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Wednesday, 26 November 1986
Page: 2775

Senator POWELL —My question is addressed to the Minister representing the Minister for Housing and Construction. Is the Minister aware of the results of a survey by the Real Estate Institute of Australia and mortgage insurer Mortgage Guarantee Insurance Corporation of Australia Ltd, which shows that the average Australian family's ability to afford a home loan decreased in the June quarter, particularly in Victoria? What does the Minister think will happen to the level of home ownership, given that the national ratio of average home repayments to median weekly family income increased from 21.3 per cent to 26.5 per cent over the same quarter and that that survey defines affordability on the basis that a family can generally afford about 25 per cent of its gross income to meet its shelter needs? Does the Minister agree that the level of home ownership is going to fall dramatically in response to continuing high interest rates, bank pressure for further deregulation, with the National Australia Bank Ltd already charging 17.5 per cent--

The PRESIDENT —Order! The honourable senator's question is getting far too long. I ask her to bring it to a conclusion.

Senator POWELL —It is concluded, Mr President, with the addition of `and the Government's wages policy of reducing in real terms the gross income of average Australian income households?'

Senator RYAN —No, the Government does not expect that the home ownership figures will fall in the way that Senator Powell's question suggested. A strong recovery in lending for housing by the savings banks has occurred in response to the housing finance measures announced by the Government on 2 April. The total value of housing loan commitments by savings banks fell by 11 per cent in August but it was 74 per cent higher than for March. It is now expected that total savings bank lending for housing in 1986-87 will be considerably higher than their commitment under the 2 April package. On present indications, total lending for housing by banks and permanent building societies will increase by about 5 per cent, to total approximately $10,800m for 1986-87.

The Government has retained the 13.5 per cent interest rate ceiling for existing borrowers from banks. It was essential to deregulate interest rates for new borrowers if savings banks were to raise new deposits and fund more housing loans. Most banks have raised the rates for new loans to 15.5 per cent. However, the Government's budgetary strategy for 1986-87 provides an environment conducive to achieving lower interest rates. To facilitate access to home ownership in a deregulated environment, the banks are promoting low start loan options. They have also freed up lending criteria and discontinued the use of cocktail loans.