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Wednesday, 30 March 1966

Mr McIVOR (Gellibrand) .- I support the amendment moved by the Deputy Leader of the Opposition (Mr. Whitlam). The announcement by the Minister for Labour and National Service (Mr. Bury) that an additional $15 million is to be made available to the States for housing purposes will be welcomed by all engaged in the building industry. Housing is one of the prime needs of man. The owning of a home has been shown to bring a high level of responsibility to those who purchase one.

The initial outlay in purchasing a home has always presented a difficulty to the average wage earner. In pre-war days, the answer was found in the availability of moneys for loans secured by first mortgages on properties and made at reasonable rates of interest. My remarks tonight will be confined more or less to that point. Since the war, however, there has been a disturbing fluctuation in the supply of such funds. This fluctuation has been due mainly to the stop and go financial policies of this Government. It is true to say that the vast financial demands made by industry and commerce on the expanding Australian economy have increased to an extraordinary extent the interest rates on loan moneys. It is also true to day that the business and commercial sectors of our community can afford to pay a flat rate of interest of 8 per cent, or even 10 per cent, per annum. Investment houses, with such lucrative returns available on loan money, have to a great extent closed their doors to those seeking finance for home building. As a consequence, the volume of money available for housing finance on mortgage security has dwindled. Such finance has been taken out of the reach of the basic wage earner and the average wage earner, who cannot afford to pay more than a flat rate of 6 per cent, interest - and even the 6 per cent, fiat rate is far too much for their pay envelopes to cope with.

The Vernon Committee's report has described this state of affairs very clearly. The high cost of land and the high cost of building a home, together with inescapable high interest rates, are preventing thousands of people whose dearest wish is to own a home from ever realising their ambition. A colossal amount of finance has gone into the avenues of hire purchase, trade, office and flat building and commerce. My colleague the honorable member for Macquarie (Mr. Luchetti) explained to me a few moments ago how firms such as insurance companies are more prepared to invest in undertakings such as the H. G. Palmer undertaking than to invest in the field of housing, although the latter form of investment would be better for the community in general. I am informed that finance for this branch of the business sector exceeds by far the finance made available for bousing by what is regarded as the greatest source of funds for home finance - the Commonwealth and State savings banks of Australia.

The tendency has been and still is to direct finance to fields other than housing. The result, as I have said before, is that countless people cannot proceed to plan and build homes because of the non-availability of finance. Many others are paying interest at rates far above the economic capacity of their pay envelopes, but, in order to obtain a roof over their heads, they are compelled to do this. This state of affairs has introduced into the financial sources of the home building industry an unsatisfactory force that is good for neither the home seeker nor the nation in general. In fact, the high flat rates of interest charged by investment houses are usury of the most vicious kind. Its victims, the low wage earners and average wage earners have no escape.

An example of this legalised robbery is to be seen in the calculations which I now submit. It is estimated that the amount of interest paid on a loan of £4,000 repayable over 12 years at 6 per cent, simple interest on a sliding scale, with equal weekly repayments over 12 years, would be £1,440. The amount of interest paid on a loan of £4,000 over 12 years at 6 per cent, simple interest, on annua] rent with equal weekly repayments over 12 years, would be £1,620. The amount of interest paid on a loan of £4,000 over 12 years at 6 per cent, flat rate, with equal weekly instalments to discharge the loan,- would be £2,880. These figures show the difference between the interest which was charged in pre-war days and the interest which is charged today.

The dangers to the ordinary working man in home purchase arise from deposit gap second mortgages. The amount secured on the average second mortgage is from £800 to £1,000, and the interest rate is, on an average, 8 per cent, flat, rising to 12 per cent. flat. This represents 16 per cent, true and up to 24 per cent. true. The repayments are spread over periods of eight to 10 years. Whilst repayment on a first mortgage is usually about £5 a week for a £3,500 loan, the repayment on the second mortgage is between £4 and £5 a week. It is the combination of these two payments which causes difficulty to the working man home purchaser. Obviously the answer is for first mortgage loans to be increased to £4,500 or £5,000 to cut out the deposit gap, and to keep the repayments at probably £6 a week, all-in, on the increased first mortgage loan. This would be fair to the working man. He would be able to buy a home costing, say, £5,500 or £6,000, paying a deposit of £1,000 and having a first mortgage loan of £4,500 or £5,000 with repayments at £6 a week and a true interest rate of 5i per cent. I consider that that is within the capacity of the country to bear. Financial arrangements of this nature would put some value back into the pay envelope of the worker and, incidentally, would benefit the community in general.

My greatest concern is that the investment houses will take advantage of the additional finance which the Government is supplying by increasing the prices of houses and land. This is what happened after the Government introduced its £250 home savings grant scheme. I agree entirely with the honorable member for Melbourne Ports (Mr. Crean) who said -

The construction of houses in Australia is lagging because the people who most need homes are not in the economic position to fulfil that need.

