Slade Brockman (WA, Liberal Party) Share this | Hansard source

I rise to commend the National Housing Finance and Investment Corporation Amendment Bill 2019. As my colleagues have correctly stated, this was an election commitment. This is something that we took to the people of Australia at the last election and the people of Australia, by returning us to government, supported this particular initiative. It is an initiative that does not pretend to be a silver bullet. What it does seek to do is give the opportunity for more Australian families—in particular, young and lower-income families—the opportunity to enter the housing market and gain access to a mortgage even though they perhaps have not been able to save the 20 per cent deposit that is required to get a mortgage without requiring lenders' mortgage insurance. They will then be able to enter the housing market in a more advantageous position with lower total costs than would otherwise be the case.

What this bill does is provide the framework. Yes, Senator Faruqi is correct: a lot of the detail will be in the investment mandate. And I will get to why that is very important a little later on—why the investment mandate is the correct vehicle, rather than a disallowable instrument, in which the details of the program are to be contained. I will go through what this bill does. It enables the existing corporation, the National Housing Finance and Investment Corporation, the framework under which it can implement the First Home Loan Deposit Scheme—the scheme we took to the Australian people at the last election. But also—and this is very important—it establishes a research function within the National Housing Finance and Investment Corporation to do some of the research work that is required to more wholly and completely understand what is happening within the Australian housing market and access to homeownership, which is a very fundamental part of the Australian dream.

The bill expands NHFIC's functions to enable it to provide guarantees to improve access to homeownership and undertake research into housing affordability, including supply and demand. The bill also establishes a funding mechanism for scheme claims. A standing appropriation will provide NHFIC with the funds to meet claims made on the scheme's guarantees as they arrive. The bill sets out a framework for the new functions with core details—including eligibility and conditions of the guarantee, and the actual operation of the research function—to be set out in the investment mandate, which of course will be issued by the minister.

The scheme itself will provide up to 10,000 guarantees per year to help Australians—in particular, young Australians and, I hope, young Australians in rural and regional Australia—to realise the great Australian goal of owning their own home. Owning your own home is a really fundamental path to economic security in this country; it has been for generations and will continue to be so. It provides a level of security throughout your life whether you are in the early stages of life—starting a career or starting a family—or in middle age or approaching retirement. Homeownership provides a level of security and stability that has been a hallmark of Australians' experience of their economic life. It remains a goal of many, many people in our society.

Facilitating younger Australians—my hope is particularly Australians in regional and remote and rural Australia—to gain access to purchasing power to buy their own homes when they do not necessarily have the ability or have not had the ability to grow a 20 per cent deposit is something that is very important. In recent decades it has become more challenging for first home buyers to get into the property market. That is something that we have seen over time, particularly in the larger capitals, but not solely in those areas. In parts of rural and regional Australia the 20 per cent deposit has also become a significant constraint. While many prospective first home buyers have the ability to service a mortgage, the time it takes to gain that 20 per cent deposit as savings is significant and it holds people out of the market for a lot longer than they would otherwise wish. As a result, the market has come up with a solution, and I do want to talk about this further as well: the lenders mortgage insurance. This developed over time, partly as a result of previous government actions many decades ago. A private market did develop, and it does provide an important provision for people to gain access to a mortgage when they do not have the 20 per cent deposit. Part of setting out the investment mandate, in consultation with those lenders mortgage insurance providers, is to make sure that that market is not significantly disrupted. I think one of the important things that came out of a Senate Economics Legislation Committee inquiry I chaired was that the lenders mortgage insurance market was comfortable that the 10,000 figure would not adversely affect the operation of that current lenders mortgage insurance market. I think that is very important.

I will, in passing, add my compliments to Senator Gallacher's comments earlier on the work done by the secretariat of the economics committee, in terms of putting together that report. I commend it to all those interested in this particular topic.

As I said, one of probably the two key issues that came out of that inquiry was the potential impacts on the lenders mortgage insurance market. They were very clear that they did not feel that the 10,000 figure would have a significantly detrimental impact on the lenders mortgage insurance market. It does enable people to gain access to the housing market when they don't have a 20 per cent deposit. It obviously does add a cost to the provision of a mortgage, but it is a product that is out there and that is utilised by a percentage of the market to gain access to a mortgage when they perhaps do not have the 20 per cent deposit that is required for a mortgage without insurance attached. I think that was a very important aspect that came out of the inquiry.

Probably the other aspect that was discussed most during that inquiry was whether or not the 10,000 and other details of the investment mandate should be either in the legislation or in a disallowable instrument. On first blush, I can understand where those views were coming from. On first blush, it sounds like a good idea—that it should be in the legislation or in a disallowable instrument so the parliament has some oversight of it. But, when you think about it in a little more detail, when you think about the potential level of uncertainty that that would place into this marketplace and when you have a government instrumentality through the National Housing Finance and Investment Corporation who is operating with a number of commercial entities, providing these guarantees to Australians seeking a mortgage, that level of uncertainty would potentially disrupt the market to a significant degree.

The investment mandate is something that actually needs to provide certainty to both the NHFIC board, who have to carry out their duties responsibly, and the market participants, who are obviously seeking to supply many of the mortgages with a full 20 per cent deposit but also access lenders mortgage insurance products through a second party. They need certainty in the provision of all those aspects of exercising functions and powers. That certainty comes not through a disallowable instrument but through an investment mandate provided by the minister which gives NHFIC and all the players, be they the banks, the smaller nonbank lenders and the borrowers themselves, certainty in the marketplace on how this is going to work, without the level of uncertainty that would come if it were a disallowable instrument.

For example, it is expected that the commercial lenders will have to make long-term commitments to participate in the scheme. Mortgages are not gone within a couple of years. For most of us—and I will include myself in this category—mortgages are something you take on for a long period of time, not just from the borrower's point of view but also from the lender's point of view, and they need certainty and stability in how those market rules will operate. Lenders expect and in fact need a level of certainty in the operation of the scheme and the manner in which any changes to the scheme are made. That certainty would be compromised due to potential delays and unpredictability in market conditions and the regulatory environment if the investment mandate were disallowable. It would also place NHFIC in an exceedingly difficult position and would lead them and their board to a great deal of uncertainty and impracticality. That would then flow on, obviously, to those who would participate in the scheme.

These sorts of ministerial directions are not unique. They're not something that we only see in exceedingly rare cases. Ministerial directions like this are completely consistent with the way ministers interact with corporate Commonwealth entities on a regular basis. To say there are no checks and balances in that process I think completely misunderstands our system of government and completely ignores the many opportunities that this chamber has, particularly through the Senate estimates process, to, for example, inquire into the operation of government agencies, including NHFIC. I think that the investment mandate is the correct instrument by which these rules are put in place. An investment mandate is required to be tabled in parliament. It is required to be registered on the federal register of legislative instruments. Again, this enables both the parliament and the public to hold the government accountable.

Once again, this was an election commitment. This is something that the Australian people, as part of a raft of measures, looked at when they chose who would govern this nation. I think that this is a vehicle by which younger Australians and lower income Australians—and, as I said, hopefully many of them are from rural and regional Australia—will be able to gain access to a mortgage at a slightly lower total cost of entry, and that is something I think we should all support. Thank you.