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Tuesday, 17 March 1987
Page: 778

Senator CHANEY (Leader of the Opposition)(4.13) —I move:

(1) That there be referred to the Standing Committee on Finance and Government Operations the briefing note on interest rates tabled in the Senate by the Minister for Education (Senator Ryan) on 25 February 1987, and that the Committee inquire into and report on the basis on which Dr R. G. Hawkins made his assessment of the outlook for home loan interest rates and why the Government has said that a document which was prepared for use in Question Time by a senior official with sound economic credentials and a detailed knowledge of the housing industry, and which was quoted in Question Time, does not represent the judgment of the Government.

(2) That the Committee report to the Senate on or before 1 April 1987.

The effect of this motion is to require the Senate Standing Committee on Finance and Government Operations to examine the briefing note on interest rates tabled in the Senate by the Minister for Education, Senator Ryan, on 25 February 1987. This matter caused some comment at the time. It became the focus for some discussion on the prospects for interest rates in this country. The motion requires that the Committee inquire into and report on the basis on which Dr R. G. Hawkins made his assessment of the outlook for home loan interest rates. Secondly, it asks the Committee to assess why the Government has said that that document and the opinion that it contains, that there is no prospect of reduced housing interest rates this year and into the early part of 1988, does not represent the judgment of the Government. There are a good number of references to Senate committees and I suspect that when Senator Coates speaks after me he will tell us that he has a very busy Committee which already has too many references.

Senator Coates —No, I have said that before.

Senator CHANEY —Senator Coates says that he has already said that. The view of the Opposition is that this is an occasion on which we have the opportunity really to examine an issue which is of central importance to virtually every Australian. The paper which was tabled by Senator Ryan touches upon the issue of housing interest rates in particular. Of course, the broader interest rate regime is of interest not only to householders and home purchasers but also to every farmer, every small businessman and every investor in this country.

If we look at the position of housing interest rates and the very high rates which have applied since this Government came into office-high rates which flow from the Government's deliberate high interest rate policies-we find developing a fairly appalling set of circumstances which are of very great importance to the Australian community not just economically but also socially. New dwelling commencements have fallen by 20 per cent over the past two years. Less and less housing funds are going into new dwellings; so fewer houses are being financed. Over the last two years new home loan interest rates have risen from 11 1/2 per cent to 15 1/2 per cent, and in the case of some bank loans up to 17 1/2 per cent. The private rental market situation is worsening. Vacancy rates are down and rents are increasing much faster than the rate of inflation. Over the past four years investor housing has declined from 25 per cent to 9 per cent of the market. Of course that reflects not just the interest rate regime but also the Government's capital gains and negative gearing policies. The number of people on public housing waiting lists is a fairly shocking statistic because the present Government has considerably increased the amount of money paid to the States for public housing. Yet under this Government, public housing waiting lists have climbed to over 160,000-up 60,000 on the figure four years ago.

Mr Deputy President, I am sure that you and your colleagues would be bitterly disappointed that after very heavy subventions from the Commonwealth Treasury you find that your constituents who need public housing are waiting in longer queues than there were when you took office. Another damning social statistic is that alternative housing numbers continue to climb with over 400,000 people living in caravan parks and up to 100,000 Australians permanently or temporarily homeless. The Government has made a token gesture. It supports the International Year of Shelter for the Homeless with a contribution of about $600,000. Clearly, that is meaningless in terms of the problem that is faced. In Sydney, the city which seems to have very great problems in housing, renters are now paying an average of $267 a week for an unfurnished three-bedroom house. The shocking statistic is that that is an increase of 25 per cent on 1985 figures, and it is anticipated that there will be another 25 per cent rise over the next year. Those sorts of statistics are horrifying to people who are concerned about the welfare of Australians. In my State of Western Australia, which has a much lower rental regime-the Government Deputy Whip also comes from that State-the increase over the last 12 months has not been 25 per cent; it has been 29 per cent. Again, there is a devastatingly low occupancy rate. The rate has dropped from 2.4 per cent two years ago to one per cent now, and the tip is that rents will continue to rise.

All of this is the context for the concern of the Opposition about the interest rate situation in Australia and housing interest rates in particular. The Opposition was delighted when, on questioning in the Senate, Senator Ryan said in February, just a few weeks ago, that the Government agreed. She said:

At this stage it appears that any reductions in market rates that may appear over the course of 1987 will not be sufficiently sustained or will not result in a reduction of loan interest rates in 1987. Accordingly it does appear unlikely that reductions in housing loan interest rates will occur until the first half of 1988 at the earliest.

Those words of the Minister bore out the very serious concerns of the Opposition--

Senator McIntosh —She was quoting.

Senator CHANEY —I will come to that. That is the unadorned answer that was given by the Minister in this place. The Opposition believed that to be an accurate answer. Indeed, the Minister then tabled a paper which was the basis of her reply. That paper came from the Department of Housing. It is now a relatively celebrated document. It was prepared, we understand, by Dr R. G. Hawkins. It quoted what the Indicative Planning Council of this Government had as its view about housing interest rates.

Senator McIntosh —Which it would forward to the Government.

Senator CHANEY —I am sorry, I do not always catch Senator McIntosh's interjections but I think he said that that is what that Council was putting forward to the Government. We agree with that. The Council was suggesting, and the briefing note disclosed, that the Indicative Planning Council, an expert body under the chairmanship of Professor Fred Gruen, had the view which I quote from the document:

. . . contain an assumption that any reductions in market rates that occur this year will not be sufficient to allow reductions in housing loan interest rates in 1987.

