APRA dangerously quiet on house prices

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House prices are skyrocketing out of the average battler’s budget. Despite warnings of a possible housing bubble, APRA is banking on the banks only losing 2% from their mortgage books in their “stress testing”. This threshold sounds very favourable to the banks and allows them to get greedy at the possible expense of Australian homeowners.

Transcript

Stress testing banks during COVID-19 dated 15th of December, 2020. I have a question about one of the criteria APRA uses to stress test a bank, and that is a fall in real estate prices or to use a simple explanation, the ability of a bank to maintain liquidity during a real estate meltdown. Can I say it like that?

Well, I think Senator, it’s more a question of whether they can sustain their solvency, which for us it’s more of an issue of a capital, but liquidity is an important consideration as well.

Thank you. From the report, the figure APRA used as a proxy for a real estate meltdown was the loss of $49 billion in residential mortgages over three years. Is that correct?

That sounds about right, I think Senator. I don’t have the document in front of me, but-

That’s what I’m reading. Thank you. And with that loss being 30% of the total bank loss in the period of the stress test, as a loss rate, this would translate into 2% of Australian banks residential mortgage loan book. Is this correct? And please confirm your figure for the value of residential mortgages held by Australian banks. What is it?

Oh, well I think the, now I think the, if we’ve published that number, Senator, I’m quite comfortable to correct, total mortgages the banking system would be-

In the term of residential mortgages.

Yeah. Sorry. Total residential mortgages. Housing loams We’re talking about here. Owner-occupiers and investors would be, it’s in the order of a trillion dollars, I think Senator that’s something that we can come back to you on.

Thank you for that.

Very happy to take it on notice.

Okay. Thank you. Final question on this topic before moving onto a simple topic, can I confirm that APRA is projecting a real estate meltdown would only cost our banks $49 billion in losses on mortgages, and that loss would accrue over three years? That seems to be a very favourable assumption for the banks.

Well, that’s the, that’s the impact that we expect to have on the bank given they have collateral against their loans. Many loans have very low loan-to-value ratios. So in many cases of banks we have loans that even with a substantial fall in real estate values the banks would incur no loss, that’s not to say the borrowers would be unaffected by any means.

Well, I think that’s the concern. Sorry, go ahead.

Senator, I was going to add, I mean, it’s just to your question of projection or forecast, this is stress test. So, it is a set of assumptions that we use to look at the resilience of the sector and the entities involved. So, it’s not forecast or projection.

Okay. Thank you. It’s just that our constituents are concerned that we’ve had 20 years of the banks putting a lot of money into real estate, and taking it away from small businesses and funnelling it into real estate. And we’ve seen real estate prices increase a lot recently. Some people are calling it a bubble. So basically the question amounts to, are you letting the banks do as they please, and then sweetening the impact for the banks?

Well, Senator we don’t allow the banks to do what they please. We’ve got a raft of prudential standards that ask the banks as they’re making commercial decisions to take risk into account, and where we see risks, and I think an example of that would be the recent increase in the buffer, APRA acts and takes action.

Okay. Thank you.

I can just note for the record that, Mr. John Lonsdale was the one who provided that answer. Just leading into your next question.

Does APRA embed staff in financial institutions, like say the Big Four banks?

[Byres] No.

Okay. Thank you. Thank you.

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Election Integrity: Make sure our elections cannot be rigged

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The Australian National Audit Office is one of the best agencies in government. They do great work chasing down wasteful government spending and exposing poor management.

The few times they have looked at the conduct of our elections, like in 2015, the report card was a solid fail. They haven’t audited the conduct of our elections since then despite promising to.

Last night at Senate Estimates the Auditor General was very honest and upfront with me. He cannot confirm the Australian Electoral Commission has comprehensive performance standards for elections. He cannot assure the Australian people that the electoral systems are fit for purpose.

He did say that the way for the community to be assured about the integrity of elections is through the Parliament acting. One Nation’s Election Integrity Bill (read more) was written for this very good reason. Whatever happens in the next election, if it passes, the public can have confidence in the result.

Parliament must pass an election integrity bill before the next election.

Transcript

Senator Rice, Senator Roberts, very quickly.

Thank you chair, and thank you all for attending. Hello Mr. Heir. I’ll just give some background, and then the questions will be quick.

Very quickly, Senator Roberts.

