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Wednesday, 5 March 1980
Page: 568

Senator SCOTT (New South WalesMinister for Special Trade Representations) - I move:

That the Bill be now read a second time.

This Bill has two main purposes. Firstly, it proposes to give effect to the recommendations which were made by the House of Representatives standing committee which looked at the Defence Service Homes Scheme and which were accepted by the Government in November 1978 and require amending legislation. These are the introduction of freedom of choice for beneficiaries in the selection of a house insurer and revision of the long title of the principal Act. Secondly, it provides for the removal from the Defence Service Homes Act of a number of restrictive lending conditions. Since the inception of the Scheme in 1919, it has been compulsory for defence service homes to be insured and for the insurance to be effected under the Defence Service Homes Insurance Scheme. It is proposed to change the legislative provisions so that persons who obtain loans under the Scheme may, if they wish, insure their properties with another insurer. This proposal follows the Government's decision that the Insurance Scheme be updated to conform with current insurance practice.

Honourable senators will recall that in 1978 the Defence Service Homes Act was amended to authorise the Defence Service Homes Corporation to provide insurance cover under terms set out in a statement of conditions, thereby enabling changes to the terms and conditions to be made by administrative rather than legislative process. The statement and any variations to it are subject to the approval of the Minister and must be tabled in Parliament. However, the commencement of this provision was deferred so that the further changes now proposed in clause 9 of this Bill could be incorporated in the new arrangements. The proposal in clause 9 enabling beneficiaries under the Act to decide whether to insure their homes with the Corporation or with another insurer is, of course, subject to the Corporation retaining the normal rights of a mortgagee. It will be necessary for the home to be insured adequately with an insurer authorised under the Insurance Act 1973 and for the insurer to enter into an agreement of a kind that would protect the Corporation's interests notwithstanding any breach of policy conditions by the mortgagor.

As the Act stands, an applicant for an advance cannot insure his home with the Corporation until it has acquired an interest in that home. To ensure that an eligible person is not disadvantaged during the waiting period for an advance, clause 9 authorises the Corporation, if the applicant so chooses, to insure his home during this period. Insurance cover taken out with the Corporation in these circumstances will be terminated on reasonable notice if it becomes evident that the loan will not be granted. I emphasise that the opportunity to insure with the Corporation will be limited to eligible persons to whom it is proposed to make an advance or to whom an advance has been made.

The provisions relating to the change in the long title of the Act are contained in clause 3. The existing long title is to be repealed and replaced by a new title which more accurately reflects the provisions and purposes of the Act. The proposed amendments to the Act to remove certain restrictive lending conditions are set out in clauses 5 and 6, Clause 5 amends section 2 1 to remove the statutory limitation on the loan to valuation ratio. Clause 6 repeals section 24, which imposes certain limitations on the discretion to make a loan. The Government is satisfied that these restrictions are not now necessary and believes, as in the case of insurance, that applicants should have the maximum freedom of choice in the selection of a home. The interests of the Corporation will be adequately protected by the amendment of section 25 proposed in clause 7 and by other provisions of the Act.

The amendment to section 40a proposed in clause 10 is in keeping with the Audit Amendment Act 1 979 and provides for interest in the investment of moneys of the Defence Service Homes Insurance Trust Account to be credited directly to that account. Under the current arrangements interest is paid into the Consolidated Revenue Fund, and this requires a specific parliamentary appropriation for an equivalent amount to be paid to the Insurance Trust Account. The remaining provisions of the Bill cover minor machinery amendments of a technical and administrative nature. I commend the Bill to the Senate.

Debate (on motion by Senator Georges) adjourned.

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