Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 15 May 1985
Page: 1964


Senator HAINES(11.20) —Anybody who was listening to Senator Lewis could well be excused for believing that the contents of the Housing Loans Insurance Amendment Bill 1985 were primarily concerned with an ideological argument about whether governments have any right to enter into this field and whether the Housing Loans Insurance Corporation, like a lot of others, ought to be sold off in some way to private enterprise. The implication has been that this amending Bill is setting up the HLIC in direct, aggressive and rather damaging competition with a flailing and failing private enterprise sector. This, of course, is not the case.

The main purpose of this Bill is to expand the role of an extremely successful government corporation, namely, the Housing Loans Insurance Corporation. It does it by way of four major initiatives which extend the charter of the Corporation and extend its activities in the market-place-not, I would suggest, with any ulterior motive of destroying the only private enterprise area set up in competition with it but in fact to assist that organisation in its activities.

The main initiative relates to the secondary mortgage market and will impinge quite favourably on the access of Australian families to housing funds. This particular initiative, contrary to implications that were made in Senator Lewis's speech, has the unqualified support of the private sector-support that it surely would not have if the private sector thought that the purpose of this legislation, or indeed the effect of this legislation, was to make the private sector go under.

Not only was a Press release issued by the Mortgage Bankers Association of Australia praising the Government's amendment to the Housing Loans Insurance Act-the organisation further welcomed this initiative at the launch of the Aussie Mac certificates in Victoria recently-but the President of the MBAA, Mr John Mark, took the time and trouble earlier this week to contact me because he did not know whether the Australian Democrats were likely to support the Liberal opposition to this legislation.

Mr Mark told me that his organisation approved of the Government's actions and wanted as much support for it in the Senate as could be given. That sort of comment is not likely to come from a man representing an organisation which fears for its very existence or which fears that there will be some sort of deleterious effect from this particular piece of legislation. Mr Mark pointed out, among other things, that while private enterprise is sometimes critical, and rightly so, of governments for allowing or encouraging government bodies and corporations of one sort or another to compete unfairly in the market-place with private enterprise there was no quarrel at all in this case because the Housing Loans Insurance Corporation obeys, as he put it, the same rules as everyone else. It is not, as Senator Lewis implied, operating unfairly. The HLIC pays tax and, as Senator Lewis commented, that is one important way in which governments raise revenue. It pays all other required statutory charges. When it makes a profit, Consolidated Revenue benefits. In other words, the Housing Loans Insurance Corporation receives no special treatment at all and competes on an equal footing, as Mr Mark pointed out, with private enterprise in this case.

Mr Mark went on to say that indeed we need a secondary mortgage market in Australia and that having the HLIC participating in insuring mortgage portfolios can only make it easier to shift them in the marketplace. Given that quite enthusiastic support from that Association, I cannot understand why the Opposition is not supporting the Bill. There is no objection to this Bill from private industry. There is no special treatment given to the Corporation, and by contributing to Consolidated Revenue through its profit-making and its payment of taxes and so on it must be assisting to keep the deficit to a minimum. This is something that the Opposition has been jumping up and down about for some considerable time, and yet here it is talking about a variety of ways of getting the HLIC out of the government sector, in which it is performing admirably, and into the private sector, where no advantage will accrue to the housing industry, to the mortgage market, to government coffers, to employment or to anything else.

I think it is important that we realise exactly what the Housing Loans Insurance Corporation is. Much has been made of the fact that it is a government business enterprise, but it is a business enterprise which is operating in an extremely important area; namely, insuring lenders-building societies, banks and so on-against loss on housing and building loans. Therefore, it is no surprise, I would have thought, that the Building Societies Association came out in enthusiastic support of this legislation. As I have said before, it is self-financing, it pays taxes and dividends to the Government, and in that regard it is in every way the equivalent of a private organisation. Furthermore, the insurance services provided by the Corporation have assisted marginal home buyers into home ownership because mortgage insurance is now accepted as a substitute for large deposits and short repayment terms. That can only assist people in need to purchase or build a home and therefore get a roof over their heads and own an appreciating asset.

As Senator Lewis pointed out, the Corporation was established under a 1965 Act introduced by the Liberal Party, I believe, for this very purpose; that is, to assist in home ownership. It was amended in 1977 and, of course, if it had had the sunset clause that Senator Lewis suggested it should have, presumably it would not have been operating in 1977 and therefore the then Liberal Government would not have been in a position to amend the legislation to provide the HLIC with a commercial charter and thereby widen the range of loans that it could insure.

When the Australian Labor Party came into Government in 1983 it further amended the Bill to empower the Corporation to insure loans for commercial buildings. It is not a very predatory Corporation. It does have a limit to the business that it can conduct and that business is limited to the insurance of loans permitted by the Housing Loans Insurance Act. The main part of its business is connected with loans for the purchase, construction or alteration of houses, including home units, town houses and the like for occupation by the owner, or for rental or sale. It is therefore of assistance to the housing industry quite directly.

