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Wednesday, 27 May 1987
Page: 3400


Mr TUCKEY —We now have a chance to put some real numbers on what the Treasurer was just saying. I address my question to the Minister for Housing and Construction. Is it a fact that the Government's own bank, the Common- wealth Bank of Australia, has increased housing loan interest rates from 15.5 per cent to 16.5 per cent for new customers and persons seeking to renegotiate outside mortgages and that that represents a 6 per cent increase to individuals in the community in the cost of servicing a home loan? Is it a fact also that the bank's stated reason for this increase is that it has been running short of funds because depositors have been pulling their money out in the search for higher rates of interest? How does the Minister equate this adverse judgment by a major bank, which effects ordinary Australians, with the Government's rhetoric that the mini-Budget would lower interest rates for all?


Madam SPEAKER —I call the Treasurer.


Mr Tuckey —Oh!


Mr KEATING —If the honourable member asks a question about interest rates he will receive the answer from me. Since February we have seen a 3 per cent decline in short term interest rates.


Mr Tuckey —What about housing rates?


Mr KEATING —I will come to that. The honourable member has asked a question.


Madam SPEAKER —The honourable member for O'Connor will cease interjecting.


Mr KEATING —We have seen a flattening in the yield curve as the long bond rate comes down and as the short rate comes down--


Mr Porter —But what is the yield--


Madam SPEAKER —Order, the honourable member for Barker!


Mr KEATING —He ought to be pitied, rather than despised, Madam Speaker; do not worry about him. As the structure of interest rates comes down, the capacity of the deposit taking institutions, that is, the permanent building societies and the--


Mr Tuckey —I take a point of order, Madam Speaker, under standing order 145 relating to relevance. The Treasurer is giving all of his black tie answers instead of talking about ordinary people, which was the purpose of my question.


Madam SPEAKER —Order! The honourable member will resume his seat. The Treasurer is in order.


Mr KEATING —Madam Speaker, I am sorry that he cannot understand it. The deposit taking institutions, that is, the savings and the permanent building societies which have to compete in the money market for funds, are of course now finding an easier time of it with their instruments for attracting deposits. I remind the House that just last week the Westpac Banking Corporation and the Commonwealth Bank indicated that they were lending at a record level for housing. The Commonwealth Bank, like the other banks, has also been refinancing existing so-called cocktail mortgages. Those mortgages exist because of regulations left in the banking system for 30 years by the previous Government, which would not allow banks to offer large mortgage packages. Part of a loan was at the concessional housing rate, part at the overdraft rate and part at the finance company rate, which with some companies was at 20-odd per cent.

The Commonwealth Bank is saying that if it is to negotiate the restructuring of a mortgage it may choose to do so at one percentage point above the existing housing rate, but if someone walks into the bank for a housing loan the rate is 15 1/2 per cent. In other words, the conclusion and the implication in the honourable member's question is quite wrong. In a deregulated world a bank is quite free to charge what it likes for, if you like, renegotiating a mortgage.

The housing rate of about 15 1/2 per cent did not rise, as the Opposition gloomily predicted, when the Government did not renew the savings bank subsidy. We have seen a number of institutions reduce their housing lending rate by one-quarter to one-half of a percentage point in the last few weeks. As the structure comes down, at some point it will impact on the housing lending rates. Of course, that is what the honourable gentleman fears. If it impacts on those housing lending rates and interest rates come down, he thinks he might be embarrassed politically-and well he might be. The Government's job is to provide scope for interest rate falls. Not only has it been providing the scope; it has been watching the interest rate falls coming.