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Wednesday, 31 March 1965


Senator BISHOP (South Australia) . - The Opposition does not oppose the Housing Loans Insurance Bill but in our opinion it falls far short of the sort of housing programme which ought to be established to meet Australia's building requirements. We feel that this proposal and the associated Homes Savings Grant Act are, in fact, simply fringe benefits and do not meet the requirements of our population. They are largely designed to influence finance for home building. While the scope and intention of the proposals might be good they do not include many things which could be said to be in advance of our time. They are mainly conventional. They do not meet the need for finance as some people think they do.

For instance, this proposal does not arrange to provide cheap finance for housing, as was the policy of the Australian Labour Party at the 1963 general election. The Labour Party's policy at that time was the origin of these proposals put forward by the Government. But the main intention of these proposals is to get up an organisation which will tend to influence money, particularly private savings to be put into the field of home building. This is to be done on the basis of a guarantee of one mortgage.

It is very clear from the discussions and reports on this measure that there is no intention at all even to consider the question of renegotiating a second mortgage - for example, in the case of the War Service Homes Division or in other sectors of home building. Therefore, the Opposition adopts the view that the real needs of the Australian community are not the sort of fringe benefits which accrue from this Bill. The benefit of this Bill can only be tested in time. We have to see what impact it will make at a time when money is getting scarce. The Opposition is of the view that while we should not oppose this Bill we should draw attention to what are to us, the real needs of the communtiy. Obviously, while there has been some improvement in housing there is still a great need, particularly for young people, to get some direct assistance by way of cheap finance and low deposits to provide them with accommodation. We certainly do not want a situation in Australia where the breadwinner and his wife have to continue working to earn enough money to pay off first and second mortgages on a home which might not be of a good standard, anyway.

During the 1963 general election campaign the Australian Labour Party said that it would set up a home building commission to provide finance for home construction and to guarantee loans from those willing to lend at low interest rates and on low deposits. It could be, of course, that this policy was the germ of the present proposals by the Government. The Labour Party's policy was fairly attractive and seemed to meet the needs of the day. The Labour Party also proposed that there should be grants to the States at 3i per cent., a low interest rate similar to that provided for war service homes applicants and. also, that there should be an inquiry into housing. In this matter of housing it is very apparent that we do not have the information, the statistics, nor the reports we want on which to base our conclusions as to the needs of the community. Most of us are working on what we know to be the practical needs in our own community. Obviously there is a great need for a proper inquiry into home building and for a commission of some sort to be set up in conjunction with the States.

The first point I want to make is that the Opposition regards this measure as simply a fringe benefit. It will be of some advantage to people. There is no doubt that, if second mortgages can be eliminated, this will make more finance available to people so that they will be able to occupy their own homes. But the real impact and advantages of this scheme can only be gauged over a long period. The need to develop a home building programme is urgent.

In his second reading speech, the Minister for Defence (Senator Paltridge), who represents the Minister for Housing (Mr. Bury), said -

The main purpose of this scheme is to assist people to obtain, as a single loan and at a reasonable rate of interest, the money they need, and can afford to borrow, to buy or build a home. As the amount borrowed may, at times, be a high proportion of the value of the house and land, there is the risk that a lender may lose some of his capital . . . lt has been argued that, if some scheme of insurance were introduced to guarantee housing loans, more people would be induced to enter this field of finance. It seems to me that we must have regard to the background against which this legislation has been introduced. A long time has elapsed since the Government announced its intention to introduce the legislation. Of course, I can quite understand the necessity to investigate the sort of scheme that should be adopted. The Minister has stated that there have been discussions with various authorities within Australia and that inquiries have been made about the situation in Canada and in the United States of America. But in this intervening period interest rates have risen and people have experienced difficulty in getting money for ordinary purposes. We must ask ourselves whether this legislation will induce people to invest money at low rates of interest when they can get a quicker return by investing that money in, say, the second mortgage field at interest rates of from 10 to 12 per cent. The Minister made this very point in his second reading speech when he said -

At present many institutional lenders have not the finance freely available to permit them to make many larger loans. Although we do expect all these lenders to make some larger high ratio loans, and to insure them, the needs of many borrowers will continue to be satisfied with loans up to conventional percentages of valuation which will not be insured.

It is common knowledge that interest rates have risen, and there is no doubt that when the proposed corporation gets down to business it will have to face up to this situation.

The Minister for Housing has been very careful not to say what the rate of premium will be. It seems to me that the approach to the proposed scheme has been based purely on business principles. Although it might be argued that the proposed corpora tion must be established on that basis, in order to assist young people to obtain homes we must get away from conventional methods. Money will continue to be in short supply. This legislation of itself will not make more money available. The basic situation will remain the same. Housing loan authorities such as the savings banks will continue to make advances on first mortgage, leaving the purchaser to obtain a second mortgage privately; the housing commissions, such as that in my own State, will continue to provide homes; and applicants to the War Service Homes Division will continue to have to wait for finance.

