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Address given to the Housing Industry Association conference, Perth

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S' 78/4 26)


. I thank you for providing me·'with this opportunity to make some brief comments before the convention moves to' consider resolutions and make recommendations. . ' '

The debate on those resolutions should be most informative and helpful. I can assure you that all of the decisions and comments emanating from your conference will be carefully . . considered by the Commonwealth. 1 ' · ■

" The Government places great importance" on its housing objectives. Its policies are aimed at: · . . : .

. Firstly, providing a sound economic basis for stable growth , in the industry. ' , ■

■ ' . Secondly, maximising home ownership, affordability, ■ and choice. . ·

. Thirdly, ensuring that those Australians who cannot '

readily satisfy their ' housing needs in the market are. ' helped by Governments in the most efficient and equitable way ■ . '

, ■ . ' and finally, positively encouraging a healthy duelling construction industry. ~ .

A mature relationship with your association and other . industry organisations is a cornerstone in our efforts to meet ' these objectives. Evidence of the strength of this relationship is: . ; ■ ·

- The participation in this convention of the Secretary of my Department, Mr R.B. Lansdown and.its two most senior officers concerned with housing industry policy - Mr Roger Beale, First Assistant Secretary and ; · Mr Rod Templar . ' . ':

- The regular and frank consultations between officers of . your association and the Department.

I have been very pleased to hear off the association’s continued development of its' research capacity and particularly of your council's decision to support the forthcoming Housing Economics Conference by bringing to. Australia the eminent U.S. housing .

industry economist, Mr Michael Susichrast. .

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It is, of course, essential to the health of the housing

industry that the economy as a whole be brought back onto a stable

footing. Interest r a t e s , the rate of inflation, growth in real

incomes and u ne mp l o y m e n t levels all influence the ability of ' .

c onsumers to e stablish new · h ouseholds and directly affect the ■

ac ti vi ty l evels of the industry. .

. Lending for housing is part ic ul ar ly sensitive to the

balance between fiscal and monetary policy. The worst example of '

mo ne ta ry i nstability was in the period 1973 to 1975. It is

' therefore not s urprising that the problems of the industry ·

i nt en si fi ed in the 1970's with shar pe r a ad more s i g n i fi ca nt cycles

than we e xp er ie nc ed in the 1950's and 1960's. '

. T h e ■ prime obj ec ti ve of the G ov er n m e n t is to restore ' .

r es po ns ib le economic m an ag e m e n t and to achieve a s us ta inable lower level of inflation and interest rates. S ta bility and sustaine d

eco no mi c growth can only be achieved when these p re co nd it io ns have

been met. Only y esterday we had dramatic' conf ir ma ti on of the .

success of these policies - the March quarter C.P.I. r ep re sente d

an' annual inflation rate of only 5 . 2% and showed that prices had moved only 8.2% since March 1977. The central thrust of our ·

policy to significantly moderate the expansion of the money supply and Government expenditure is working. Its jsuccess will provide a solid base for long-term prosperity in the '.industry. '

The iaitial procedures for formulating the 1978/9 Budget have already commenced and I can assure you the next Budget will be based on a firm determination by the Government to continue the same economic approach adopted to'date, which we believe is showing tangible signs of success. In other words, we shall continue to see a strict wages policy and a tight rein on both the money supply and Government expenditure.

.The Government's fight against inflation has already had an impact on the costs of home ownership. The.official price statistics published by the Australian Bureau, of Statistics show that the reduction in the underlying trend of inflation has been shared by the duelling construction industry. The Bureau's index of . house-building material price's rose by 6.6 per cent in the twelve months to March 1978'. This compares with rises of 11.9 per cent over 1976-77, 13.5 per cent during 1975-76 and 21.2 per cent during

1974-75. . ' . ' . .

I believe it should be said that the industry itself has been very conscious of the need to keep costs' increases to a minimum and has played a significant role in. the trend towards a ·

moderation of. prices.· . ' ■

• The point should be made that criticism directed from : time-to-time at builders for cost increases are often, misdirected as they .result from factors totally beyond the control, of the builder.

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Uithin ■ the. c onstraints of the general thrust of the G o v e rn m en t' s economic policy, ue have taken positive steps to ensure that there are no. ar tificial restraints on the volume of .

finance available for house construction ·and purchase. Ue have '

taken action to. relax the. savings banks' prescribed asset ratio, so that this uould not limit lending. :

. The G o v er nm en t is committed to ensure that adequate

housing finance is ava il ab le in the coming months. Both the

Prime M i nister and T re asurer have given assu ra nc es on this point.

Factors a ffecting the supply of finance are being' closely uatched and the G ove rn me nt will ensure that there will not be any undue

s easonal tightness. .

. As well as taking action to m ai ntain the flou of finance

for housing, the G o ve rn me nt has made i mportant progress in its

fight' to reduce the cost of finance. Ue have been adamant that

i nterest rates should come down, from their previous high levels as and uhen circu ms ta nc es permit. In line uith this objective,·

the Reserve Bank consulted uith the major financial i ns ti tution s and' a n no unced on 2 February that savings banks and trading banks

uould make a general reduction of ■§â–  per . cent 'in interest rates on ·

loans for o u n e r - o c c u p i e d housing. Most per ma ne nt building .

s o ci et ie s have reduced their rates by the same amount. '

. A trend to l ouer interest rates uill ad va nt ag e -greatly

the uhole Austr al ia n community, espec ia ll y young families uho are saving- to purchase a house, and thus your industry. -

The G o v e r n m e n t has vieued uith some concern recent sharp .

f l u c tu a ti on s in the intake of depositors' funds by p ermanent

building societies, part ic ul ar ly in Queensland. S u c h 'm ov ement s have a- damaging effect on the ability of the societies to lend

money for housing. . .

