You take my house
when you do take the prop
That doth sustain
my house. You take my life
When you do take
the means whereby I live.
Merchant
of Venice Act 4, scene 1
It is widely accepted common ground that housing is an
important element in addressing deep-seated disadvantage. See for example the AHURI research report
released with the recent Remote Housing Review (link
here).
Australia’ remote Indigenous communities are the locus of perhaps the most
concentrated deep-seated disadvantage in the nation.
Since the Second World War, the Commonwealth has played a
crucial role in funding social housing nationally, initially through the
Commonwealth State Housing Agreement (CSHA) as well as through the development
of the Commonwealth Rent Assistance Program. Following the 1967 referendum, the
Commonwealth gradually ramped up its own direct investment in Indigenous
housing programs both in the CSHA, and in a number of Indigenous specific
programs. Up until 2007, the CSHA included an element directed towards
Indigenous social housing which was delivered by the states and territories, while
the Commonwealth delivered an Indigenous specific housing and infrastructure program
with a nation-wide footprint called CHIP (Community Housing and Infrastructure
Program).
These Indigenous specific programs funded by the
Commonwealth were in specific recognition of the political reality that the
states had not been prepared to provide services to their Indigenous citizens,
often adopting discriminatory policies of exclusion. While the overt racism of
the states’ policies has largely disappeared, the institutional and structural
invisibility of Indigenous interests continues to the present day. The
discussion below of ‘acceptable’ levels of overcrowding is just one example. The
case for ongoing Commonwealth engagement in remote housing policy remains
incontrovertible.
A review of CHIP commissioned by Minister Mal Brough in
2007, Living in the Sunburnt Country,
found that the program was not focussed on need and recommended greater focus
on remote housing since regional and urban Indigenous citizens had access to
mainstream social housing options which were not available in remote regions.
For example, the virtual total absence of private rental housing options in
remote communities meant that Indigenous residents had a structural incapacity
to access Commonwealth Rent Assistance, the largest social housing program in
the nation.
In its last year in office, the Howard Government made a
number of moves to upgrade the funding for housing in remote regions, through a
program known as ARIA and later renamed the Strategic Indigenous Housing and
Infrastructure Program (SIHIP).
Following the election of the Rudd Labor Government, in
early 2008, the Commonwealth and the States agreed to establish a National
Partnership Agreement on Remote Indigenous Housing, known as NPARIH. This was
part of a broader reform of Commonwealth – State financial relations. The
agreement in effect combined the former CSHA component with the Commonwealth
CHIP program and provided for Commonwealth funding of $5.5bn over ten years, a
massive increase in previous funding levels for remote housing, with housing construction
and tenancy management to be undertaken by the states and the NT. It set
specific targets for each jurisdiction related to new builds, refurbishments,
and Indigenous employment. Even so, it was recognised that it would not address
the totality of outstanding housing needs in remote Australia.
The ten year agreement survived the change of Government in
2013 albeit with a change of name – it is now known as the National Partnership
on Remote Housing, or sometimes as the Remote Housing Strategy.
The National Partnership expires in June 2018, and thus
raises the question, what will replace what has been the major national investment
program in remote Australia (apart from welfare and employment programs) over
the last ten years? While I dealt with this topic in a previous post (link
here),
this post is an update following the publication of the Remote Housing Review.
To pave the way for the Government decisions which will determine
the answer to that question, in November 2016, the Minister for Indigenous
Affairs, Senator Scullion, announced a review into remote Indigenous housing. In
his media release announcing the review, the Minister stated that
‘Overcrowding, homelessness and poor housing conditions in remote Australia
remain unacceptably high’. According to the Department of Prime Minister and
Cabinet (PMC) website, the Review had two tasks: an analysis of what was
implemented in the past and an assessment of what should be effected in the
future.
Notwithstanding that the Review suffers from a range of
serious analytical flaws which I outlined in my previous post (link
here),
the review’s findings essentially confirm the Minister’s assessment of the unacceptable
state of remote housing.
On 10-11 May 2017, the Prime Minister’s Indigenous Advisory
Council was briefed on the review. In their communique dated 19 May, the
Council made a number of comments on Indigenous housing and the then unreleased
review of remote housing. They noted,
inter alia:
Council
acknowledged the findings of the Remote Housing Review and expressed concern
that despite significant reductions in overcrowding investment is required to
meet unmet need and maintenance of housing stock. Council emphasised adequate
housing is critical to ensure positive outcomes are maintained in health,
education, employment and community safety...