A little document that has been prepared by the Housing Industry Research Committee of Victoria has quite a lot to say about this legislation and housing requirements. Whatever we may think about the need for research, this document, which has been discussed in another place, is of considerable interest and we ought to consider its contents. In its newsletter of March 1965, the Committee said that savings banks, co-operative societies and government housing authorities in Victoria loaned £1.2 million less in the December quarter of 1964 than they did iri the same quarter of 1963. This is equivalent to a drop of about 350 houses. During the December quarter lending by savings banks and the cooperative groups was down by 6 per cent, on the same period in the previous year. The newsletter makes the point in relation to finance restrictions that the life assurance offices, permanent building societies and friendly societies increased their lending during the quarter. However, as their combined lending was less than 8 per cent, of all institutional lending, their increased lending could not offset the reduced lending of the major institutions. It continues by stating that the figures do not reflect the results of new measures taken by savings banks at or about the beginning of this year in following the request of the Reserve Bank to slow down the rate of lending. The newsletter also states that generally the banks are making fewer loans, some by introducing new qualifying conditions.

The effect of all these measures is to restrict the buying of homes on low deposit. It seems to me that to introduce this legislation at a' period of rising costs and interest charges will not meet the intention of the legislation. Although there are some fine sentiments incorporated in the legislation, it seems that it will not have the effect that was proposed. The Minister for Housing has said that the general idea is to encourage the investment of money in the market for housing mortgages. One of the associated points of view was that somehow somebody should set up a market for housing mortgages. On 18th March of this year, as reported in " Hansard " at page 134, Senator Paltridge, the Minister representing the Minister for Housing, said -

.   . wc must encourage an increased rate of flow of the nation's savings, especially private savings, into our home building industry. We expect the home savings grant scheme to assist in stimulating additional saving for this purpose.

To the Opposition this seems to be merely picking at the problem. Government supporters are saying: " We want to encourage the investment of money in home building. We want to divert savings into home building." But the fact is that the legislation to implement grants for housing already is being amended as it does not meet the circumstances of many young people setting out to buy a home. We think that the legislation to insure loans by the Corporation is too bound up with business principles.

One problem that has been discussed in another place is the value of the sentiment expressed by the Minister when he said -

.   . we said we would introduce legislation to permit the Corporation to insure housing loans up to a high percentage of valuation, ranging up to 95 per cent, in appropriate cases. We also referred to those who want a house which is, in size or quality, better than the average. At present the average value of a newly erected house and land is in the vicinity of £5,000.

It is quite clear that the ordinary worker in industry, because of his income, will not have sufficient finance to cover the purchase of the house that he wants and obtain the benefit of this legislation. In the last report of the War Services Homes Division two figures are given as estimates of the cost of home building. The figure given for my home State of South Australia exceeds the figure cited by the Minister. The War Service Homes Division stated that, in South Australia in the year 1963-64, 'the cost of land and a dwelling house was £5,376. Using the type of formula that has been indicated by the Minister for Housing in another place, it seems that a worker on an income of £22 a week, for example, will be able to obtain a loan of only £3,500. Of course, this is not sufficient for him to buy a home so that he has to wait until he has saved the balance. Either he must anticipate his marriage a long way ahead or he must have income other than his wages in order to raise the amount in excess of the loan needed to buy a house and land. If he cannot raise the required amount he will do as most young husbands are doing; he will ask his wife to go to work, and together they will pay off not only the first but also the second mortgage. This should not be allowed to happen, in our view. Our contention is strengthened by the fact that the Minister made many references in his speech to what he called a credit-worthy borrower, or to the ability of borrowers to meet a situation. This is again an indication to us that a conventional approach will be made and that no risk will be taken in the granting of benefits. One of the directions given by the Minister to the Corporation is that it is to make neither a profit nor a loss. So it appears to us that the legislation will cover the situation only of people of some means or people who have a high combined income and thus will be enabled to obtain a better type of house.

This does not mean that there are not some very good sentiments in the Bill itself. It seems to me that the scope of the Bill is quite good. A number of new principles are laid down which may, in our opinion, form the basis of improved legislation in the future. I mention, for instance, clause 4 of the Bill, which refers to the kinds of things that may be insured. This goes a fair way towards covering many items which are at present personally covered by the people immediately concerned. For instance, most people who build or buy a home at the present time have to pay at some later stage for the provision of kerbing and footpaths. This is an item of expenditure that might be covered by the Corporation. A loan may be granted to meet such a situation. There is also a provision for the Corporation to renegotiate a mortgage on the basis of the credit worthiness of the applicant. Again, there is a worthwhile provision covering existing buildings. All these things represent very fine sentiments, but I believe you must have something more than sentiment. You have to be able to say: " We in some way will help to provide the finance, so that it will not be necessary for the community at large, in a competitive society, to attract the right sort of cheap money in a situation of rising prices and rising interest rates".

