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Wednesday, 3 December 2003
Page: 23640


Mrs IRWIN (3:57 PM) —The trouble with this government and its attitude to interest rates is that it can only see one figure. Every time the question of housing affordability comes up, the Treasurer trots out the level of interest rates under Labor—as this minister has just done—and the Prime Minister tells us how much the average household is saving on mortgage payments each month. But that is not the whole picture. In fact—and listen to this, Minister—out there in the real world a lot of households are doing it tough, but this government wants to pretend that everything is rosy. From here in Canberra, you can easily be fooled into thinking in terms of averages. But we should all remember the statistician who drowned wading across the river with an average depth of one metre. Averages do not tell us what it is like at the margin; they do not tell us much about those households suffering mortgage stress or just how many households are suffering from mortgage stress.

I am grateful for the Parliamentary Library research note No. 16, which sheds some light on the effect of interest rate rises and who is affected. The paper defines mortgage stress:

... as a situation in which homebuyers are paying 35 per cent or more of their income on home loan repayments.

The reason for that definition is that an accepted rule of home lending is that home loan repayments should not exceed one-third of household income. But we also need to take income levels into account. The paper also shows that for income levels of less than $21,000, more than half of all households experience mortgage stress. But for incomes over $100,000, less than four per cent of households are affected.

Importantly, levels of mortgage stress are much higher in some parts of Australia than in others. In looking at stress by electorate, we find that the top 10 most affected are all in Sydney. While the silvertail electorate of Wentworth ranks the highest, the electorate of my colleague the member for Reid ranks number two. My own electorate of Fowler ranks eighth highest, with Barton, Watson and Blaxland ranking even higher. But while Wentworth has the third highest household income in Australia, Fowler has the lowest household income of any metropolitan seat in Australia. That is the picture that the government is missing. It is definitely missing that picture. It cannot see that for tens of thousands of Australian families, mortgage stress is a reality; it is a fact of life.

As a result of today's increase in interest rates by a quarter of a per cent, coming on top of a similar rise in October, many of those families face an increase of $20 a week or $80 a month in their mortgage payment. That is $20 a week that will have to come out of an already tight family budget. For families which we can define as suffering from mortgage stress, that $20 a week can be, and will be, the straw that breaks the camel's back. Remember, mortgage stress is higher for low-income households. But the research paper also tells us that 88,000 households are paying more than 45 per cent of their income on loan repayments. Two-thirds of them are low-income households earning less than $36,000 a year. That is 88,000 households that are doing it tough, and many of those are in the so-called middle ring suburbs of Sydney.

So while the Prime Minister says that he does not get many complaints from people saying that the value of their home has risen, the reality is that the dream of home ownership in Sydney is fading fast for many younger families and first home buyers. With median home prices over $400,000, young families have been priced out of areas that are close to family support. The Reserve Bank figures show that the average mortgage for first home buyers has increased from $92,000 to $162,000 since 1996. But try to tell a first home buyer in Sydney that they will need a mortgage of only $160,000 and they will definitely laugh at you. The fact is that most new first home buyers in Sydney are taking out mortgages of over $300,000, and even then they would need to save up a $100,000 deposit just to buy an average home.

The figures I have quoted have been looking back over home loans made in past years, but we face a blow-out in mortgage stress in the years to come, as higher and higher mortgages are taken on to purchase homes in areas of Sydney. One of the most significant impacts of that is that families are delaying having children until they can get ahead on their mortgage payments. But if family income falls, mortgage stress will affect many families.

To get some idea of the impact of the recent interest rate rises on families, let us look at a typical family in my electorate of Fowler. I will call them the Tran family. The Trans bought a town house in Canley Vale last year and have a $260,000 mortgage. With the quarter per cent increase in October and this month's quarter per cent rise, they now have to find an extra $80 a month to meet their mortgage repayment. That means something has to be cut. The family will go without. If you have a high income, you can probably do without a few luxuries. But if you are like the Tran family and are paying more than 35 per cent of your income in mortgage payments, that is sad. Their life has just got a lot harder. That $80 a month might be for your basic private health insurance. It might be for music lessons for one of the kids or it might mean shaving a bit off each item of household spending. Whichever way you look at it, what it means is $80 a month that you do not have anymore. Just imagine that. Take four $20 notes out of your packet and tear them up. That is what these interest rate rises mean to the Tran family and that is what they mean to hundreds of thousands of Australian families today.

As I said at the start, the government always trots out the line about interest rates under Labor. I was interested to read the story of Labor's high interest rates in the late 1980s. In his autobiography, former Labor Minister John Button gives a frank account of the time. What is revealing is that John Button admits that he and other Labor ministers at the time simply could not appreciate the hurt that high interest rates were causing. Here they were, in this same ivory tower in Canberra that we sit in today, looking at the figures that gave them a picture of the average mortgage. They could not see the mortgage stress. They could not see the hurt that they were causing to families. They learned their lesson the hard way. This government will learn its lesson the hard way at the next federal election.

But this government is no different. It still talks of averages. The Prime Minister still thinks that rising home values are good for all Australians, and the Treasurer is too busy talking about ancient history to see how Australian families are hurting under rising interest rates today. So we can expect interest rates to increase even further. The pain of mortgage stress will affect more and more Australian families. They will become the interest rate rises that we have to have, just like the GST that we had to have. When you look past the statistics and the Reserve Bank reports, when you look beyond the averages to see how those families on the margins are affected and when you look at what each quarter per cent rise does to the family budget, you see a different picture. Running an economy is not just about pulling levers. Interest rates are a blunt instrument for controlling the economy, and they will go up. (Time expired)