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Tuesday, 22 October 2002
Page: 5596


Senator KIRK (3:26 PM) —Australian families are sinking under the combined weight of household and government family payment debts but today the government—through the Minister for Finance and Administration, Senator Minchin—has failed to acknowledge their plight. We heard today that recent ABS statistics show that Australian families are now straining under a record $597 billion of debt, an average of $81,000 for every household. Household debt has jumped $23.4 billion in the three months to June and $79.3 billion in the 12 months to June this year. Household debt has gone up $319.5 billion since the coalition came to office, yet the government speaks of its `economic management'.

These amounts are almost double the amounts of household debt under the last Labor government. Household debt per household has jumped from $41,450 when Labor left office to almost double that— $83,000—today. Average household debt has surged from 82 per cent of disposable income in 1995 to 122 per cent at the end of March this year. ABS statistics show that the average family now owes $122 for every $100 of their disposable income. With credit card debt also at a record high, families are now saving just 50c out of every $100 earned. This is one of the lowest saving rates ever.

These figures are a stark illustration of the growing debt burden faced by Australian families as they struggle to cope under the highest taxing and highest spending government in Australian history. Yet today the minister refused to acknowledge this in his answer to my question during question time. Under the Howard government, Australian families are under greater financial stress than ever before and are increasingly vulnerable to interest rate increases. Homebuyers who have borrowed heavily relative to their income—often close to the full value of the property—will be particularly vulnerable if prices fall or if interest rates rise further. The Reserve Bank and the Australian Prudential Regulation Authority have given repeated warnings to borrowers and lenders to exercise caution. But, despite this, the government has failed to recognise that there is a household debt problem and has made no consistent response to the risk of the housing bubble. This is despite repeated warnings made by the Reserve Bank about the expansion of household debt and the increasing vulnerability of Australian households to interest rate increases. It is irresponsible of the government to sit on its hands and passively await a housing bust, with the pain that this will inflict upon Australian households. The government should join the opposition in warning potential borrowers to ensure that they are not overstretching themselves. In particular, borrowers should be warned to assess whether they have the financial capacity to respond to worsening financial circumstances, such as possible interest rate increases.

October Reserve Bank transaction card figures show that Australian credit card debt has hit record levels under the Howard government. Total debt has soared to $21.5 billion in August, an increase of over $100 million in just one month. These figures indicate Australian consumers are increasing their exposure levels to personal debt, month after month. In four years, credit card debt has exploded by 220 per cent from $9.8 billion to $21.5 billion and has increased as a proportion of household debt by 35 per cent. This is of particular concern when the August Reserve Bank statement on monetary policy showed average credit card interest rates at 16 per cent.

It is clear that consumers are extremely vulnerable when it comes to credit card debt. I asked the minister today whether the government would work with the states to ban credit card providers from issuing unsolicited promotional material with pre-approved credit limits or credit limit increases, but the minister provided no answer to this question. Labor calls on the government, in cooperation with the states, to reform the uniform consumer credit code. (Time expired)

Question agreed to.