The Government's policy in connection with housing matters has been, and still is, one of all care and no responsibility. In spite of repeated appeals by myself and other members of the Opposition for an investigation into the interest rates being charged by certain sections of the com munity on housing loans, the Government has repeatedly refused to do anything. It has repeatedly refused to have a national inquiry into all aspects of the home building industry in Australia. It adopts this attitude in spite of the fact that the price of land in the outer suburbs of Melbourne has jumped by over 12 per cent, in recent months. It would be interesting to know just what has been the increase in the price of land situated in suburbs within a radius of six miles from the Melbourne General Post Office.

The action of the Government in making available an extra $15 million for housing indicates its alarm at the downward trend in the home building industry and the effect this is having on the economy of the country. It can be assumed, therefore, that the extra money being made available for home building will tend only to recover some of the drift or, in other words, save the industry from complete breakdown. The remarks contained in the report of the Housing Commission of Victoria issued in January 1966 concerning aged people are most revealing. That report states -

The care of Elderly Persons in communities has become a world-wide problem, because of two major factors:

1.   The population explosion.

2.   The increased life expectancy of a man and woman today.

In Victoria at the beginning of 1966, an elderly applicant for accommodation might well have to wait several years before becoming installed in a flat or unit.

The waiting list today includes 3,620 lone persons and 403 couples.

The Victorian Minister for Housing goes on to state -

We need {20 million in the next two years to house those at present on the waiting list.

Only then will we be in a position to deal with the future.

As I have said, Mr. Deputy Speaker, that is the report by the Victorian Minister for Housing. But this report concerns only the aged. From it can be gained a general impression of the housing situation in Australia. The picture is not one of great assurance.

Insofar as the housing situation is concerned, it gives one less hope for any improvement while there are still nearly 11,000 people on the waiting list of the Victorian Housing Commission. Another feature of the housing situation that is alarming is the annual residential mortgage demand for housing finance in Australia. It was estimated as far back as June 1963 that mortgage demands for housing finance were approximately £800 million per annum. Residential mortgage indebtedness was about $8,000 million per annum. This is an alarming state of affairs. It confirms the facts that I have stated previously and which I emphasise again. There is a need - a national need - for an investigation into all aspects of housing finance in Australia.

The greatest need, however, is to scrap flat interest rates and to return to sliding scale simple interest rates. By so doing the low wage earner would be given a chance to get a roof over his head. The matter of housing shortages has persisted for many years in this country and restrictions on finance from time to time do not help matters. In order to emphasise this point I ask honorable members to listen to some of the newspaper headings that I have here. In 1956 the situation was indicated by the heading - " Housing rackets are rife." I heard the honorable member for La Trobe (Mr. Jess) suggest a few moments ago that we should start to get down to a plan with regard to housing. He says that now is the time to talk about all these things. But when will the time come for the Government to accept its responsibility? Another newspaper headline in 1956 was "Families in single rooms ". The accompanying article stated, in part -

Families of children are growing up in single rooms under conditions which in every other country in the world would have meant juvenile delinquency and crime. . . .

A newspaper headline in 1957 was " Tight rein to be kept on money for housing." The article quoted the statement made by the Prime Minister, Mr. Menzies, as he then was -

It was not sufficient to relax bank credit for housing, he said. It must be established that the additional money would not drive up the price of materials and the wages of building employees.

The limitations on housing were in the supplies of manpower and materials. More money would not increase the number of carpenters or tilers.

In 1958, Sir Douglas Copland said that Australia should plan to build immediately 75,000 houses a year, rising to 80,000 within five years. He was reported as saying -

.   . that the increase of population numbers in the early twenties age-group would make this a minimum target.

But the Government has never had a plan for housing. It has not a plan now. So the situation will continue. A headline in 1959 read " 15,568 wait for commission houses ". The accompanying article stated that 15,568 people were waiting for Housing Commission homes in Victoria and that some had been waiting for four years. In 1960, a letter to a newspaper was headed " Housing shortage real ". Another newspaper in the same year carried the headline " New housing in Victoria still falling behind demand ". The article said in part -

The report says that the Department of National Development had tried to measure the housing demand and, with some reservations, had predicted that the backlag was within sight of being overcome.

This has led to some statements warning the building industry against gearing its production to a demand that might not be sustained.

However, the report adds, any suggestion that there should be a slowing-down of house production on the basis of the backlag having been nearly met was premature.

A headline in 1961 was "Cost of houses won't fall, say builders. Claim wrong." The article stated that many builders were going broke due to the financial policy of the Government.

Mr Calwell - They did go broke.