Since May there have been a number of development which
relate to the next phase of funding. In August, the Minister made a number of
comments in an ABC Q&A program at Garma (link here),
where in response to a question about overcrowding and the impact on peoples’
lives, he foreshadowed a number of likely policy directions:
We’re deadly serious about this. We’ve invested
$5.4 billion over the last decade, and I think everybody would agree we could
have done a lot better. We have reduced overcrowding from 52% to 37% – it’s still
in the margins, and that took a fair while to do. So, the next rollout, which
we are now negotiating with the states and territories about the National
Partnership on Remote Indigenous Housing, we’ll be negotiating on the basis of
what the communities have asked us to negotiate on.
So, Indigenous employment is non-negotiable.
Indigenous procurement is non-negotiable. And we’ll be asking the states to
match those funds. Because we need a pulse. Sometimes we can just trickle along
and we’ll be just catching up, just getting ahead, but we actually need a
significant injection of funds. So, that’ll be the basis of our negotiation
with the states. But those houses cannot be built by whitefellas getting off
planes with nail bags. Those times have to go.
Prior to the most recent Estimates Hearings relating to the
Indigenous Affairs portfolio, the Minister released the Remote Housing Review
Report on 26 October 2017 (link
here).
In the lead up to that release, a government source provided The Australian’s Darwin correspondent
Amos Aikman with not just the report, but the earlier May version which had
been provided to the states and territories for their comment and input. That
source was presumably the Minister or his Office; who else had access to both
the earlier draft and the about to be released final version? While it is
normal for Ministers to provide the media with advance copies of reports they
are releasing, the provision in this case of both versions was clearly aimed at
highlighting and undercutting the changes the review panel had made after
consultation with the states, and ‘bells the cat’ on the lengths to which the Government
has gone to frame the public discussion in the lead up to its decision on
future funding for remote housing.
The ‘drop’ to The
Australian would likely have involved at least some level of briefing as Aikman’s
26 October story (Blot on $5.4bn indigenous housing) reported
on the key changes between the two versions. This related to the extent to
which jurisdictions allocated NPARIH funds for non-construction activities such
as land servicing, infrastructure provision, and program administration.
The final data is presented in Table 4.2 of the report.
While WA spent 33.6 percent of its allocated funding from 2008-2016 on
ancillary costs (the source of the 34% figure), other jurisdictions spent less.
The average across the four jurisdictions remaining in the scheme was 20.8
percent. While the inevitable inference of the media story was that ancillary
costs were somehow illegitimate, the report does not say this is the case, and
indeed explicitly states (section 7.1.3) that there was no suggestion these costs
were illegitimate, merely that the Commonwealth did not have a line of sight to
them. The reality is that houses without access to power, water, sewerage, and
access roads are not ‘fit for purpose’. Much of the debate around remote
housing over the last decade has overlooked this crucial fact, and instead been
simplistically focussed on three key metrics: numbers of new houses, refurbishments,
and levels of Indigenous employment. Important as these are, the remote housing
system is more than the sum of these three metrics.
Aikman’s lead paragraph also managed to pick up on a
subsidiary observation by the Review Panel (‘the scheme is opaque, “complicated
by multiple objectives, poor governance and constantly changing policy
settings’ and has not fostered home ownership or business growth”) rather than
the Review’s headline finding, namely that:
By
2018, the Strategy will have delivered over 11500 more liveable homes in remote
Australia (around 4000 new houses and 7500 refurbishments).
This
increase in supply is estimated to have led to a significant decrease in the
proportion of overcrowded households in remote and very remote areas, falling
from 52.1 percent in 2008 to 41.3 percent in 2014-15. The Panel projects this
will fall further to 37.4 percent by 2018. (Executive Summary
page 1).
