Mr SWAN (4:12 PM) —The Prime Minister and his backbench simply do not understand the new interest rate reality; they simply do not get it. We have asked dozens of questions of the Prime Minister and the Treasurer over the past few weeks and it is apparent that they simply have not got a clue about the tremendous financial pressure that is hitting Australian families through rising interest rates, and the problems that is causing for those families—the leading edge of which is seen in those repossession figures that we questioned the Prime Minister about over the last two days.

The truth of the new interest rate reality is this: Australian families are facing record high mortgage repayments under the Howard government, the highest in our history. Every time John Howard, or for that matter Peter Costello, have been asked about the impact of rising interest rates their chant has been to blame the states and then to go on and argue that the solution to this problem must be large-scale land releases. Why are they doing that? It is very simple. They will not admit responsibility for rising inflation and rising interest rates, so they have to blame someone else. They will not deal with the capacity constraints that were so evident in the national accounts yesterday that are putting upward pressure on inflation and interest rates, so they have to find some other scapegoat out there. At the moment it is the state governments.

They have driven up interest rates to the point that Australians are now paying a higher proportion of their household income in mortgage interest repayments than they did under former Prime Minister Paul Keating. That is the new interest rate reality. But they are so out of touch that they have not woken up.

Mr Baldwin interjecting—

Mr SWAN —You do not get it, Parliamentary Secretary. You simply do not get it because there is no such thing in John Howard’s Australia as a small mortgage, and there is no such thing as a small interest rate rise. We have had seven interest rate rises of one-quarter of a per cent—up on 8 May 2002 and 5 June 2002 and up in November 2003, December 2003, March 2005, May 2006 and August 2006. And the Prime Minister went to the last election and said: ‘Trust me with your interest rates. We will keep them at record lows.’ They have gone up three times and it is starting to cause real pain and distress in the Australian community. At the moment, according to the Reserve Bank of Australia—listen to this, Parliamentary Secretary; this is the new interest rate reality—almost 11 per cent of income is—

Mr Baldwin interjecting—

The DEPUTY SPEAKER (Hon. IR Causley)—The parliamentary secretary will not be baited.

Mr SWAN —consumed by interest repayments today—higher than at any time in history. It is higher under Howard than under Keating.

Mr Baldwin interjecting—

The DEPUTY SPEAKER —The parliamentary secretary is warned.

Mr SWAN —These are the figures from the Reserve Bank of Australia. Of course, the Prime Minister wants to deflect attention from this. We know about this Prime Minister: he is the doyen of deception, the master of misinformation. Every time he gets into trouble he has to find somebody else to blame. Of course, his latest tactic is to say, ‘If the states released more land, we would not have such a problem with such high house prices and such large mortgages.’ He wants to talk about anything other than interest rates. That is the Prime Minister’s new motto: ‘Anything but interest rates.’ You can see it on the whiteboard in his office: ‘Talk about anything other than interest rates.’ And it is interest rates that are really having a tremendous impact not only on people buying houses but also on small business—but that is a topic for another day.

Labor is happy to have a balanced debate about all the factors that influence the housing market. In John Howard’s world, when things go right it is all down to him and when things go wrong it is always someone else’s fault. What are the real implications if the states and the private sector were to take John Howard’s advice seriously?

The DEPUTY SPEAKER —The member for Lilley will address members by their title or by their seat.

Mr Baldwin interjecting—

The DEPUTY SPEAKER —The parliamentary secretary has been warned.

Mr SWAN —What if they were to take the Prime Minister’s advice seriously? They would flood the market with land. What would be the outcome of that? There is a report from the Institute of Public Affairs. The Prime Minister has taken a shine to this report. He has been quoting from it all week—quoting in a way which I believe does not reflect the true facts—to back his argument. But this report makes it very clear that if there was a mass release of land to the market it would have a downward impact on prices for all existing homeowners. His solution, in effect—particularly in the outer suburbs of our cities—is to dramatically reduce house prices. People who are suffering from negative equity at the moment would be worse off, as the member for Prospect spoke about in his remarks.

What the Prime Minister is actually talking about would have a dramatic impact on the current median prices in different Australian capital cities. If you go to page 64 of this document you will see the median prices in our capital cities. On page 67 of this document you will see the expected median house price after the market was flooded with more land. It is sober reading. I know now why the Prime Minister does not quote the rest of this report. If you were to follow through—and I do not accept these conclusions necessarily from the IPA—you would see a reduction in the median house price in Sydney of 67 per cent. This is the report the Prime Minister is quoting from to validate his argument about what is going on in the housing market. This will be a report that will haunt our Prime Minister. As I said, Labor is happy to have a balanced debate about this matter. Land is part of the equation; we do not dispute that for a minute. But what we know is that seven interest rate rises, three since the election, is a huge factor in the new interest rate reality.

Why has the government ramped up this argument about land only in the last couple of weeks? I will tell you why. On 19 August the Governor of the Reserve Bank blew the whistle on the dishonesty of the Howard government and the lie of the last election campaign. They went to the last election campaign saying they would keep interest rates at record lows, and people in the western suburbs of Sydney and across this country went out and borrowed money. They said that the Prime Minister took personal responsibility for this. They believed him and now they are in trouble. On 19 August Peter Hartcher in the Sydney Morning Herald interviewed the Reserve Bank governor—perhaps the most independent, credible commentator and authority on interest rates not just in this country but around the world. His standing is that high. What did he say on 19 August? He said that the Prime Minister’s claims during the election campaign were incorrect and not plausible.

That explains why we have had this frenetic activity over the last couple of weeks trying to find a new scapegoat for rising interest rates because the Reserve Bank governor blew the whistle on the Prime Minister and put a torpedo into his credibility when it comes to interest rates particularly and economic management more generally. That is why we have had that activity. He has exposed our Prime Minister as the doyen of deception and the master of misinformation. That is why we are seeing these answers in this House from the Prime Minister, not only this week but over the previous two weeks of sitting. They are acutely embarrassed by what the Reserve Bank governor had to say.

Of course, before the Reserve Bank governor entered the scene, we had all of the other scapegoats rolled out when the interest rates went up in August and we had them back in May. If you want an example of someone being terminally out of touch in this government, try the Treasurer. The Treasurer said that interest rates with a single digit were low. He does not understand the new interest rate reality. And in August when interest rates went up the Prime Minister and the Treasurer were blaming bananas. They went out and said, ‘Oh, it’s the fault of bananas.’ We have had all of these other deflections; we have had them out there talking about the history wars, about facts and figures. Of course, when we pointed out to the Prime Minister that there had been a certain Treasurer who had had interest rates at 22 per cent he lost his memory. We have had all of these deflections because the government knows there is pain out there and it is not facing up to the responsible economic decisions that this country requires to put downward pressure on inflation and on interest rates. (Time expired)