If I can reference the report titled third follow-up audit into the Australian electoral commission’s preparation for the conduct of federal elections. It’s ANAO audit number 6 2015-16. This inquiry was called by the joint standing committee on election electoral matters. The terms of reference were a performance audit focusing on the adequacy of the Australian electoral commission’s implementation of recommendations arising from earlier, and they are audit reports. Your findings were and I’ll quote, no meaningful action has been taken had been taken prior to 2013. The election that triggered the audit in relation to those recommendations directed towards more secure reporting of election night counts on the development of comprehensive or the development of comprehensive performance standards for the conduct of elections. And finally, conclusion number eight, ANAO plans to undertake a follow-up audit following the next federal election to examine adequacy and effectiveness of the AECs implementation of these 10 recommendations in that report. Did you do that followup audit?

We did. We didn’t do a followup, followup audit Senator of exactly that nature. We did a further audit, which was, which was focused on particular aspects of procurement, including IT, for the scanning system system following the next election. But now we didn’t follow up each of those recommendations as was then proposed.

Thank you. Can you confirm that the AEC now has comprehensive performance standards for the conduct of federal elections?

No, Senator we haven’t been in there to conduct a performance audit in this space since that, that one I mentioned. So, no, we don’t, we don’t, we don’t have current knowledges as to that know.

I like your quick answers. How, how would anyone know if that would, if they’d done that?

I suspect you’d ask them in estimates.

We’ve asked them lots of times and their questions are their answers. Why didn’t you do the follow-up audit? That would have been the fourth followup audit on the AEC.

I think we, what we decided to do was in the context of what was going on in the, in the office at the time, which was the IT procurement, that that was probably a, a better order to undertake in the AEC. It’s not a huge agency. It’s not the one. We go into every year. So, so about picking the topic. And at that particular time we thought that was that that procurement audit was a, a better topic to undertake.

Can you say with confidence that the AEC systems now are fit for purpose?

We haven’t been into the entity.

How can people be assured of the integrity of future elections?

I think through the parliamentary processes is the appropriate way for the community to be assured through the oversight. The parliament gives of the, the office.

I could make a comment. Do you not against you? Do you have the authority to audit?

Yes, I say yes.

Okay. My last question chair, in your submission to the finance and public administration’s inquiry into my Commonwealth electoral amendment integrity of elections, bill 2021. ANAO made this statement, I quote in accordance with the auditor General’s mandate under the auditor general act, 1997, the auditor general is empowered to conduct a review of a particular aspect of the operations of the AEC at any time. ANAO could have conducted a followup audit in respect to the AEC’s noncompliance with multiple ANAO audits. Yet you chose not to why I?

Think of.

If there were multiple audits.

We were doing.

My multiple follow-up audit. Sorry.

We did multiple followup audits then the last audit we did, I made a decision that the.

Not follow up at the specific electronics.

Yeah. That was the reason.

Will you audit the next election.

I.

Was seen it also understanding it through. The first three follow-up audits followed what happened in the 2013 election with Senate Ballot Papers in Western Australia being effectively lost. And whilst there are three audits that audit was conducted the then audit general received a specific request from the joint standing committee of electoral matters for us to do follow-up audit work, looking at an earlier audit we did have the 2007 election as to where those recommendations have been implemented. The only reason there were three followup audit wasn’t was because the joint standing committee of electoral matters, wanted us to one of particular things looked at very quickly. And so that’s why there were three performance audit. So we packaged up what are the recommendations we could follow up as a higher priority in a shorter timeframe and then a medium timeframe and then longer timeframe. So it was, it was by seen. By three audit was really packaging out the follow-up to that all the way earlier audit report, to meet a request of the parliament, So, you know.

So as Mr. Hare said, it’s, it’s a matter of looking at the, what the followup is in context of what’s going on. Okay. Thanks, Chair.

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Inland rail

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The assumptions about the business case for Inland Rail are difficult to get a hold of. All of the Government Departments I talk to duck and weave and point the finger at other departments who then point the finger at someone else. We just want transparency about the true cost and assumptions that one of Australia’s largest infrastructure investments is being built on.

Transcript

Inland rail. In August, I contacted the RRAT chair Senator Stirl and asked for the big four accounting firms. Ernst & Young, KPMG, PricewaterhouseCoopers and Deloitte to attend a hearing of the RRAT committee to explain their data that underpins the entire inland rail project. The 24 hour turnaround time. So I just want to get this straight Minister. Inland rail is Australia’s largest infrastructure project since the snowy mountain scheme. Is it correct to say that you are refusing to show the committee or the Senate, the data that justified the spending on $25 billion in taxpayers’ money?

Is that question to me Senator Roberts?

Yes.

I’m afraid I can’t answer that question because I represent urban infrastructure and inland rail is not an urban infrastructure project.

Is there anyone that can answer the question?

Senator, I just clarify that it’s a $15 billion project.

Still the largest since snowy.

I think there’s one bigger right now.

Well exactly. You’re right.

