“Interest”ing news

From the “Advertiser” 3/9/2003
http://www.theadvertiser.news.com.au/common/story_page/0,5936,7151113%255E910,00.html

PUBLIC FUNDS CHEAP HOME LOANS
By PAUL WHITTAKER
03sep03
AS millions of Australian homeowners anxiously await today’s interest rate announcement by the Reserve Bank, the bank’s own staff can rest easy with half-price mortgage rates.

Almost 200 of them will pay just a fraction of standard variable rates, taking advantage of a special discount offered by their employer – and subsidised by taxpayers.

The RBA staff – some of whom provide monetary policy advice to the bank’s board, which sets official interest rates – enjoy mortgage rates about which ordinary taxpaying householders can only dream.

The average Australian home loan of $180,000 costs $1223.26 per month over 25 years but RBA staff with the same mortgage pay just $880.02.

Documents obtained under Freedom of Information reveal RBA staff enjoy a housing interest rate set at half the Commonwealth Bank’s standard variable home loan rate (6.57 per cent) – or just more than 3.28 per cent, a figure well below the official cash rate of 4.75 per cent.

Almost a quarter of the central bank’s staff – 196 of 820 – have a discounted loan and more than $25 million in loans is outstanding.

That also is far more generous than the concessional interest rates offered to employees in the private banking sector, with major banks such as Westpac and the Commonwealth offering employees interest rate discounts of around 0.6 per cent, plus fee exemptions.

The RBA’s 2002 annual report shows the discount home loans scheme, known as Officers’ Home Advances, was owed $27 million in 2002 (down from $35 million in 2001). The bank also has to pay fringe benefits tax on these discounted loans.

Reserve Bank staff have been entitled to discount loans since 1959 under the Reserve Bank Act.

RBA Secretary David Emanuel said that of the bank’s 78 executives – officers earning between $100,000 and $500,000 a year – only one had a discount housing loan as at June 30, 2002.

Mr Emanuel refused to release the name of the executive or senior RBA managers who had been given discounted home loans since 1996, saying this would involve “the unreasonable disclosure of personal information”. Although not disclosing the names of the senior officers, documents released under freedom of information laws show loans had been given to some of the officers who had held these senior posts in the past seven years.

The RBA was forced to defend the discount loans practice three years ago when it was revealed then RBA deputy governor Stephen Grenville, one of nine members of the bank’s board, which sets official interest rates, received a discounted home mortgage.

Dr Grenville, who retired from the bank in November 2001, had $77,007 left to pay in 1999 on a $378,260 loan for his North Sydney home. The mortgage has since been discharged.

Reserve Bank Governor Ian Macfarlane does not receive a discount RBA loan, with property searches showing Westpac holds a mortgage over his family’s Cremorne home.