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Tuesday, 23 August 1994
Page: 17

Senator KERNOT (Leader of the Australian Democrats) (3.14 p.m.) —We have heard from Senators Short and Campbell what the opposition thinks is wrong with what the government is doing, but we have not heard from the opposition what it will do. Perhaps we will hear.

Senator Panizza —We have not heard from the Democrats, either.

Senator KERNOT —I am about to tell Senator Panizza. It is one thing to stand up and criticise but another to have constructive alternatives.

  I think the federal government has a couple of options available to it right here and now. It does not have to wait until it reduces the current account deficit; it can take action now. The first thing it can do is to admit that the changes it has made to deposit rules for housing purchases are badly targeted, that they have missed the mark. The second thing it can do, if it will not do the first, is to use the government's highly profitable Housing Loan Insurance Corporation to cut the premium on mortgage insurance for home buyers. For people with low deposits, this would effectively offset any penalty interest rates caused by these new rules. There are two options.

  Why I say that the change is missing the mark is this: any boom in housing finance demand—and, let me remind honourable senators, the figures show that the demand is tapering off at the moment—has been triggered not by low income earners and first home buyers but by an explosion in the use of mortgage deals for other reasons like funding holidays, buying cars and boats and paying for home improvements. These are the sorts of mortgage top-up deals which are advertised every night on television.

  The fact is that the Reserve Bank itself is largely responsible for the increase in this type of lending because last year it made changes to the purposes for which a mortgage could be used. So, instead of now making other changes to adversely affect young people and low income earners, I say that the Reserve Bank and the government should be attacking this private consumption binge; it is reminiscent of the speculative property investment of the 1980s.

Senator Kemp —What do you propose to do?

Senator KERNOT —I have just given two options which could be implemented by the government now; they can be taken easily and now. We do not have to wait for the opposition's future directions statement or the reduction of the current account deficit. It is quite possible for the government to take action now, and that is what I think it should be doing. It can act itself or it can put some pressure on the Reserve Bank. Young people, first home buyers in particular, will be watching what Mr Willis does with interest.