to be refinanced.