Mr BRUCE SCOTT (Minister for Veterans' Affairs)(9.36 a.m.) —I move:

That the bill be now read a second time.

Mr Speaker, Australia owes a significant debt to the men and women who have served in defence of Australia. The purpose of this bill is to protect and preserve one of their long-standing compensatory benefits, a subsidised housing loan under the Defence Service Homes Act 1918.

This government has been very pleased with the reduction in interest rates. This is continuing good news for the economy in general. However, the reduction in the market rates for housing loans has significantly reduced the value of the beneficial interest rates that have traditionally been available to borrowers under the defence service home loan scheme.

This bill introduces a guaranteed minimum subsidy that will ensure defence service home borrowers retain an interest rate advantage of at least 1.5 per cent lower than the benchmark rate, regardless of future changes in the market interest rates. These changes will take effect from 5 January 1998.

The benchmark rate is the average unregulated standard annual rate of interest applied to the largest number of owner occupied housing loans provided by the five largest banking group providers of housing finance in Australia. This guaranteed minimum subsidy provides a simple means for responding to and accommodating future fluctuations in interest rates.

This bill also introduces a single rate of interest for those many borrowers whose loans may comprise two or even three different rates linked to different levels of borrowings. Each of these multi-tiered loan rates will be collapsed into a single interest rate. The effective new interest rate will depend on the current mix of interest rates on a particular loan. This arrangement will benefit many borrowers and means the abolition of the 10 per cent interest rate which has been an issue of some concern to the veteran community. Until now they have been prevented from repaying their 10 per cent tier faster than the lower tiers. Its introduction is part of this government's continuing commitment to providing and improving justly deserved compensation measures to the veterans and war widows of our nation.

Continuing this rationalisation of the defence service home interest rates, this bill will reduce the interest rate on additional advances and on advances made for essential repairs. In reducing the interest rate on these advances, the government completes its reform of these rates which it began during the 1996-97 budget when a lower interest rate was introduced for certain new additional advances. All advances will now have an interest rate of 6.85 per cent or less.

The defence service home scheme is administered jointly by the Commonwealth and the Westpac Banking Corporation. The administrative arrangements are set by agreement between the Commonwealth and Westpac. Following any legislative change some consequent amendments need to be made to the agreement. In addition to those implementing lower interest rates, these amendments will reflect changes in business and banking practice since the original agreement in 1988 and the need to simplify administrative procedures.

In conclusion, this bill once again demonstrates the determination of this government to preserve and protect the benefits of veterans and their families. The bill not only benefits many people by direct interest reductions, but the guaranteed minimum subsidy provides an important, continuing protection of the benefits under the defence service home scheme.

I commend the bill to the House and present the explanatory memorandum to the bill.

Debate (on motion by Mr Laurie Ferguson) adjourned.