There was one aspect which was not covered in another place and which I think 1 should mention now. No premium rate or interest rate has been mentioned. There has been no indication of the interest rate that may apply in relation to the operations of the Corporation. We would have hoped that if this legislation was to do something more than set up the usual business enterprise, there would have been an indication of the premiums that will be asked of the borrower in obtaining a first mortgage or in trying to discharge a second mortgage. I had hoped that the Minister would indicate the rates of premiums and interest so that we might evaluate the possible effectiveness of the measure.

It seems to me that clause 23 of the Bill is a good provision. It is gratifying to see such a provision in a Bill of this kind, which contains a mixture of sentiments, with one or two good clauses which could prove beneficial. Clause 23 seems to me to lay down something in the nature of standards of home construction which will be of advantage throughout the whole community. It. may be that as a result of our criticism the Minister will see fit to make some alterations to the provisions governing the Corporation. There will be some advantage in the provision that the Corporation will decide whether a dwelling is of suitable standard. I see something good in this part of the legislation. It seems to us that the Government is excusing its failure to make some attempt to provide cheap money for low deposit homes and to establish some authority to tackle the housing question. Throughout the second reading speech one notices a tendency not to deal with the question in a very positive way. Stress is laid upon the difficulties that would arise from labour shortages even though there were an increase in available funds. The Minister said that even if there were a large increase in the funds immediately available for housing it is doubtful whether there would be an increase in the rate of home construction, as almost all the labour available for home building was now fully employed. He added that in the first nine months of 1964 there was a most gratifying increase of 7,600 in the number of persons engaged in new dwelling construction.

The Minister's point that even if we provided the funds we could not provide more houses because we have not the necessary labour, is the very point that we have been arguing over the years. There must be a plan for these things. The problem must be dealt with in a positive way. There must be a review of material resources, and finance for home construction must be provided. We must obtain the necessary statistics. We ought to be able to assess the requirements of the country in a sensible way. We are not able to do that now because there is an absence of information. It seems to me that the Government has a responsibility to start upon this work. There should be a review of the labour situation in the building industry with the idea of increasing the effectiveness of the labour force and determining why there has been a high turnover of labour. On 29th May the Commonwealth Statistician pointed out that the building industry had the greatest labour turnover of all industries. It is hardest hit by the movement of workers. The number of building workers who left jobs of their own accord jumped from 5 per cent, to 8.4 per cent. What the Government ought to do is to ascertain the reasons for this and try to remedy the position. It ought to organise labour requirements for an Australia-wide housing programme, having regard to the sentiments that we have expressed.

In my own State, apprentices in the building industry are at a minimum. The South Australian Premier has just made a proposal, which building industry groups have accepted, to the effect that one of the factors which will weigh with the Housing Trust in considering a contract is the number of apprentices to be employed by the contractor. This seems to be a remedy of the sort that anybody can take. The Commonwealth Government itself could promote measures of this kind. In South Australia applications for loans from savings banks cannot be met without delay. Applications are still being placed on a priority list.

Another aspect of the labour shortage is the proposition which was canvassed when the Government, the employers and the unions discussed the need for more skilled labour. It will be recalled that certain modifications were made to the apprenticeship system whereby credit was given for the holding of certain certificates by applicants for apprenticeships. Arrangements were made for paying living away from home allowances for apprentices in the metal industry generally. To my knowledge, such a provision has never been extended to the building industry because to some extent nobody seems to have worried about what was happening in that industry. I should be interested to know whether anything has been done along these lines. These matters are most important if it is agreed that some sort of organised effort ought to be made. It is not enough merely to set up a corporation to act on business lines and perhaps relieve many borrowers of the burden of a second mortgage at a very high rate of interest.

It is very difficult to find what rates are being paid. There are no reliable figures. The nearest I have been able to get to this information is an answer given by Sir William Spooner on 2nd May 1963, which appears at page 231 of "Hansard". The question asked was -

1.   What rates of interest are applicants for war service homes paying for temporary finance for the purchase of their homes white waiting Cor war service homes finance to be made available?

2.   What are the sources from which they obtain the temporary finance?

Senator Sir WilliamSpooner supplied the following answer -

1.   The last survey made by the War Service Homes Division of the rates of interest paid by applicants purchasing second hand homes was in respect of applications dealt with in October 1962. The survey showed that -

(a)   61 per cent, of applicants obtained temporary finance at 7 per cent per annum or lower; (b) 81 per cent, of applicants were able to secure finance at interest rates not exceeding 8 per cent, per annum; (c) 11 per cent, of the applicants obtained finance at rates between 8-9 per cent, per annum; (d) 7 per cent, obtained finance at rates between 9-10 per cent, per annum.

