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Tuesday, 17 March 1987
Page: 759

Senator Dame MARGARET GUILFOYLE — My question is directed to the Minister representing the Treasurer. I refer the Minister to the comments by the Chairman of the Government's Indicative Planning Council for the Housing Industry, Professor Fred Gruen, following the release of the report of the Indicative Planning Council at last Friday's meeting of the Australian Housing Council. Does the Minister agree with Professor Gruen that a fall of at least 3 per cent in short term interest rates will be needed before there is any chance of a drop in home loan interest rates? Does the Minister further agree with Professor Gruen's comment: `I don't at the moment see that market rates will come down sufficiently to reduce the current 15.5 per cent housing rate'?

Senator WALSH —I refer Senator Dame Margaret Guilfoyle to paragraph 1.4 of the report, which contains phrases such as the `considerable uncertainty in the outlook for interest rates' and `there are inevitable differences of view'. It contains that sort of language. Those are actual phrases taken from the report. The report makes it abundantly clear that there are working assumptions, interim assessments and so on. The working assumptions and interim assessments made by the Indicative Planning Council necessarily reflect the advice of the Treasury and the Reserve Bank of Australia because there are 15 other representatives on that Council, from a number of trading banks, building societies, unions, building industry representatives, academics and other government departments.

It should be noted also that in the discussion on interest rates the IPC report lists policies which would improve the climate for interest rate falls, including restraint in labour costs, a lowering of inflation and a steady improvement in the balance of payments. Although I would not hang too much on the figures released today, they are certainly in keeping with the very significant improvement in the balance of payments for the first eight months of this year compared with the first eight months of the previous year. The report noted also that the May economic statement could have some effect. All of those conditions which the IPC report saw as being important for interest rate reductions are being met by the Government. As to the specific reference to Professor Gruen's comment on the need for a 3 per cent general decline in interest rates before housing interest rates will come down, I do not want to either endorse or necessarily disagree with that; I think it is very much in the realm of opinion.

Senator Dame MARGARET GUILFOYLE — I have a supplementary question. I note what the Minister has advised, but as I understand it the Indicative Planning Council includes representatives of the Federal Treasury and the Reserve Bank who provide economic information to the Council. I now ask the Minister whether he is able to give us any information on the advice which was given by the Treasury or the Reserve Bank to the Council and on which it based the recommendations to which I referred in my earlier question.

Senator WALSH —Senator Dame Margaret Guilfoyle said `recommendations'. I am not sure whether she meant to say `conclusions'. However, according to my advice it is correct that there is a representative of the Treasury and of the Reserve Bank of Australia on that Council. I do not know what opinions were given to the IPC by officers representing those institutions, but I pointed out in response to the initial question that the conclusions of the IPC-phrased in the context of such terms as `working assumptions' and `interim assessments'-are not necessarily the views of the officers of those two organisations or of the organisations themselves.