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Monday, 11 May 1987
Page: 2907


Mr WEST (Minister for Housing and Construction)(3.29) —With regard to the Opposition's inadequate matter of public importance today, let me first deal with the question of the survey by the Real Estate Institute of Australia for the March quarter which alleges that housing loan repayments have risen by an average of $124 per month or in some cases by 42 per cent. I certainly put it to the House and to the people of Australia that, as I said at Question Time today, that report presents quite an exaggerated picture. What is more, the Housing Industry Association and the Australian Bankers Association are in complete agreement with me. For instance, Dr Silberberg, the Executive Director of the Housing Industry Association, pointed out that the affordability index used by the Real Estate Institute and MGICA Ltd did not take account of the changing structure of housing finance. He said:

Since housing loans have been deregulated and more funds have become available, people have not had to take out as much additional high cost finance.

He was talking about the old practice of cocktailing. He continued:

They are now more able to put all their finance on a first mortgage through the banks.

Similarly, the Australian Bankers Association Executive Director, Mr Cullen, said that the figures presented over the weekend by the Real Estate Institute of Australia gave a very misleading picture.

Let me expand on what Dr Silberberg said. That the measures used in that report ignore significant structural changes in the way in which housing finance is being provided. Since April 1986 cocktailing of housing finance has almost disappeared. This has enabled prospective home buyers to borrow from one source only and at one interest rate. This has led to an increase in the size of the average loan recorded by savings banks. Total repayments under the new arrangements can be significantly less than they were under the combination of a bank loan and a loan implementing the so-called cocktail system, whereby loans at higher interest rates were used to supplement the bank loan.

I hope that that is clear to the Opposition. Let me put it in another, perhaps simpler, form. The Real Estate Institute stated that the average repayment had increased by $124 a month, and in some States by 42 per cent. Let us look at the situation. In late 1985 a housing loan of $50,000 at a rate of 13.5 per cent cost $604 a month. At a rate of 15.5 per cent, the cost is $676. That is a 12 per cent increase, and it is a result of an increase of 2 percentage points in the interest rate, from 13.5 to 15.5 per cent. It is a far cry from the sort of beat-ups and exaggerated claims that illustrate to me, and to the more responsible people in the industry-including the Housing Industry Association, which wishes there to be confidence in the industry-that the Real Estate Institute of Australia, by presenting some of these beat-up reports, can be the industry's own enemy. The Institute does not have the full agreement of the industry in regard to those sorts of exaggerations.

Furthermore, these surveys have been issued after, but conducted before, the announcement of the March housing package. In that package we protected the 13.5 per cent ceiling on loans made before April 1986. By reducing the bank reserve asset ratio requirement from 15 to 13 per cent, we have released another $900m for housing finance, if the banks so direct it. We have increased the income limits for the first home owners scheme. I referred to that point in Question Time today, and I will come back to it in a moment. We gave a forward commitment over the next triennium to provide $700m a year for housing finance by way of grants through the Commonwealth-State Housing Agreement. Of course, we restated that the States would be able to nominate up to 60 per cent of their State government borrowing program at 4.5 per cent, repayable over 53 years. In this financial year that has been worth almost $600m at a rate of 4.5 per cent, to the States. Of course, the Opposition, while saying that it will abolish the CSHA Federal funding for public housing, at the same time weeps crocodile tears for those who are on the waiting lists.

I was saying what we had done in the March package, which superseded what may have appeared, to some degree-although it was exaggerated-in the Real Estate Institute's March quarter report. We have protected those 900,000 loans at an interest rate of 13.5 per cent. How could those 900,000 loans that we have protected have gone up by $124 a month? That is the first point. The second point is that we have assisted those earning less than $34,000 a year-that is, at the top end of the range-with two children, through the first home owners scheme to meet the deposit gap and have subsidised their monthly interest repayments. The table of benefits available for others is on the record. I urge all of the home seekers who may have been misled by these extravagant figures of the Real Estate Institute of Australia to go to their lending institutions and see what sort of deposit and interest rate subsidy assistance is available through the Hawke Labor Government's first home owners scheme, particularly since it has been improved.

Let me give an example: A family with an income of $25,000 a year-that is, 108 per cent of average weekly earnings-with one child can now receive $5,500 from the first home owners scheme. Before the increase in income limits on 30 March, such a person would only have received $1,744. Honourable members can see how obsolete REIA survey figures have become in regard to people who are eligible under the first home owners scheme. They are very important points. We have protected all of those people who have savings bank loans at the 13.5 per cent rate, who took out their loans before April last year. We are giving very substantial assistance to those who meet the income requirements and who are seeking their first home.