Ue are currently d eveloping a series of deposit insurance

mea su re s d esigned to protect investors' funds in societies and to .

pr ev en t crises of c onfidence uithin the building society movement.

Deposit insurance is likely to attract addit io na l funds into s ocieties and increase the a gg regate volume of finance ■

available' for housing - this uill in turn uiden the access to home

o unership. ·

. Before leaving the question of finance I u a n t to make one further observation. People appear to be saying the current problem; faced by the industry, result from a reduction in the flou of funds. But does this reflect a reduced' capacity in the lender to provide finance, or are borrouers not seeking loans? .1 am bound to say

that in some informal discussions I have had uith officers from banks and building societies over recent ueeks, it has been suggested that the problem appears to be one of demand rather than availability"

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- A contrary vieu has been put and uas put at ■

a meeting I had this morning with Mr Kirby Jones

■ and the State p r e s i d e n t s .

■- Fair to say that if addit io na l funds uere available

■ state by state they uould be taken up ·

- Ue have seen evidence of this here in Western A u s t ra l ia .-

' uhere I under st an d some $15 million uas approved for

lending uithin a. u e e k .

. - It does s e e m , h o u e v e r , that' in certain areas of A ustr al ia

there are funds sitting in lending institutions not '

" being used ■ .

- In c ir cu ms ta nc es like those nou existing in the industry

nationally, there may be good reason to look at the ■

. question of the flou of funds betueen l o c a l i t i e s . .

While the industry can drau c onfidence from the fundamental

steps taken to improve the u nderlying strength of the economy and

our institutions, it uould be foolish of me to say that the industry

has had a boom year - it has not. '

There can be no doubt that industry activity in 1977 uas

adve rs el y affected by the large number of unsold stock houses

carried over from 1976. . Although the total number of houses

c on s tr u ct e d in A u s t r a l i a in 1976 uas not in excess of the .

unde rl yi ng demand for housing, in some regions there uas over

building, p ar ti cularly in South Aus tr al ia and the Australian Capital Territory, and in. the "other- duellings" sector in W e s t er n A u s t r a l i a . This meant that the increased level of lending

for housing in the second half of 1977 uas not translated into

duelling c omme nc em en ts but helped to reduce the unsold stock. .

I believe ue are nearing the end of this- stock .

a d j us t me n t p r o c e s s . As the stock of unsold houses approaches

more normal levels, ue. can expect a closer link betueen the level ·

of lending for housing and industry activity.

• My D ep ar t m e n t ' s best estimates, at this stage suggest that

there uill be moderate grouth in duelling comme nc em en ts over the

rest of 1978. .1 intend taking careful account of the joint

f orecasts prepared by the Housing- Advisory Committee as ue move, into the neu financial year. '·.

I believe the industry can drau confidence from the

G ov er n me n t' s performance. The industry can expect:

. Stable economic management, part ic ul ar ly in the .

■ conduct of monetary policy . ■ -

. A steady upturn in the economy .

. -And a u il li ng ne ss to consider the impact on .

the housing sector in the fo rm ul at io n of overall '

e co nomic policy. . ·

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■ This uill create c ir cumstances in uhich it is possible ·

for the trend to lower interest rates to continue in a manner uhich

is s u st a inable and not d isruptive to t h e ·flow of finance to the

housing sector. · '

■ The major factor in housing industry activity in the .

.1980's is likely the underlying demand for h o u s i n g , uhich is deter mined by both e co no mic and demogr ap hi c factors. . '

Your own c onference has clearly indicated, the need for

an informed d iscussion of these l on g-term influences. One thing that

is incre asingly clear is that no one can be dogmatic about the

f u t u r e ; this is why my own D ep ar t m e n t has e mphasised the .

s e ns i ti vi ty of demand p rojections to a variety of important factors of both an economic and d e m o g ra ph ic n a t u r e . You can b e .sure that

there is no intention to make lon g- te rm a ss es sments of underlyi ng

demand either the basis for s hort-term m an ag e m e n t of the s e c t o r ,

or s el f- f ul fi ll in g prophecies by controlling, down- to them. This uould be totally i n c o ns is te nt with the Gov er nm en t' s philosophy and policies. - - ' ■

The key conclu si on s that I would like to draw from the

disc us si on of the future of the' housing industry at this conference

a r e : . · · · · ' ' ·

. Firstly, it is clear that the housing industry and .

market are intimately linked with the economy as a

whole and that it is neither possible nor d es irable to

insulate totally the industry from national economic t r e n d s . ' '

. S e c o n d l y , a smooth and- stable m a n a g e m e n t of' the

• · economy is the most important single c on tr ibution that

the G ov er n m e n t can;make to the health of the industry.

. . T h i r d l y , we must ensure that the industry', all levels -

of g ov er n m e n t and the general community are kept .

informed through continued frank and open discussion.

■ With co- op er at io n between g ov er n m e n t and the industry ,

and the assistance of both the Housing- Cost Inquiry and the' .

I ndicative Planning Council we will b e 'provided with an u n p a r al l el ed o pp or tu ni ty to overcome those problems - and meet , those challenges. ■

The G o v e r n m e n t will continue- to be receptive to comment and s ug ge stions from this A ss oc ia ti on and I therefore look forward

to studying the conclu si on s reached at this convention. ·