It depends on how you measure it. Ms. Hall Dewey, there was a series of business cases undertaken for the inland rail project. Now I’m not aware of when was the last one.

The last- Sorry, Senator. Jessica Hall, first assistant secretary, Major transport and Infrastructure projects. The business case was released in 2015. And that’s the last business case that was made available. In regards to additional information that has been provided, my understanding is that ARTC releases anything that isn’t commercial and confidence. So, it would just be a question of the fact whether that information was commercial and confidence or not.

Well, Ms. Hall, thank you. My understanding is that the business case was released but the fundamental assumptions in which the business case is built were not released. And that’s what we want to see with the material from the four consulting companies. Because without that basic assumptions, we can’t tell whether it’s feasible or not.

Well, the business case did go to infrastructure Australia and infrastructure Australia, I think put it on the infrastructure priority list.

Are we able to get a look at the assumptions there? They’re fundamental to understanding whether or not inland rail is viable?

Well, I think the information around inland rail has been made viable because BCR has been made public.

BCR?

The Benefit Cost Ratio.

But without the assumptions, how can we assess that ourselves?

Well, I think that’s the role of infrastructure Australia. The infrastructure Australia has assessed that and said that it’s a viable project.

When’s the infrastructure Australia

They’re on this evening at 9:45.

Okay, thank you. So, that’d be able to tell me the details about the 24 hour turnaround time?

I think ARTC would be the best organisation for the 24 hour turnaround times. They’re not currently scheduled for today though, Senator.

No. Do you know when they are scheduled?

I don’t believe they’re scheduled for this estimate, Senator Roberts.

Okay. So is there any possibility that the real figure for compensation for loss of property rights along the inland rail route is ever going to be made public before the project is built?

I think we’d have to take that on notice Senator. I’m not quite sure what you mean in regard to loss of property rights. There’s compensation paid to anybody whose property is acquired.

Yeah. We’d like to know who’s getting the money? Who’s being compensated? We’d like to know who owns the land.

We’ll take that on notice, Senator.

Okay. Thank you. So why is it structured? Why is inland rail structured so that the data that could challenge the preferred alignment is locked up in the big accounting firms and can never be brought into debate? It seems like to me that the government is trying to keep this vital data from us.

I don’t think so, Senator. I think any information as I said, that is not commercially sensitive in regards to ARTC entering into contracts is being made publicly available.

The alignments for the route, also subject to environmental impact assessments and studies through state relevant state jurisdictions. So the usual regulatory approach for this and the control of final approvals for alignments lies with states through their environmental approval processes. More appropriately, ARTC can probably answer in detail on this, but of the 13 major project elements of each of those will be subject to an environmental and consultation process that then goes through the relevant jurisdictions approval arrangements which is subject to different state and territory law, depending on which state it’s in it crosses Victoria, New South Wales and Queensland.

So you’re saying it’s not finalised yet. And it’ll ultimately be in the hands of the states that you need environmental approval?

Yes. Environmental approval is in the hands of the state jurisdictions.

And that could affect the route?

It can. Yes We think the route is currently set and the environmental approval processes are underway. The final detail of the route though I think is question best for the ARTC that’ll be to do with engineering solutions around.

The route has been set. So, the route has actually been set. The purpose of the environmental assessment processes are to give confidence to the communities and to the states and to others about what provisions ARTC has to put in place to make sure that the environment is actually protected.

Will we ever know who owned the land that was purchased for the inland rail and what price was paid for it?

I’ll take that on notice, Senator. We should be able to get you something in regards to that.

Thank you very much.

So, just to clarify, because Senator Stirl has made a valid point about questions taken on notice and amount of time and blah, blah, blah. But just to be specific because I’m not entirely sure what that question is that you’ve just taken on notice. So you talking about in Queensland, you talking about the entire route from Victoria. So what you want is the-

The names of the people.

The names of the property owners.

Correct.

And the amount they’re being paid for their acquisition of the inland rail route through their property.

Correct.

And I’ll take long notice to see what information I can provide in regards to that. Because there’ll be a whole lot of issues in regards to personal information being provided.

Yes, so I’d imagine that not everybody wants that too.

It’s quite a complex requested 17,000 kilometres of route traversing a lot of different territories.

In the communities and among our constituents, there are a lot of questions being asked about that. A lot of questions.

Yeah. I understand.

And I appreciate that I guess it’s just been clear about if you can narrow that that would probably be helpful if you want to question and answer back quickly.

Well, I think what you’ve done is helped narrow that process.

All right.

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No plan to remove toxic solar panels

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Solar panels have a limited shelf life before they lose efficiency and don’t generate enough electricity. When that shelf life is reached, the panels need to be removed and disposed of.