Let me deal now with the question of the private rental market. It has been said that this is an area of concern. I am not saying that the private rental market is not tight. Clearly, in several cities, it is. But as I have said before, if one looks at the tables put out by the Real Estate Institute of Australia, one will see that the vacancy rate today is worse in only two capital cities than it was in the middle of 1982. The vacancy rate in Sydney at that time was 1.7 per cent; today it is about 0.9 per cent or one per cent. In Perth, five years ago it was 2.6 per cent and now it is 1.2 per cent. But in Melbourne the vacancy rate is now 2.1 per cent compared with one per cent previously; in Brisbane it is 4 per cent now compared with one per cent previously; in Adelaide it is now 2.8 per cent compared with one per cent previously; and in Canberra it is 4.7 per cent now compared with 1.9 per cent previously. So when honour- able members opposite talk about the so-called crisis in the private rental market, they are talking about two capital cities in particular, or maybe three.

The question is, given the fact that interest rates are on the way down, whether we should be doing anything extra in addition to what we have already done with regard to the implementation of a depreciation allowance of 4 per cent. Should we increase that in order to improve the situation in, say, two cities when it may not be really required in all other parts of Australia, at a time when interest rates are coming down?

Let me now look at interest rates. Of course, the bill rates in the time of the previous Government reached the staggering height of 22 per cent. Today, as was said during Question Time, the figure is 14.5 or 14.6 per cent. I am not saying that interest rates are not a key factor as far as housing policy is concerned. Clearly, they are. We can pay out record sums in Federal assistance for public housing; we can increase the benefits available under the first home owners scheme; we can peg old savings bank interest rates to 13.5 per cent; we can release more money into housing from bank reserve asset ratio deposits with the Reserve Bank. But at the end of the day it is correct that we must do something about interest rates. The point is that that is just what the Government is doing. What would the Opposition do? Would it allow housing interest rates to crash overnight from 15.5 per cent to, say, 11.5 per cent? Would it be able to sustain that? No. We are seeking a sustainable fall in interest rates, and that is what we are achieving. The current account deficit has been, of course, trending down over the last few months. The bank bills rate today, as I pointed out, is 14.6 per cent-its lowest level in almost a year. I assure honourable members that the tight fiscal policies that we have already started to implement will be enhanced by the statement of the Treasurer (Mr Keating) at 7.30 on Wednesday night. What is more, the dollar is currently much more stable. As I said, we are seeing a downward trend in general interest rates. It will be a sustainable fall, and that is something we would not see if the Opposition were in government.

I refer now to the availability of housing finance, because that is clearly pertinent to the matter of public importance that has been raised today. The availability of finance depends very much on continuing increases in growth in savings bank deposits. Last Friday we saw that the monthly figures, seasonally adjusted, for March showed a $866m increase in depositors' balances, which is the largest increase since July 1986, and that, year on year to March, deposits in savings banks have grown by 16 1/2 per cent, resulting in very strong lending by the savings banks. In February, the savings banks lent at an annualised rate of $9.8 billion. I expect that strong lending to continue, A majority of the savings banks agree with me. Just the other day spokespeople for the Westpac Banking Corporation-although the ABS figures overall for March are not yet released-kindly released its own figures which showed that Westpac lent $198m during March. That was a record for Westpac. What I am saying is right; it is not just pie in the sky. The short term interest rates are coming down and bank lending is strong. After the May statement the short term rates will come down further. It is fair to say that the increased deposit growth and the increased lending will shortly translate into increased housing approvals. The factors which I have already mentioned, plus the improvements to the first home owners scheme, will lead to an upward trend in housing approvals which I forecast will translate into more commencements over the rest of the calendar year 1987.

In the remaining time available to me, I address the taxation policy aspect of the matter of public importance. We are the only people who have a legislated tax package of reforms on the record. The Opposition was in government for seven or eight years and it did nothing in terms of tax policy. We have introduced income tax cuts. According to a table in front of me, the former Government left office with a top taxation rate of 60c in the dollar, dropping down to 48c, 46c, 30c and 25c. Already, the rates are down to 55c, 46c, 43c, 29c and 24c. On 1 July this year, when the final part of our tax reform strategy takes effect, the rates will be 49c, 40c, 29c and 24c in the dollar. That is worthwhile income tax reform. Last year the tax cuts applied across the board. This year we are giving attention to the 60c in the dollar rate, which last year came down to 55c and will go down to 49c on 1 July. That is the income tax side of the picture.

There have been other reforms, such as the fringe benefits tax, to prevent the sidestepping of the system by the payment of non-cash benefits to high income earners in particular. Similarly, there has been the capital gains tax, which is prospective only and which exempts the family home and treats earnings on capital as taxable income. Clearly, from a wage and salary earner's point of view, that is desirable. Furthermore, we have done this at a time when we have been able to reject the suggested consumer tax and when the Opposition is unable to produce any tax policies at all. All the Opposition has been able to do is to utter a list of long promises which, according to our reckoning, amounts to $16 billion. Even if the Opposition reduced that figure by half-if it were $8 billion or $10 billion-I must say to it and to the people of Australia who are listening this afternoon: Where will the money come from? A consumption tax maybe. The Opposition is not capable of answering that, nor is it capable of producing a tax policy.


Mr DEPUTY SPEAKER (Mr Leo McLeay) —Order! The Minister's time has expired.