It would appear from the latest figures that the interest rates have risen even higher in this field of finance. We are not very confident that the purposes of the Bill can be met in this regard. There was a further increase in interest rates recently. The Government expects that the ordinary investor in the community, who can invest his savings in all sorts of investments and receive quick returns at high interest rates, will put his savings into housing loans. We hope that there will be some positive step taken in this regard.

The Minister said, and it has been mentioned in another place, that the Corporation will be told that it cannot renegotiate second mortgage where the moneys for the construction of a home have been borrowed through Commonwealth or State housing authorities. This matter immediately brings into question the position of people who are on the waiting list for assistance from the War Service Homes Division. While they are waiting for loans from the Division they are paying extraordinary interest rates on money borrowed elsewhere. The report of the War Service Homes Division for 1963-64 indicates that there is still quite a waiting list of applicants requiring assistance, although it has been reduced. On page 6 of the report, under the heading "Applications on Hand and Waiting Periods " the following statement appears -

The gradual reduction in the number of applicants awaiting assistance is continuing. The number of applications on hand for assistance to build or purchase homes was reduced from 12,965 at 30th June 1963 to 11,806 at 30th June 1964.

Of the applications on hand at 30th June 1964, only 6,624 were applications for which there is a waiting period. The remainder were in process of being dealt with at 30th June 1964, or were deferred by the applicants for various reasons.

Applicants for finance from the War Service Homes Division should be dealt with in the same way as are the ordinary members of the community. Governments have endeavoured to give them special consideration by providing for low interest rates where homes are built or purchased through the Division. The situation created by the Bill will do an injustice to persons awaiting assistance from the Division, and it ought to be corrected. Whilst the problem has been recognised, as yet there has been no attempt to correct it.

I ask the Minister to consider the position in South Australia where the South Australian Housing Trust might be in similar difficulty in relation to second mortgage loans. A similar situation arose when we were dealing with the homes savings grants legislation last year. In South Australia, usually the savings banks advanced £3,500 for the purchase of the home, and the nurchaser, as a general rule, has to raise a second mortgage of £750 from the Housing Trust. I am concerned that the purchasers of homes through the South Australian Housing Trust might be in the same position as ex-servicemen who are purchasing homes through the War Service Homes Division. That is one of the matters that seem to me to require urgent consideration.

The Opposition takes the stand that, while it is possible that the legislation might be of some benefit and that it might attract finance into the home building field, there is obviously a need for more positive action on the part of the Government in conjunction with the States. There is, of course, the vital need to increase the amount of moneys available and to ensure that those moneys are loaned at low interest rates on small deposits in order that people on low incomes may be able to own their own homes during their lifetime. There is also a need to ensure that both the husband and wife are not forced to work in order to pay extraordinarily high mortgage repayments.

We believe that the legislation will provide fringe benefits. It may be of value in the long run, but its real effects will have to be watched and evaluated for, perhaps, a couple of years. Many of the clauses in the Bill are praiseworthy. We say that the intentions of the legislation, as expressed by the Minister, are good in themselves, but we have doubts, for example, about it encouraging additional finance. It seems to us that the Government cannot encourage additional finance into the home building industry because investors have a better market in other fields. We hope that the Government can encourage additional finance.

Another point which we ask the Minister to consider is the need to ensure that the interest charges and premiums paid by the borrower are reasonable. We ask him to give us an idea of the rates that will apply. We also ask him to ensure that the Corporation is not too businesslike in assessing the creditworthiness of applicants. It is of no use establishing the Corporation for the purpose of assisting home builders and enabling more finance to be directed into the home building field if its establishment will place greater burdens upon the people. I ask the Minister to consider the point I made concerning applicants who are on the waiting list for assistance from the War Service Homes Division, and also to examine the situation in South Australia to which I have referred. The system which operates in South Australia at the present time covers a very large percentage of home purchasers. We are building 3,000 homes per year in South Australia. As I have said, many people receive an initial loan from the savings banks and obtain a second mortgage from the Housing Trust. A worse position arises in other States where a young married couple who wish to buy a home for about £6,000 both have to work. They pay off a second mortgage at rates of interest between 10 per cent, and 1 2 per cent.

They are the general remarks of the Opposition in relation to the measure Amendments will be moved at the Committee stage. We do not oppose the Bill, but we feel that it falls short of the requirements of the Australian public. We hope that the Government will consider the proposals which we have advanced, particularly in relation to surveys and statistics.







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