SENATE

Friday, 21 October 2016 Senate Page 25
Senator McCARTHY: Yes.
Mr O'Neill: We offer terms of up to 32 years.
Senator DODSON: I understand the challenge of people trying to access loans for houses, homes and
businesses. I just want to explore with you the notion of the risk factors that govern the way you set your interest
and your loan amounts and periods in relation to the sustaining of the quantum of your cash flow. Can you
explain that to me? What are the risk factors that are at play here that either enable you to respond, which is part
of what the minister's question was, or for those people who come before you who do not meet all these criteria,
because you have a certain risk profile that you have? And that risk profile goes to the outlays that you are going
to make in relation to the loan, but also in terms of the sustainability of your quantum of your reserve. Can you
explain that to me, please?
Mr Fry: I just want to frame it up so that Leo and Peter can add more meat to this discussion on it. The
board—we deliberate on the matter of risk. We do it probably every quarter around home loans. The issue for us
is this: if we get 4,000—or whatever it is—inquiries what is the see-through return in providing a home loan for
those individuals that managed to get there. The first thing is to acknowledge and understand that those who do
get the loan are never going to get it from the bank. That is the very first thing. A great portion of them that are
sitting inside that four or five—regardless of what the inquiry is, they are going to struggle to put together the
actual package that will satisfy getting into a home loan. Then, from a risk point of view, the challenge then is: do
we provide a home loan to an individual knowing that they are right on the margin and that they may very well
end up in a distressed environment where we are having to foreclose the home on them because they just
cannot—they have lost their job or their business has gone broke. It is not just a question of looking at risk from a
monetary perspective. It is a risk on the community and the individual themselves. So when we look at risk it is
not clearly just about the financial constructs to this and whether it is a good spend or a good investment.
Senator DODSON: I was wondering also whether there is equity participation considerations that go to
mitigate that risk, particularly if Indigenous people are owning their own land or, in the case of native title
holders, bringing the land to market, as it were. What is the appetite for risk in that situation? I am just trying to
see the innovative ways in which you are trying to respond to some of this—if there are innovative ways.
Mr Fry: I can actually answer partly that because, only as recently as about three weeks ago, that very
question was being discussed between Leo, myself and Peter—how we look at what ILC is doing out on the lands
and how we tie in any employment opportunities to home loans arranged for purchasing of houses in those near
remote areas. One of the considerations is how we might peg or lock in where they are tied into ILC activity to
actually get them to commit to passing on a portion of that employment money into acquiring a home loan. These
are the things that we are thinking about. These are things that we have been crunching and looking at. We are not
sitting back just waiting for people to come in; we are actually—
Senator DODSON: Or let the market determine what you are doing.
Mr Fry: That is right—or let the market determine. We are actively doing this on a regular basis. As I alluded
to earlier, I meet with them bi-weekly. I can assure you I have a very long list which is probably more extensive
to the questions that are being asked. It is all about how we are: operating as a commercial entity; delivering our
products; innovating on those products and expanding them into the areas that we may not traditionally be in, and
reaching into them and to see what we can do; but, more importantly, how we can align this with the activities of
the ILC or any other body that is working in that region with those Indigenous groups.
Senator McCARTHY: I have just two quick questions, and you might want to take this one on notice, Mr Bator.
You said 495 home loans were successful. How many people actually applied overall in 2014-15?
Mr Bator: I can get those details for you.
Senator McCARTHY: In terms of Aboriginal land—like, for example, the Northern Territory, where over 50
per cent of the land mass is ALRA—do you loan to Indigenous families on Aboriginal land?
Mr Bator: We do. That is one of the challenges, I think, that Senator Dodson was referring to. We have
responsible lending practice that we like to follow. So if there is no market for a house, what is the challenge we
are going to put up to a person?
They may well be able to pay or employment opportunities might go and they might not have an opportunity to
sell the house. So we are trying to think through, as well as giving the loan, the next steps in some regions like
that.
An important point, which the chair was making as well, is how we can bring all of our tools to play in terms of
business start-up, investments and ILC activity to try to create an environment where there are ongoing
FINANCE AND PUBLIC ADMINISTRATION LEGISLATION COMMITTEE