In particular, Aikman noted that ‘At an average price of
$600,000 per house, estimated from the existing program, the next ten year
agreement is likely to cost around $3bn. The report recommended that federal
and state governments split the cost equally, but the NT has already demanded
more’. Given the likelihood that The Australian received a detailed
briefing on the report (the $600,000 figure appears to be an extrapolation of
data provided in Tables 4.2 and 4.4 of the Review, and unlikely to be a figure
the journalist would come up with unilaterally), there seems to be a
possibility that the $3bn figure may reflect one of the options in the
Minister’s bid to Cabinet for a national allocation. Of course, such a notional
calculation is fundamentally flawed, as it ignores the potential need for
refurbishments as well as new houses, and also the increasing need for Property
and Tenancy Management costs (which include ongoing small repairs and
maintenance costs)
In a follow up story on 27 October 2017 (Housing loses out as cash diverted), Aikman’s
lead paragraph reported that:
States
and territories are spending up to 34 percent of federal funds provided for
remote indigenous housing on “ancillary costs”, but those governments also
blame Canberra for poor living conditions in the bush, arguing it has not
committed to ongoing payments.
The story went on to report that the 34 percent figure
highlighted in both media stories related just to one jurisdiction.
Nevertheless, the headlines and lead paragraphs in the two articles laid out a
narrative which painted the states and the NT as mendicants not pulling their
weight.
At the most recent Estimates Committee hearings (link
here),
there was a rather bizarre discussion around the next phase of Commonwealth
involvement in funding remote housing. The Minister and his officials made no
absolute commitments, but appeared to lay down a few benchmarks which will
shape future Commonwealth policy.
First, the Minister and his officials argued (against
accepted wisdom and the history of Commonwealth involvement since at least 1968)
that funding for remote housing was primarily a responsibility of the states
and territory, and that the Commonwealth’s role was in effect optional or discretionary.
As Minister Scullion stated:
Yes
we have seen this review and we’ve let the states know about the review. They
are aware that this is a national partnership agreement under which we haven’t
reached the goals we were supposed to reach, because then it was to go back to
the states’ responsibility. This is overcrowding in remote areas. So
negotiation still has to happen about in which states this is mostly occurring
in. And it’s a matter for the Commonwealth to negotiate with the states about
what percentage of the responsibility remains with the Commonwealth. It was the
intention that by this stage, the Commonwealth would have no further role and
the role would go back, rightly, to the states and territories in this regard. (Estimates
transcript 27 October 2017:51).
This statement is factually wrong on a number of levels.
There was never an ‘intention’ that NPARIH would be the end of the
Commonwealth’s involvement; indeed, it was recognised at the time NPARIH was
first negotiated that the targets embedded within it would meet only around half
of the outstanding national need. Second, NPARIH largely met its goals, and
allowing for substitution of investment between new builds and refurbishments,
in fact exceeded its goals. (Refer section 4.3 of the Review report).
One way to interpret Minister Scullion’s statement is that the
Minister has yet to obtain a Cabinet decision on the quantum of funding
available for the renewal, but recognises that Cabinet is unlikely to allocate
a further $5.5bn over ten years. Alternatively, the Minister may have been told
that he won’t get a further $5.5bn, and thus he has engineered a review and a
set of arguments designed to throw dust in the air to avoid criticism for his
lack of capacity to deliver an ongoing program at former levels for Indigenous
constituents.
Second, the Minister appeared to rule out the use of a
National Partnership going forward, indicating instead that the Government was
considering a series of bilateral agreements with each of the four remote
jurisdictions (WA, SA, NT and Qld) rather than an overarching National
Partnership. The Minister has not laid out a persuasive argument for making
this shift, but what is clear is that it will allow him to set up an effective
bidding war between the jurisdictions (who now happen to have Labor
Governments) based on their preparedness to match Commonwealth funding. A
series of bilateral agreements also opens up the possibility of a shift away
from a ten year program to shorter bilateral agreements. A further risk in
moving away from the National Partnership model is that it increases the scope
and likelihood of reductions in investment levels through the ongoing annual
budget process since COAG endorsed National Partnerships appear to have a
greater (but not total) degree of quarantining from budget revisions during the
life of the agreements.
Third, the Minister was quite vague on the timing for an
announcement of new funding arrangements. In responses to questions in Estimates
previously, the Minister had advised that a decision would be announced as part
of the Mid-Year Economic and Financial Outlook (MYEFO) statement, normally
brought down around December or January. However in the latest Estimates hearing,
he shifted his ground, indicating that discussions with the states and
territory were at a very preliminary stage, and that ‘it’s unlikely any
announcement will be made prior to MYEFO, but there will certainly be an
announcement prior to or during the budget process’. This suggests that the
MYEFO budget process will likely be used to decide on the national funding
allocation quantum, but that there will then be a subsequent negotiation or
‘bidding process’ undertaken with the four jurisdictions.