Mr McIVOR -- Yes. I come to 1965 where under the headline "Tax-free return on housing loans proposed " a newspaper reported that a Mr. Leighton had said -

The Government should concentrate on providing housing finance instead of guaranteeing finance. . . .

This could easily be achieved by adopting the very effective British system based on the principle of tax-free interest on money invested in housing loans.

The investor earns a satisfactory return as s result of the tax advantage. The house buyer can then get finance to the extent of 80 or 90 per cent of the house price at less than 6 per cent.

In Australia, despite election promises, house buyers have not been provided with a clear and adequate means of financing houses.

I come to 1966 where I find an article concerning the high prices charged by way of rent for slums. The article states -

Ten guineas a week for three rooms in a slum; a kitchen floor of bare, chipped bricks; cracked windows held together by bandages. . . . lt does not finish here. Another article written this year has the headline -

The low-income home seeker is getting a raw deal . . .

This article reads -

New houses stand shoulder-to-shoulder in what a few years ago were the placid prairies of Broadmeadows, the rolling hills of Doncaster and Templestowe.

It is all part of a gigantic . race for homeownership.

But what about the casualties? What about the thousands of couples, often with young families, who are victims of a new term in our language(he deposit gap?

There is, for many people, a widening gulf between their cash resources (plus what .they can borrow on a first mortgage) and the cost of building or buying.

Researchers say land prices have risen by 360 per cent, in the Melbourne metropolitan area since 1952, and that the cost of average-priced homes has gone up by 84 per cent, in the same period.

Restricted housing finance has had the tendency also to cause industries allied to the building industry to become cautious. When this state of affairs becomes evident, it soon spreads throughout the trade in general. Unfortunately, Government policy is based on housing requirements and not on housing needs. Indeed, it has been proved that homes purchased on a deposit of £50 is not the answer. The reason for this is simple. The lower the deposit, the higher the weekly repayments.

An indication of the desperate position of the low wage earner can be gained from the fact that prices have risen from 1939 to 1965 from 7 times to 40 times their original figure whereas the basic wage has only increased by a little over three and a half times in that period. Between June 1964 and June 1965, the consumer price index for all components rose from 125.7 points to 1 30-4 points. This represented an increase of 4.7 points. In contrast, the food component rose from 126 points to 133 points, or an increase of 7 points. The housing component of the index rose from 159.6 points to 165 points, or an increase of 5.4 points. In the miscellaneous group, a rise of 6.2 points was recorded when that group rose from 129.9 to 136.1 points.

These figures confirm the contention of the trade union movement that the family depending entirely on the average weekly wage of $54.60, or £27 6s., merely exists.' It shows something else also. This is that the average weekly wage does not suffice. A man must work overtime or a wife mustgo to work. The latter event often means that the children may have to be neglected. In fact, it is interesting to note a survey that was carried out by the United StatesLabour Department. This survey found that one in every 20 workers in the United States of America finds it necessary to work at two jobs to make a living wage. The survey reported that 3.7 million Americans, mostly married men, work an average of 13 hours a week at a second job. I wonder what a survey of that type! would reveal in Australia.

The value of property has increased from approximately £550 for a three bedroom brick cottage in 1939, to £1,000 in 1948, and to £6,000 in 1965. For this type of cottage, rates have risen fromapproximately £5 in 1939 to approximately £40 in 1965. In 1947, a married man with two children on £6 a week - the then basic wage plus 11 per cent - paid no income tax. Today, a married man with two children on £17 10s. - the current basic wage plus 11 per cent. - pays 15s. 9d. a week in income tax. These figures clearly show that housing costs today are out of the reach of the multitude of low wage earners. The system of indirect taxation has done practically nothing to help in this regard either. Surely therefore it is becoming increasingly obvious that although the Government gives the home building industry injections by providing additional finance from time to time, this help is not finding it's way into the hands of those who need it most.

I have said before, and I say again, that plenty of money has always been available for housing if a person can afford to buy a house, but unfortunately the man on the basic wage cannot afford to do so. Home ownership must be encouraged on a more liberal scale than is possible under the existing finance schemes. Indeed, it is estimated that only about 25 per cent, of

Australian home buyers can obtain housing finance at interest rates of 5i per cent, or less. The other 75 per cent, pay interest rates well above that figure. Repayments amount for many to more than 40 per cent, of their weekly income. It is necessary therefore to end the disparity between those who can afford to pay the high interest rates and those who cannot. Although the Government claims that Australia has a high ratio of persons who either own or are buying their homes, because of the disorder and inequity in the home finance field many people pay much more for their homes than they should. The system is creating hardship. Indeed, it would be true to say that 75 per cent, of people buying homes have made themselves slaves fo the financial institutions for the rest of their lives the minute they sign their housing contract. The time has long since passed for a national inquiry into housing finance. The need for such an inquiry becomes more urgent every day.

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