Characterising derivative-based loan arrangements

The income tax and GST laws contain an array of rules that apply to debt and gains in the nature of interest. The definitions of 'debt' or 'loan' and amounts in the nature of 'interest' vary across the provisions and tax officials, taxpayers and courts must decide whether the terms should be read as applying to debt, loans or interest in a narrow legal sense or should be read more broadly to catch multi-element arrangements that give effect to a debt or loan relationship in an economic or commercial sense but not in conventional single document form. This article reviews the UK, US and Australian approaches to interpreting multi-element transactions and considers whether four tax provisions dealing with debt should be interpreted to apply to multi-element, derivative-based loan arrangements.

Deakin's e-book device loan trial

Powerpoint presentation presenting an overview of e-books and e-content at Deakin University, revolving around the e-readers trials that were done in 2010 at Deakin University Library.

Mortgage-Backed Securities (MBS): Is It a Curse or a Blessing for the Australian Home Loan Market? A Natural Experiment

The Australian home loan market has seen a significant and persistent boom over more than two decades. Theextant literature exploring the underlying factors explaining this boom has predominantly looked at thedemand side rather than the supply side. In this paper, we look at a major supply-side issue, the introductionof mortgage-backed securities and its likely impact on the home loan market. In doing so, we have developeda mathematical model that theorises this likely relationship. Our mathematical model predicts possibleexistence of an unstable equilibrium in the home loan market in the presence of mortgage-backed securities.We have subsequently backed up our theoretical exercise with sound empirical evidence acquired andanalysed as a natural experiment in the Australian scenario using quarterly market data on home loans andmortgage-backed securities data for a 36-year period from 1976 to 2012. Using unknown structural breaktests, we have identified significant breaks around late 1992 to mid-1995, clearly indicating that there weresignificant changes in the housing market due to the introduction of mortgage-backed securities in early1993. We have also performed a stability test confirming that under certain conditions this market canbecome unstable.

Herding behaviour in the Australian loan market and its impact on bank loan quality

We examine the effect of herding behaviour on the credit quality of bank loans in Australia. We find that bank herding varies with different types of loans. It tends to be more prevalent in owner-occupied housing loans and credit cards than other types of loans. During the global financial crisis period, herding in owner-occupied housing loans was most pronounced due to the flight-to-quality phenomenon in the housing sector. Furthermore, we find that the big four banks tend to herd more than smaller and regional banks. Bank herding behaviour is countercyclical, as it is negatively related to real GDP growth and the cost of funding but is positively related to market risk. Regulatory capital requirements may also encourage herding as banks are required to hold less risk-weighted capital for residential loans. Most importantly, bank herding is related to higher impaired assets and therefore lower loan quality. Our findings may have implications for policymakers and bank regulators.

Reconsidering the scope of the equitable mortgage arising from deposit of title documents

This article examines the underlying fairness of applying equitable security presumptions to the deposit of title documents belonging to third parties. It argues that within such transactions, the focus of the equitable jurisdiction must be upon the intention of the owner of the title documents rather than presumptions arising from the fact of the deposit. It suggests that there is no logic in applying equitable presumptions, founded on the principles of part performance, to infer a security intention in transactions involving third party title documents. The fact that the parties to a loan advance may have intended to create a mortgage between themselves does not mean that the third party owner of the title documents also intended to create a mortgage. In third party transactions, the objectives of the equity jurisdiction are best achieved through a comprehensive assessment of the intention of all parties and the abolition of presumptions based upon the bare fact of title deposit.

