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Thursday, 4 June 1970

Mr BERINSON (Perth) (12:18 PM) Last Tuesday morning I delivered to the Parliament petitions bearing the signatures of 1,000 Western Australians who wanted to register their protest at current Government policies of increasing interest rates. Today I was informed that another 5,500 to 6,000 signatures are already available for presentation next week. I want to stress the spontaniety of the protest which has taken this form and may do so by indicating that the body which has collected these signatures, the Housing Loans Reform Movement, only came into existence a fortnight ago, and it came into existence without any organisational background or backing at all. Today thousands of Australians are being advised by the building societies that existing loans on home mortgages are subject to an automatic and compulsory increase in interest rates. I know that there is a point of view which holds that building societies should be prevented from imposing an increase in interest during the term of a mortgage, but I think that to be practical one cannot support that view, nor does it indicate where the real source of the problem lies.

If we are to limit building societies to lending on long term only and at fixed rates only we will concurrently be restricting them to borrowing at long term and at a fixed rate only and the result can only be a diminution of their capacity to lend for houses. As I will indicate as I proceed, that is a policy that we can hardly afford to adopt at this stage. Throughout the present session of the Parliament 2 consistent themes have been advanced by the Government on increased housing interest rates. Firstly, the Government has insisted that there is no question of a direct attack on housing or the housing industry as such and that the present difficulties in this area are merely a by-product, so to speak, of overall economic policies. Secondly, the Government has said that in any case, although it might hurt a little in the meantime, it is in our own long term interests to grin and bear it because current measures are necessary to control inflationary trends. We have heard these propositions advanced time and again by the Treasurer (Mr Bury). The question is how well do they relate to reality. As to the Treasurer's first comment, it is surely reasonable to point out that whether or not the present economic policy is aimed at housing, that is where it is hitting hardest. It is hitting buyers and it is hitting builders, and there are serious consequences for both. I understand that my colleague the honourable member for Swan (Mr Bennett) will be discussing the position as it affects builders. At this stage I want to look at the buyers' position.

In a debate as recently as 15th April the honourable member for Reid (Mr Uren) complained of the effect of increased interest rates on home purchasers. He complained that between 1964 and 1969 permanent building society rates increased from 5i% to 7%. He went on to insist that a rate of 7% was too high. I am sure, at the same time, that today he would be happy to have back that 7% rate because in the last couple of weeks the rate has again jumped, this time to a minimum of 81%. The largest building society in Western Australia, the Perth Building Society, is now charging 8i%, having increased to that figure from 7%. I understand that other smaller building societies are in fact charging more. 1 ask the House to look at the position of home purchasers as a result. On a $12,000 loan over 25 years the home purchaser was liable to pay in 1964 interest of $10,105; in April this year he was liable to pay $13,445; and today he is liable to pay no less than $16,385. There has been an increase in interest alone over the 6 year period of $6,280 - more than 50% of the original amount borrowed. Monthly repayments have gone from $73.68 to $84.82 and now to $94.62. In those 6 years there has been an increase in repayments of almost $21 per month.

The Minister for Housing (Senator Dame Annabelle Rankin) last, week was reported as making the incredible statement that the monthly increase should not be of any real concern because in the last year average weekly earnings had increased by $6. The mind boggles at that sort of oversimplification, especially coming as it does from one holding ministerial responsibility. I wonder why the Minister thinks wages went up. What does she imagine is left once earlier increases in the cost of living are absorbed, not to mention the new tax account to which the extra $6 gives rise. There is only one source out of which home purchasers can pay these increases and that is out of their standard of living. It is intolerable that they should be expected to do so.

There is another aspect of this problem of equal concern. The position is bad enough for those who are already in a home and who are trying to pay it off. It is even worse for those who have not a home yet and who are looking forward to buying one in the near future. They find that credit has been turned off like a tap. Their hopes for a home in the future have been deferred indefinitely. This is especially serious in a State such as Western Australia. The Chairman of the Housing Industry Association of Australia reported last week that building approvals were down 25% on average throughout Australia compared with the same period of last year. But please note this: They were down by 45% in Western Australia. For builders and building tradesmen in Western Australia the position is very serious indeed: for potential home purchasers it is disastrous. I have had occasion already this session to refer to the serious house shortage in the West. Our State Housing Commission has a backlog of over 15,000 homes and a wailing period of up to 4 years and 10 months for State Housing Commission purchase homes.

Only yesterday, the Minister for Housing who, by an ironical coincidence, currently is acting also as Minister for Immigration, was good enough to send to me a circular advising - to use her own words 'with pleasure' - that Australia was set this year to exceed the migrant intake target of 175,000. She might have noted also that Western Australia consistently is absorbing far more than its proportionate share of migrants. For example, Western Australia in the past 4 years has had an average 7.5% of the Australian population but an average migrant intake of 13.18.% In this situation, already strained for accommodation and already subject to the heavy disproportionate migrant intake, comes this crunch on the activity of the building industry in Western Australia and a drop in construction of approvals of 45.%

Something has to be done. If it was good enough to make special provision for rural interest rates at the beginning of the current credit squeeze it should be good enough to make some special provision in this field as well. The problem is not a technical one. It is a matter of policy. The current policy is hitting too hard and in the wrong place. The Treasurer has over-reacted to whatever problems of pressure there were in the building industry earlier this year. In the discussion on housing interest rates, which was raised for debate as a matter of public importance on 12th March, the Treasurer said that the building rate in the last December quarter was 12% above the figure for the same quarter in 1968 and that was too much. Even if that was so - and it is open to argument - a cut back of 25% overall and of 45% in Western Australia is just too much, lt is another case of the cure being worse than the complaint.

With respect, the value anyway of these measures as a brake on inflation is doubtful. The Perth Building Society has assets of $100m. Most of these assets are out on long term loans. Borrowers have been offered an increase in the repayment period rather than an increase in current amounts of repayment. What will be the effect of this? The effect will be that there will be no alteration to the level of liquidity or the levels of demand for other materials and services about which the Treasurer has indicated he is concerned. In other words, over this whole important major area no effect occurs in relation to inflation but a serious effect results for home purchases. I am not an economist, but I cannot believe that our economic measures must be so crude.

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