❓ The Treasurer outlines a new $100 million short-term lending facility to support local governments and universities facing financial pressures due to COVID-19, offering cheap interest rates and waived fees.
AnsweredQoN 259Legislative Assembly
QuestionView source ↗
CORONAVIRUS — LOCAL GOVERNMENTS AND
UNIVERSITIES — LENDING FACILITY
259. Mr M.J. FOLKARD to the Treasurer:
I refer to the impact of COVID-19 on local
governments and universities across the state. Can the Treasurer outline to the
house how the McGowan Labor government's establishment of a new lending
facility will support those local governments that are facing financial
pressures due to COVID-19 ?
UNIVERSITIES — LENDING FACILITY
259. Mr M.J. FOLKARD to the Treasurer:
I refer to the impact of COVID-19 on local
governments and universities across the state. Can the Treasurer outline to the
house how the McGowan Labor government's establishment of a new lending
facility will support those local governments that are facing financial
pressures due to COVID-19 ?
AnswerView source ↗
I thank the member for the
question. A vast range of measures have been announced by the state and
commonwealth governments as we seek to manage the economic impacts of
the health response to COVID-19 . Some $2 billion of targeted and well-placed commitments have been
made by the state government, as has been acknowledged by Moody's.
We are now in a situation in which we can offer support to other areas that
will be impacted by COVID-19 —namely, the local
governments and universities of Western Australia, both of which are not immune
from the impact. Member for Burns Beach, I will start with the university
sector. The university sector has been hit by a range of different impacts from COVID-19 . The most obvious and perhaps most severe has
been the impact of travel restrictions on the universities' student
body. Of course, that has led to lower international student enrolments. That has had less of an impact in Western
Australia than perhaps in some other states; nonetheless, it has been a sudden
impact on our universities. Similarly, with local governments, there have been
impacts on revenue. Decisions that they have had to make to comply with the
social distancing requirements have had an impact on their revenue. Of course,
the community also expects the local government sector to make decisions to
support ratepayers. As a result, last week we announced a $100 million
short-term lending facility to support both these sectors. This will allow both
local governments and universities to access short-term loans to support
liquidity. That is the fundamental difference. Historically, the WA Treasury
Corporation has supported through borrowings for capital works, but this is to
support liquidity of both universities and local governments. Applications will
open on 1 June, and there has already been a range of inquiries from
universities and local governments.
This facility will be priced off the current short-term
variable interest rate, which means, member for Burns Beach, it will be the
cheapest money they will get, certainly in my lifetime, with the current
short-term variable interest rate that we are seeing. On top of that, normally
a loan guarantee fee of 70 basis points is applied. We will waive that, which
will save the sectors even more as they go about seeking liquidity support. To
be eligible to borrow through this facility, local governments and universities
need to demonstrate the impact that COVID-19 has had and
is expected to have on their forecast cash flows for 2020–21. There is
one thing that seems to have taken off as
fact, but I want to put on the record that it is incorrect. I want to stress
this: there are no borrowing limits for local governments or
universities. There are none. Of course, there is the practice, as would be
expected, of ensuring each borrower's
ability to pay, but there are no caps or limits on what local governments and
universities can borrow through the WA Treasury Corporation. The new
facility also provides an opportunity for borrowers to restructure existing
borrowings, enabling them to defer principal and interest repayments for 2020–21.
We have sought to provide an injection of liquidity at a very cheap interest
rate to ensure that local governments and universities continue to keep their
staff on, for example, to manage through a period of great disruption, which,
hopefully, will only really have its most dramatic impact in the 2020 calendar
year. I encourage local governments and universities to get in touch with the
WA Treasury Corporation to find out how this lending facility might assist
them.
question. A vast range of measures have been announced by the state and
commonwealth governments as we seek to manage the economic impacts of
the health response to COVID-19 . Some $2 billion of targeted and well-placed commitments have been
made by the state government, as has been acknowledged by Moody's.
We are now in a situation in which we can offer support to other areas that
will be impacted by COVID-19 —namely, the local
governments and universities of Western Australia, both of which are not immune
from the impact. Member for Burns Beach, I will start with the university
sector. The university sector has been hit by a range of different impacts from COVID-19 . The most obvious and perhaps most severe has
been the impact of travel restrictions on the universities' student
body. Of course, that has led to lower international student enrolments. That has had less of an impact in Western
Australia than perhaps in some other states; nonetheless, it has been a sudden
impact on our universities. Similarly, with local governments, there have been
impacts on revenue. Decisions that they have had to make to comply with the
social distancing requirements have had an impact on their revenue. Of course,
the community also expects the local government sector to make decisions to
support ratepayers. As a result, last week we announced a $100 million
short-term lending facility to support both these sectors. This will allow both
local governments and universities to access short-term loans to support
liquidity. That is the fundamental difference. Historically, the WA Treasury
Corporation has supported through borrowings for capital works, but this is to
support liquidity of both universities and local governments. Applications will
open on 1 June, and there has already been a range of inquiries from
universities and local governments.
This facility will be priced off the current short-term
variable interest rate, which means, member for Burns Beach, it will be the
cheapest money they will get, certainly in my lifetime, with the current
short-term variable interest rate that we are seeing. On top of that, normally
a loan guarantee fee of 70 basis points is applied. We will waive that, which
will save the sectors even more as they go about seeking liquidity support. To
be eligible to borrow through this facility, local governments and universities
need to demonstrate the impact that COVID-19 has had and
is expected to have on their forecast cash flows for 2020–21. There is
one thing that seems to have taken off as
fact, but I want to put on the record that it is incorrect. I want to stress
this: there are no borrowing limits for local governments or
universities. There are none. Of course, there is the practice, as would be
expected, of ensuring each borrower's
ability to pay, but there are no caps or limits on what local governments and
universities can borrow through the WA Treasury Corporation. The new
facility also provides an opportunity for borrowers to restructure existing
borrowings, enabling them to defer principal and interest repayments for 2020–21.
We have sought to provide an injection of liquidity at a very cheap interest
rate to ensure that local governments and universities continue to keep their
staff on, for example, to manage through a period of great disruption, which,
hopefully, will only really have its most dramatic impact in the 2020 calendar
year. I encourage local governments and universities to get in touch with the
WA Treasury Corporation to find out how this lending facility might assist
them.
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