The HLIC competes with three private insurers-the Mortgage Guarantee Insurance Corporation of Australia Ltd, the Australian Mortgage Insurance Corporation Ltd and AFG Insurances Ltd. It currently holds some 60 per cent of the market for insurance of home ownership loans and around 20 per cent of the market for commercial loans. If those three other organisations had strong objections to it, I would have thought that they would have made their objections known.

As I pointed out earlier, the HLIC has consistently returned an underwriting profit and has healthy net operating profit figures. Indeed, 1983-84 was an exceptionally successful year for the Corporation. Sixty-eight thousand housing loans were insured and the net profit after income tax-and it does pay income tax-was some $5.4m, up 16 per cent on 1982-83. It is working well, and it is working well in concert with private industry.

The main purpose of this Bill and the part which has received the most marked support from industry is that relating to the HLIC's involvement in the secondary mortgage market. The secondary mortgage market is not something new, although up until now we have had only a slowly emerging secondary mortgage market in Australia. That embryonic market has been based mainly on transactions in mortgage-backed securities rather than in individual mortgages and has existed in Australia for some years. Mortgage-backed securities or mortgage certificates typically have been issued by mortgage broking firms and have been backed by single short term, interest only mortgages, which are frequently applied to finance rental investment dwellings or commercial property. I believe that they have been purchased mainly by individuals such as people who have just retired and by institutions such as superannuation funds. They were available in only a fairly limited way until quite recently when three State governments-the New South Wales, Victorian and Queensland governments-undertook initiatives designed to act as catalysts for growth in the market in mortgage-backed securities. Of course, if the Queensland Government has become involved in it, it cannot be seen in any way as some sort of socialist plot.

I think it is important to remember that the aim of this legislation and of related State legislation is to assist home ownership and to assist the private organisations that already are operating in this area. I think it is important for us to realise that the Federal Government has a role in assisting this market to develop in a rational and orderly way and in ensuring that it has the highest possible standards. I believe and my Party certainly believes that the Corporation will make an important contribution to this role and will complement and support other initiatives already taken by State governments.

The insurance cover to be provided by the Corporation will have a strict commercial basis, as has all its other insurance cover. It will relate back entirely to the performance of the underlying mortgages. The Corporation will also, I believe, provide timely payment cover to ensure that funds flow as scheduled to the investor from the underlying mortgages. It is not surprising, then, that the National President of the Mortgage Bankers Association of Australia, at the quarterly luncheon of the Association held recently in Victoria, said, in his introductory remarks prior to the guest speaker rising to speak, that the Association approved of this piece of legislation. Mr Mark, in a Press release put out on 10 April, said:

. . . the impending legislation . . . will make the Housing Loans Insurance Corporation more diversified and flexible, with the ability to play a stronger role in the government's range of housing policies. It will also have the power to enter into contracts of insurance in respect of Secondary Mortgage Market securities issued by the State Governments and other mortgage market corporations and thus complement and support other initiatives such as the National Mortgage Market Corporation Limited.

He pointed out, as I have today:

The new insurance covers will be on a strict commercial basis and will relate back to the performance of the underlying mortgages. The M.B.A.A. considers the Federal Minister's announcement most timely in view of the first issue of 'Aussie Mac' certificates by the National Mortgage Market Corporation Limited.

Congratulatory and commending comments came not just from that Association. The Australian Association of Permanent Building Societies also took the trouble to issue to the media, late in March, its comments on this initiative. The Press release stated:

The permanent building society industry was delighted at the expanded role for the Housing Loans Insurance Corporation announced by the Minister for Housing and Construction . . .

That comment was made by Mr Jim Larkey, Executive Director of the Association. The Press release continued:

'Changes to the HLIC's charter will permit societies to insure any loans secured by mortgage, including loans where the purpose of the loan is not related to the mortgage security. This initiative by the Commonwealth Government will ideally complement for building societies the wider lending powers provided by some State Governments and expected from others'.

Mr Larkey also welcomed the expanded role for the HLIC in the secondary mortgage market.

Mr Larkey said:

The further involvement of the HLIC in the important but fledgling secondary mortgage market will contribute significantly to its acceptance and growth.

One presumes that he was giving it the Good Housekeeping seal of approval. Given that the Housing Loans Insurance Corporation does not compete unfairly against private enterprise, notwithstanding comments to the contrary from a previous speaker, and given that the moves made in this Bill to expand its operations have received enthusiastic industry support, the Australian Democrats are happy to applaud the Government's moves, to support the second reading of this legislation and not to go along with the Liberal Opposition's privatisation mania and its other criticisms of the effect of this legislation.

Senator Lewis mentioned at the end of his speech the amendment that the Opposition intends to move at the Committee stage. I received it shortly before the debate started and have not yet been in a position to talk to Mr Fitzpatrick who, I hear in comments around the chamber, seems to approve of it; but I point out to Senator Lewis that a consequential numbering amendment is required if this amendment is to be supported. It will be proposed in the amendment to omit sub-section (2) completely and to replace sub-section (4) with a new sub-section (4). After the omission of sub-section (2), only three sub-sections will remain. So, some attention needs to be paid to that minor change. In the interim, while other speakers are on their feet, I will investigate the effect of the amendment put forward by the Liberals, with a view to seeing whether we can support it.