Ironically, one of the important and sensible recommendations
of the Review Panel was that ‘a minimum five year rolling plan for the program
should be established’ (rec.7, page 4). Yet the Commonwealth has allowed a
situation to develop where the states and the NT will essentially enter the
2018-19 financial year with minimal lead time to develop a capital works
program, thus virtually guaranteeing at least a one year hiatus in capital
works and potentially PTM momentum. The review was critical of the National
Partnership’s two year capital works cycles, yet the Commonwealth has done
nothing to ensure a smooth transition between the current Remote Housing
Strategy and the next phase.
So what then should the next iteration of the program look
like? As with any policy issue, the answer must take into account a number of
issues. In this case the core first order issues are the levels of need across
remote Australia, measured by overcrowding; and the necessary investment
required to maintain the asset base and maximise asset (ie house) lifespans. These
first order issues go the quantum required to address the outstanding housing
deficit in remote Australia.
Other issues, such as maximising local indigenous
employment and/or Indigenous employment generally; deciding how to best deliver
necessary repairs and maintenance; choosing and resourcing the most effective tenancy
support models; design/cost trade-offs; new builds versus refurbishment
trade-offs; and construction cost versus whole of asset lifespan cost trade-offs;
are all important, but second order issues. The second order decisions will be
crucial determinants of the effectiveness and efficiency of the resources
allocated. Merely listing them provides a sense of the complex decision-making
processes embedded within this program, and the overall complexity of the
remote housing system. This is further complicated by the fact that two levels
of government are involved, and that choices in relation to any one of the
second order issues will inevitably impact on the options and choices available
on the other second order issues.
Turning to the first order issues, the Review is only of
limited assistance. The Panel’s assessment of the outstanding ten year need of
5500 houses is extremely problematic. The Panel itself admits that the estimate
relates only to households requiring three bedrooms or more, or to citizens who
are homeless. As they note in the text under Figure 3.3, this suggests ‘the
overcrowding challenge is likely to be greater’.
Secondly, they note that the estimates are based on modelling
of 2011 Census data and as they state in footnote 29: ‘remote housing need
requires remodelling when the 2016 Census data is available’.
Third, the Panel fails to include any estimate for houses
which reach the end of their effective lifespan. Data on the effective lifespan
of the current asset base nationally is virtually non-existent and
disappointingly, the recent Remote Housing Review provides no insights into the
issue. But if average asset lifespans were 30 years, and the national remote Indigenous
community housing asset base was 15,000 houses[1], then we could expect
around 500 houses to reach effective ‘end of life’ each year, or 5000 over the
next decade.
Fourth, the Panel’s modelling is based on reducing
overcrowding from 37 percent to ‘around 25-30 percent by 2028. This level of
overcrowding is still 10 percentage points higher than the rate in urban and
regional Australia.’ The Panel makes no assessment of the level of outstanding
need based on parity in overcrowding levels with metropolitan Australia[2], and indeed, asserts in the
Executive Summary of the report that the targets specified above involve
reductions in ‘levels of overcrowding to acceptable levels’ without any
discussion of what makes them ‘acceptable’ (emphasis added).
Fifth, the Panel ignores entirely the figures on current
demand and projected need provided to it by three jurisdictions, which total
7520 houses without including projected need in South Australia and Western
Australia (see Box 3.2).
Based on the factors identified above, a more realistic
assessment of outstanding need for housing across remote Australia over the
coming decade to 2028 would be at least 10,000 new houses and arguably 15000
new houses.[3]
Using the figure of $600,000 per house, the cost of delivering 10,000 houses
would be $6bn. This would need to be complemented by a program of
refurbishments aimed at extending asset lifespans wherever possible, and
assuming effective PTM policies are in place, this might involve somewhere in
the region of 2 to 5 thousand refurbishments over the next decade. Add say 3000
refurbs at $100k each would cost $300m or $0.3bn.
