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Wednesday, 8 December 1976

Mr DEPUTY SPEAKER (Mr Drummond - Is leave granted? There being no objection, leave is granted.

The table read as follows-





Mr UREN -I thank the House. At the present time average weekly earnings are $ 1 84. A person earning 135 per cent of average weekly earnings is receiving $248 a week. Even the Labor Government found it extremely difficult to meet its commitments to this group. Later I will explain the programs which the Labor Government was trying to introduce to overcome that burden. Those programs were only in the early stages of development, but they were being undertaken by the Australian Housing Corporation.

If one examines the table one finds that on a loan of $20,000 at the existing interest rate of 10.5 per cent the monthly repayments over 20 years would be $199. That is well in excess of the capacity of those on average weekly earnings of $184. People trying to repay that amount on the basis of 25 per cent to 30 per cent of their earnings would be in a very difficult situation. If interest rates are increased next year by 2 per cent or even more, those repayments will represent an enormous burden. In the table which I had incorporated in Hansard and which was compiled on 5 April 1976, I have taken interest rates only up to 12 per cent. I would have thought that a rate of 12 per cent would have been sufficient, but regrettably I will have to have the table reviewed and I will have to show interest rates of up to 14.5 per cent. The Minister at the table, in his cynical way, can laugh. Does he want to put into the record that interest rates will not rise by at least 2 per cent in the next year?

Mr Newman - It is already on the record.

Mr UREN -The Minister says that it is already on the record. We will see how history deals with him. This Government, which has showed complete incompetence in economic management, knows the enormous pressure that this will put on the home building sector. The Government has intimated already that it is orienting all its economic pressure to export incentives and that the rural sector and the export of the minerals sector will be protected by directions from the Government to the Reserve Bank. Enormous pressures will be placed on the home building sector in relation to the availability of finance. If the Government thinks that it can isolate this sector, it is badly mistaken. The Labor Government tried to protect this sector itself. When interest rates rose in the year 1974 by more than 2 per cent, we gave a direction to the Reserve Bank to make sure that interest rates increased by only one per cent. The situation is that interest rates, like anything else, find their own level. Consequently money flowed away from the home building sector because the returns from interest rates in that sector were lower than those in other areas. The Government cannot isolate any one sector from the others. That rise in interest rates will put enormous pressure on the whole home building sector. I say that with great gloom and not with great delight.

The Labor Government in its last Budget proposed to introduce a deferred mortgage repayment scheme on second mortgage loans, to assist those people earning between 95 per cent and 135 per cent of average weekly earnings. The Labor Government appropriated $20m for this purpose in the Hayden Budget. If this scheme had been introduced it would have meant that in the early years of the loan repayments would have been lower than those on loans obtainable from traditional financial sources. The program would have helped the low and middle income families, particularly oneincome and one-parent families, to obtain adequate housing. It was our intention that these funds initially would be made available to families whose regular weekly income, excluding overtime and child endowment, did not exceed 1 10 per cent of average weekly earnings in each State. Recipients would have been expected to contribute no more than 30 per cent of regular gross income of the household to meet mortgage repayments. We did this even though we knew that some building societies were introducing similar schemes. Our scheme was to supplement the building societies ' programs.

The building societies' schemes did not cater for people earning as little as 1 10 per cent of the average weekly earnings. The schemes introduced by the private lending institutions catered only for those earning marginally less than 135 per cent of the average weekly earnings. They did not even get close to those people earning 1 10 per cent of the average weekly earnings. Although our scheme initially was to make loans available to people earning up to 1 10 per cent of the average weekly earnings we intended progressively to increase the figure to 135 per cent of average weekly earnings. We knew that this was a difficult area. We thought that the deferred mortgage repayment scheme was one way to attack the situation. With the coming rise in interest rates and the scarcity of money these private institutions will be forced to abandon the programs they introduced for these potential home buyers.

The Corporation under a Labor government would also have made available first mortgage loans in this financial year, but these would normally have been available only for specific housing developments being earned out on a joint venture basis by private developers and development corporations or land commissions; in other words, for buildings carried out in co-operation with respective State authorities. We recognised that to achieve our urban and regional development objectives specific housing programs of this nature were necessary. The Corporation also had been instructed to look at the possibility of introducing loans to cover the full cost of housing. To achieve this and to allow traditional institutions to lend a higher proportion of the total value of a home it was our intention to amend the Housing Loans Insurance Corporation Act to guarantee low income earners. This form of guarantee would have allowed the low income home buyers to acquire their home loans and to repay them by minimising the financial burden in the early years of the loan. In this way we would have been able to link the income of the home purchasers with a guarantee that they would never have to pay more than 25 per cent of their income as repayments until the home purchasers reached the point where they had enough equity in their homes to be regarded by banks and building societies as normal risks.

It was also our intention to use the Corporation to establish cost rent housing associations. The basic principle of this proposal was that non profit-making co-operatives would be funded in pan or in full by way of loans or if necessary grants to construct, acquire or refurbish housing according to their needs and interests. We allocated $9m to the Australian Housing Corporation in 1975-76 for this purpose. These cooperatives also would have had access to funds from conventional financial institutions. This scheme was developed by the Housing Corporation in the time of the Labor Government. As I said at the beginning of this debate, the Corporation was not the be-all and the end-all. Its establishment was an evolutionary step towards developing working policies to overcome the structural inequities in the provision of housing in Australia. I believe the Corporation was a fine body. I think it had good foundations. It is a great regret that it is to be abolished. I think it would have- made a great contribution to the whole housing situation in Australia.

Mr DEPUTY SPEAKER (Mr Jarman)Order!The honourable member's time has expired.

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