Government Gambles With Your Money

I wanted to get some straight answers about the government’s 5% deposit scheme, because to me, it looks like risky lending at the taxpayers' expense. APRA have previously said that loans with a 95% value ratio are high-risk. I asked how they reconcile that with a government scheme that encourages this exact behaviour. They admitted that high-ratio lending is "more risky" and they are watching it closely. I’m worried about what happens if property prices drop by 10 or 20%. If people fall into negative equity, the taxpayer is underwriting a huge chunk of those losses. APRA ducked out of giving a specific answer on the scheme itself, however insisted their "stress tests" for the overall banking system are even more severe than the scenarios raised. I asked: was the Treasurer warned about the scheme’s risks? They told me they gave some advice to Treasury early on about mortgage insurers, but nothing specifically to the Treasurer. They will provide me with a copy of that advice on notice. I questioned APRA as to whether this scheme follows their own sound risk management standards. They replied that they don’t "opine" on government policy, however confirmed that they’ll expect banks to hold the same amount of capital against these loans as any other high-risk product. Finally, I asked if they would publish stress test results specifically for this 5% scheme. They stated that their stress tests are "much broader than any one government policy" and that they are "not aware of a stress test" planned for this specific scheme. APRA knows these loans are risky and are tiptoeing around the topic. Transcript: https://www.malcolmrobertsqld.com.au/government-gambles-with-your-money/