Finally, the Review Panel correctly emphasised the need for
a complementary recurrent program to be funded designed to deliver PTM to the
entire asset base. The review’s most insightful conclusion, based on detailed
research by NOUS Consulting (link
here),
was that annual rental revenues covered only between 10 and 20 percent of the
actual cost of maintaining the asset base. Much of this extra cost is a
function of remoteness. See section 8.1.1 of the Review report also. This
suggests that some $2.8bn in additional funds will be required to maintain the
existing asset base over the next decade.[4]
These admittedly rough ‘ball park’ calculations suggest
that meeting the outstanding housing need in remote Australia over the decade
to 2028 would cost around $9bn; $6bn for ten thousand additional houses; $0.3bn
for refurbishments; and $2.8bn for PTM. While this quantum is daunting in
itself, the challenge is magnified by the fact that it does not include the
concomitant ancillary costs of land servicing, essential services
infrastructure, and access roads.
The prospects that the Commonwealth will allocate anywhere
near $9bn to fund remote housing provision over the next decade appears
negligible. The level of political and electoral pressure on the Commonwealth
is minimal. The daily challenges of Indigenous interests in remote Australia are
largely invisible in national political discourse, which has focussed in recent
years on constitutional recognition. Moreover, Indigenous interests are spread
thin and exercise very limited political influence. Increasingly, the Indigenous
community vote spans the political spectrum, which often mean that Indigenous
voices cancel each other out. Advocacy is almost non-existent. Nationally, the
National Congress of First Peoples does not currently list housing on its list
of priority policy issues (link
here).
In the NT, the Aboriginal Peak Organisations Northern Territory (APONT) has
been building its advocacy capability since 2010, and in 2015 facilitated the establishment
of Aboriginal Housing NT, a body dedicated to advocating on housing issues for
Aboriginal citizens in the NT (link here).
AHNT made a submission to the Remote Housing Review (link
here)
but has not to date built a public profile.
The consequences of underinvesting in remote housing over
the coming decade will be devastating on a number of levels. For taxpayers, the
value of the investments of the past decade under NPARIH, along with whatever
reduced amount is allocated, will in effect be substantially and prematurely depreciated
as housing asset lifespans are shortened. The economic impost on taxpayers of meeting
the costs of poor health, education and social outcomes will expand. The local
economic multipliers which spin off capital works investments will not arise, thus
further undermining the prospects for economic development in remote
communities. And most importantly, the life opportunities of tens of thousands
remote citizens will be irretrievably constrained. The evidence emerging form
the latest census is that income levels are worsening in remote Australia, and
a pull back in remote housing investment will only exacerbate this trend
further (link
here).
In short the economic, social and human cost of not investing
in addressing the deep-seated disadvantage which derives from poor and
overcrowded housing will be substantial, with the most intense impacts falling unnecessarily
on remote Indigenous citizens.
Apart from renewing the National Partnership with a
significant level of funding, what policy options exist for the Commonwealth
(and the states)?
I would propose four possible policy initiatives, though I
am sure there are others.
First, the lack of progress in opening up opportunities for
private sector investment in remote community housing is a glaring policy
failure by the Commonwealth. Lack of progress in advancing land reforms, which
to be effective must not lessen the rights of Indigenous traditional owners or
native title holders, has been one major impediment. Another has been a lack of
innovative policy vision within governments. A third has been the impact of
transaction costs and other hidden disincentives which hold back investment
even in communities or locations which have made progress in establishing more
flexible institutional frameworks (eg the township leases in a number of NT
communities). And fourth is a lack of access to capital. The focus by
governments on moving straight to higher levels of home ownership is in my view
misdirected. Governments would do better to concentrate on building up a rental
housing market in remote Australia. It is currently virtually non-existent.
One way to kick start such a shift would be to establish a
government owned corporation with commercial powers to borrow in the private
sector (and which might joint venture with Indigenous corporations) to build,
own and rent out housing within remote communities. Such an initiative would
address a number of pressing issues: the shortage of housing assets; the lack
of staff housing in remote communities (which acts as a disincentive to attract
and retain both locally engaged and external staff); open up new sources of private
sector capital for investment in remote locations; and would begin to expand access
to the Commonwealth Rent Assistance program to remote Indigenous residents who
to date have been structurally denied access.
