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Legislative Assembly for the ACT: 2002 Week 6 Hansard (16 May) . . Page.. 1762 ..

MR HUMPHRIES (continuing):

the territory. The future of that particular business must be in some doubt, given what has been described to us as an adverse claims history, whereby the size of the claims being made each year appear to exceed the sum of the premiums being collected in respect of that particular fund.

A reasonable case has been made in the ACT for taking action to deal with the great difficulty a number of individual builders face in accessing appropriate insurance-insurance which the law of the territory requires. It requires that work of a certain dimension being done on any home carry with it insurance against the failure of a builder or company to complete the work or to have delivered a product that will stand up for five years from the date of completion-that is, work that is protected by a warranty during the five-year period subsequent to completion and by the terms of that insurance.

The presentation speech describes in general the way in which this scheme will work; as I have said, the details are not presently available. Yesterday the government was kind enough to provide drafts of two instruments, versions of which will be executed under the Building Amendment Bill. They are a Building (Approval criteria) Determination and a Building (Prudential Standards) Determination, which go some way towards providing a framework, which we are seeking.

It is also true, however, that more documentation needs to be provided before the full picture is available. In particular, the actual application made by the organisation that is supporting the creation of this fidelity fund is yet to be placed on the public table. That will describe the operation of this fund. It will describe how this particular scheme will operate to protect builders, and hence consumers, in the ACT against failure of those businesses.

We have not seen those arrangements. We have not seen, for any length of time, the prudential standards or the approval criteria under which that further scheme will be created. It is therefore difficult or impossible to give this concept anything other than in-principle support-and that avowed sense of hesitation needs to be put very firmly on the record.

The presentation speech by the minister suggests that, in the event of what he calls the "catastrophic failure" of a fidelity fund or an insurer, the government would need to "consider the impacts on the economy, employment and consumers and formulate a plan to suit the circumstances". We assume that means that the government would have to consider some kind of bail-out or emergency support to allow the continuation of this fund.

That kind of comment is perhaps appropriate, given that among the arrangements being proposed is one to establish a fund in the ACT with start-up capital provided by borrowings of some sort, since there will be no other source of funding for this scheme to begin with. The borrowings will be used to establish the scheme. The scheme will be fed, I understand, by levies paid by builders who undertake the work, and the levies will feed the fund so that over a period of time a sufficient corpus of the fund is available to provide adequate guarantee that, should, to quote the minister's words, a "catastrophic failure" occur on the part of the builder or builders, there will be money available to provide relief to the builders and, particularly, to the home owners concerned.

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