Unfortunately solar panels are full of highly toxic chemicals like lead, lithium and cadmium which are hard to dispose.

Despite knowing about this looming problem for decades, the government has no plan and no budget to clean up the millions of toxic solar panels across the country.

Transcript

Chair, and thank you for appearing today. In terms of clean energy technology development, what is the proposed solution from the government to safely dispose of the heavy metal component of degraded solar cells?

Senator, there is some work underway through ARENA to look at end-of-life issues for solar cells, but to give you a specific answer right now, I’d have to take that on notice.

Okay, thank you, so some work is underway with ARENA, end-of-life. How expensive, I guess you probably can’t answer this question. How expensive will this process be and what amount had been budgeted for this task?

Yeah, Senator, I don’t think we have the right answers for those questions, and certainly from a Commonwealth perspective, there isn’t a budget allocated to that activity.

Who will be responsible for implementing this policy once it’s developed.

So I think that there’s waste disposal issues. So that’ll be governed more by state legislation than Commonwealth legislation.

So we’ll have some Commonwealth legislation hybrid?

No, Senator, I’m saying that

I’m just trying to clarify.

it’s more a state issue.

Okay, it’s a state issue. So is it likely to be privatised or would it be the responsibility of the individual solar complexes owners?

Look, I really don’t think we have answers to those questions, Senator. I think the research that ARENA is doing will provide some light onto whether or not there are issues that need to be dealt with, and then if there are, there will be policy responses developed by the relevant level of government.

If there are issues?

Yeah, that’s right.

So we don’t know if there are issues yet?

I can’t say myself that I’m aware of how significant those issues are. So research is underway.

Senator, this issue further, we’ll take the rest of that on notice. That question…

Thank you. Will these costs be factored into the massively high government subsidies that are the only way to fudge the actual cost of solar to the community who have been duped into thinking that solar is a cheap source of electricity?

We’ll take that on notice, Senator.

Thank you. Isn’t it true that if the subsidies were removed from solar, they would not be viable because solar in reality is much more expensive than coal, which is still the cheapest form of energy apart from hydro?

On notice, Senator.

On notice? Given that we know that within 10 years or less, the Australian landscape will be littered with hundreds of thousands of dead toxic solar cells. What is the plan? You don’t know the plan yet, ARENA?

We’d take that on notice to do that properly for you, Senator.

Okay, thank you. Is it the government’s intention to create a new industry of solar cell disposal?

Same again?

Senator, we’ll take that on notice

Okay. When will this government, Minister, when will this government stop pandering to the greens on this issue when it works out against Australians who now are forced to pay the most expensive electricity bills in the Western world because of the government subsidies paid for solar and wind generation?

Well, I don’t accept the premise of your question, Senator Roberts. I mean, if you look at the record under this government when it comes to energy prices, for instance, we saw quarter on quarter, month on month energy reductions in costs in energy prices. So we take that

Does that have anything to do with COVID?

We take that very seriously. No, that predates COVID, like, we can go to some of the detail of that if you’d like, but we have had a very strong focus on reducing emissions. That’s why we don’t support things like, sorry, on reducing prices and reducing emissions at the same time. And that’s why we don’t support things like carbon taxes. We have pursued approaches that support reliability, ensure, yes, renewables are very important part of the mix. I know that there will be disagreement between the government and yourself, Minister Roberts, Senator Roberts, on that, but if you look at where renewable energy is affordable, of course, that’s a great part of the energy mix. It’s doing an environmental job and it’s also contributing to the overall price points, but we know that there are challenges with that. That’s why you need backup. That’s why you need, for instance, gas-fired power as backup to renewables. And so the mix of energy is important. We take that very seriously, but no I certainly don’t accept the premise of your question.

Do you think, Minister, it’s responsible for a government to embark on a policies as they did with the Howard Anderson Government in 1996 to reintroduce the renewable energy target, to drive renewables, and yet had no plan for how we would deal with the legacies of these solar panels and wind turbines?

Well, look, it’s probably difficult for me to comment.

This is now, excuse me, this is now 25 years.

But it’s probably difficult for me to comment on sort of the policy process in, you know, 1996 and sort of in that government. So it’s, I probably can’t add too much…

Well given that we are now aware of this issue, and we’ve been saying this for years now, given that we’re now aware of this issue, let’s forget 1996, and let’s look at what your government is doing with regard to this issue now. It’s right on us. We’re gonna have these toxic panels all over the country.

Well, look, as Ms. Evans has said, I think some of those questions have been taken on notice, and, obviously, we will provide you with some further detail if we can.

Thank you, Chair.

Okay, thanks Senator Roberts.

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