Second, policymakers could focus on supporting the
introduction and expansion of three or four community housing providers across
remote Australia to complement the operations of state housing authorities in remote
regions. Notwithstanding the fact that the NPARIH reforms introduced institution
arrangements which for the first time established formal accountabilities for
the owners of social housing, the experience to date has been disappointing with
state housing authorities yet to deliver on their responsibilities. The introduction
of competing providers may be necessary to demonstrate that poor housing is not
an inevitable and endemic feature of remote regions.
Third, given the propensity of the states and the NT to
underfund PTM in remote regions, the Commonwealth should move beyond rhetoric
and take a much more direct role in either delivering PTM services itself (perhaps
by injecting Commonwealth officials into the relevant parts of state and
territory housing authorities) or in establishing a new statutory office to
monitor, oversight and regulate the provision of PTM services in remote
communities. Such a policy initiative might need only exist for ten or fifteen
years until new expectations were set and embedded into bureaucratic practice, but
would ensure that the substantial capital investments to date, and hopefully
the value of the considerable investments into the future by the Commonwealth
will be protected from dissipation and accelerated wear and tear arising from
poor PTM which shortens asset lifespans.
Fourth, one innovative element of NPARIH which actually
worked to improve state and territory performance, and which was discontinued
after the change of Government, was the capacity for funding allocations to be
varied both up and down in response to state performance in delivering against
key metrics. While the Review Panel (section 4.7) argues that the competitive
bids process (as this financial incentive system was known) led to ‘undesirable
and unintended consequences’, it is salutary to reflect on the fact that the
best performing state in terms of value for money, South Australia, was penalised
by the Commonwealth for poor performance in the early years of the program. The
bottom line si that states and territories will respond to financial
incentives, and given the importance of PTM for protecting the Commonwealth’s investment
to date, there would be value in giving serious consideration to re-instituting
the system with a focus on PTM delivery.
To sum up, the prospects for the renewal of the current
levels of Commonwealth investment in remote Indigenous housing do not appear
positive. The Minister and his Department appear to be basing their policy
development work on a Review Report which is fundamentally flawed, and in
particular, which substantially under-estimates the outstanding housing need
across remote Australia.
The costs of not addressing this need effectively will be
significant and will fall on taxpayers in the future, and importantly, substantially
constrain the material life opportunities of thousands of remote citizens over
the course of their (shortened) lives. The asymmetry between the short term
political benefits of reduced investment and the associated long term social,
economic and health costs is driving a decision-making dynamic which is not in
the public interest, and certainly not in the nation’s long term interest.
How this issue is resolved will be a test; a test of the institutional
capacity of the Australian Public Service to drive good policy, a test of the calibre
of our political leaders, and ultimately a test of our national character, and
whether we are the land of the fair go.
Disclosure: In the interests of full transparency, I should indicate that I worked as an adviser to Minister Jenny Macklin from 2008 to 2011, and as a senior public servant with responsibility for NPARIH from 2011 to 2013.
[1]
The Sunburnt Country Review in 2007 states there were 21,000 houses managed by
Indigenous Community Housing Organisations across Australia, but doesn’t split
this between remote and regional areas. NPARIH has built 4000 houses nationally
in remote regions, and refurbished 7500, so there are at least 11500 remote
houses. The figure of 15000 is my estimate. Achieving effective asset lifespans
of 30 years assumes effective PTM policies. In many locations, the effective
asset lifespans are likely to be shorter.
[2] I
am not in a position to make a detailed analysis of how many additional houses
would be required to reduce overcrowding by an additional ten percent. However,
NPARIH’s extra 4000 houses reduced overcrowding by 15 percent, and the Review
estimates that a further 5500 houses would reduce overcrowding by a further ten
percent. It seems likely that at least 5000 houses would be required to reduce
overcrowding by a further ten percent.
[3]
This figure is calculated based on the Review’s base figure of 5500 new houses
to meet existing needs plus population growth, the estimate of 5000 new houses
to replace assets which reach the end of lifespan, and the approximately 5000
additional houses required to reduce overcrowding to metropolitan levels.
[4] Table 5.5
of the Review report suggests that average weekly rents are around $90. If we
adopt the conservative assumption that rents cover 20 percent of maintenance
costs, then average annual maintenance costs will be $23,400 per annum, of
which only $4680 is rent. If there are 15,000 houses nationally, then the
additional funds required exceed $280m per annum, or $2.8bn over the next
decade.
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