It continued:

. . . whilst reductions in housing rates may occur in the first half of 1988, it is unlikely that such reductions would have any significant impact on building activity until the second half of 1988.

That caused a furore. The Government proceeded to assert that the report could not be relied on. Statements were made by a series of people. I wish to quote from a number of them. The Minister for Finance, Senator Walsh, put the report down when he was interviewed on television on the 7.30 Report. He said that, after all, it was written on 13 February-before the announcement about the May economic statement. He referred to variations in the value of the dollar and said that the report was written by an officer who was not from a major economic department. On the Macquarie News report of 26 February, Senator Ryan said, rather lamely, that the Prime Minister (Mr Hawke) was the Government's major spokesman. She said:

. . . he is cautiously optimistic that interest rates and therefore housing interest rates will come down this year and of course he has said that quite recently, whereas the material in the brief was quite outdated and certainly took no account of our decision to have a May economic statement.

By agreement, this is to be a restricted debate and time does not permit me to go into great detail on the matter. All I can say at this stage is that we have the extraordinary situation where the Prime Minister, the Minister for Finance and Senator Ryan are disavowing the report as not being the opinion of the Government, as being a report prepared without the benefit of knowledge that there was to be a May statement. Yet, when the housing Ministers of Australia met late last week, I think in Canberra, the Indicative Planning Council, in a document which has been published, reported to those housing Ministers in precisely the same terms as those contained in the briefing note of February. In other words, that expert group, after considering the fact that there was to be a May economic statement, still concludes that any relief in this calendar year is unlikely. I will quote from the report, which was partially quoted by Senator Walsh in Question Time today. Paragraph 1.4 states that there is considerable uncertainty in the outlook, that there are inevitably differences of view, and that a working assumption is needed. It goes on to say:

In view of the size of the current account deficit and the consequent likelihood that monetary conditions will remain firm, the Council now believes that while market rates of interest may fall, they may not decline sufficiently to lead to a fall in housing interest rates much before the end of the forecast period.

We are talking about June 1988 as the end of the forecast period. The important point to note, and one of the reasons we want a Senate committee examination of this, is that in paragraph 3.2 of the report, which was not quoted by Senator Walsh today, these words appear:

The potential for reduction has been enhanced by the foreshadowed May Economic Statement. At this stage, the outcome of the May statement and the subsequent Premiers' Conference are not known. In the interim, the Council believes that it would be inappropriate to assume that lower market yields will lead to a decline in mortgage rates much before the end of the forecast period.

Again, that is June 1988. In other words, this document, which was given by a government agency to the housing Ministers of Australia just last week, was prepared in the knowledge of the May statement and the prediction remains the prediction which was disclosed by Senator Ryan in the Senate in February.

There has been some attempt to reduce the importance of the IPC. I do not believe that anyone in the Australian Labor Party would dare to attack its expertise or the expertise of its Chairman, Professor Fred Gruen. When the report was made available, Professor Gruen was quoted as saying:

. . . a fall of at least 3 per cent in short term interest rates was needed before there was any chance of a drop in home loan rates.

He went on to say:

The report-

that is, the report from which I have quoted-

says that market rates may not fall sufficiently . . . I would put it more strongly than that-

I am quoting Professor Fred Gruen, not Senator Fred Chaney-

I don't at the moment see that market rates will come down sufficiently to reduce the current 15.5 per cent housing rate.

What we seek in this motion and this reference, in the face of continuing tips from the Prime Minister that interest rates will ease-as recently as 9 March he repeated this belief-is for a Senate committee to be given an opportunity to examine the report and to make the inquiries which we have set out. We want it to inquire into and report on the basis on which Dr Hawkins made his assessment of the outlook for home loan interest rates, because we believe that such an inquiry will demonstrate that his assessment was made on the basis of proper inquiries and input from the normal sources of advice to government-that is, the Department of the Treasury, the Department of Finance, the Reserve Bank of Australia, and so on. If that is the expert advice of the Government's advisers, we want to know what the foundation is for the rather more optimistic outlook which the Prime Minister holds and which he has insisted that his Minister, Senator Ryan, adopt, contrary to the view she expressed in Question Time in the Senate when initially she was prepared to quote from the briefing note prepared by the Department of Housing and Construction.

Why is that of direct political relevance? It is because there is no matter more central to our economic recovery and to fixing the problems which are grinding down living standards in this country. I believe that if a Senate committee properly examines the questions we want to put before it there will be an additional burden on the Government to take the measures which are required to do something about the crippling high interest rate policy which this Government has imposed on Australia. I believe that the inquiry would probably establish that there is a fundamental need for the Government's May economic statement. In fact, it would give support to what the Government proposes, but I think that it would go on to give support to a very strong attack on expenditure in May if we are to have any chance of reducing the high interest rate burden which is doing so much damage to Australian families and businesses. We believe that the inquiry is central to getting at the facts which relate to the real economic problems that Australia faces.

I commend the motion to the Senate. I hope that it will have support. I have reason to believe that it will have the support of the Australian Democrats. I believe that a proper inquiry by the Senate Standing Committee on Finance and Government Operations would present an opportunity for Senator Coates, who is the Chairman of the Committee and is present in the chamber, to make a genuine contribution to the welfare of Australia and his State, instead of engaging in idle politics, which is so often the curse of this place.