The effectiveness of seminars in educating adults in financial literacy

In Australia, financial literacy is not given prominence within the education system, and it is a general view that financial literacy is gained through ‘hands on’ experience in earning and spending money; further, financial education seems to occur only when people take a loan or experience financial difficulties (Hajaj, 2002). This is not sufficient if people need to make informed decisions about their investments and, because of a number of social factors, it has become necessary to educate the majority of the adult population in Australia in Financial Literacy over a relatively short period of time. Given the large numbers requiring such an education, the seminar approach is being widely used, however is it effective? Drawing on the adult education literature, this study examined the effectiveness of the seminar approach by surveying adult participants in a Financial Literacy seminar. The survey found that while a majority of participants (50%) expressed none or weak financial knowledge prior to attending the seminar and 45% expressed that they only had a moderate rate of financial knowledge, a majority of 63% strongly agreed or agreed to the seminar improving their knowledge of the need for retirement savings. Furthermore, 58% of participants were either confident or very confident of being able to apply what they learned in the seminar to achieving their retirement savings goal. These findings suggest that the seminar approach was effective in educating adults and improved their level of financial literacy. Future research could investigate whether the level of financial knowledge gained during the seminar is retained over a considerable period of time.

Charges over book debts in the United Kingdom and Australia : the way forward

Is it possible to create a fixed charge over book debts? This question was recently decided by the House of Lords in National Westminster Bank plc v. Spectrum Plus Limited & Ors [2005] UKHL 41 where the full House was against the idea of a fixed charge on book debts and insisted that only a
floating charge had been created. The law in this area is still vague and uncertain in Australia. This article argues that the financiers and the companies should be given the freedom to decide how they wish to structure their charge documents. The article sets out to argue that it is possible to create a sustained workable fixed charge or even a multiple combination of fixed and floating charge over book debts and argues that this would be the only way for both the financiers and the companies to do business together, in respect to the use of book debts as security for a loan. The author explains how this could be possible and how the proposed model would not deny the statutory priority rights of the preferential creditors.

The rise and decline of the New South Wales cooperative housing societies

In the past, New South Wales cooperative housing societies made an important contribution to the financing of housing construction. In this paper the expansion and later contraction of the societies is explained. It is shown that, in recent times, not only have they suffered from a drying up of loan funding, but also a great number have operated at far below their possible level of efficiency.

Fixed and floating charges : the latest conflicting law and how to address the gaps

Can book debts be subject to a fixed charge? This question was considered by the House of Lords in National Westminster Bank v. Spectrum Plus Limited [2005] UKHL 41 where the full House was against the idea of a fixed charge on book debts and insisted that only a floating charge had been created. The law in this area is still vague and uncertain in Australia. This paper argues that the financiers and the companies should be given the freedom to decide how they wish to structure their charge documents. The paper sets out to argue that, in respect to the use of book debts as security for a loan, the only way for both the financiers and the companies to do business is to create a sustained workable fixed charge or even multiple fixed and floating charge on book debts. The author explains how this could be possible and how the proposed model would not deny the statutory priority rights of the preferential creditors.

No limits : exploring the psychology of unsolicited credit card limit increase offers

The issue of credit card debt has become an increasing concern in recent years. In Australia, for example, there is currently $42.5 billion worth of outstanding debt on credit cards, with $30 billion (over 70 per cent) bearing interest. Further, in 2001, Visa reported that 32 per cent of consumers had not paid their card off in the previous 12 months, which suggests that interest-bearing debt in Australia is held by approximately only 113 of credit card borrowers. An important element of credit card marketing is the use of psychological manipulations to encourage consumers to take-up credit. In this article, we examine the use of language and imagery in unsolicited credit card limit increase offers, and how these might influence consumers' decisions to increase their credit card limit. The analysis found that the use of terms that focused on the benefits of credit card use, such as "choice", "freedom", and "peace of mind" were used consistently to convince consumers to increase their credit card limit, whereas the use the of terms that could be considered more pragmatic and with direct reference to the nature of the product, such as "debt", "repayment" and "loan", were rarely used. Similarly, the use of colour, text changes, and images, were used which may have an influence over a consumer's ability to rationally consider whether the increase is appropriate for them. The paper concludes by recommending that government and representative bodies need to take into account the psychological manipulations used by credit card providers when developing consumer policy and codes of ethics.