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Thursday, 25 August 1994
Page: 424

Senator O'CHEE (6.13 p.m.) —This motion canvasses the government's callousness when it comes to the economy and to those who are borrowing to buy homes or struggling to pay off the debt on their farms. This motion deals directly with one of the most lamentable failures of this government's economic policy: the inevitable rise which we saw recently of 0.75 per cent in official interest rates.

  That rise in interest rates was inevitable from the very moment that the Treasurer (Mr Willis) delivered his budget. We were doomed to face higher interest rates because this government was unwilling to curtail its massive spending and massive borrowing, which can do nothing but wreak havoc on this country's economy.

  I recall very well sitting in the lock-up on the day the budget was to be delivered and looking at the budget papers with dismay and despair and saying, `It is inevitable that interest rates will rise.' I wrote an article for the National Party's budget special which said, `Why this budget will make your home loan dearer.' It does not bring me any great satisfaction to say it, but I was right, because this government is spending well beyond its means with deficits of over $11 billion to $12 billion.

  Yet those opposite seem to be congratulating themselves. They stand with a hand on their hearts and say, `Aren't we wonderful people because we are cutting the deficit?' People in Australia seem to think that that means the government is cutting its debt; in fact, it is not. Every year that this government runs a deficit the amount of money the government has to borrow increases. Government debt goes up because this year's deficit will be added to last year's deficit and the deficit of the year before, and next year's deficit will be added on top of that. That is why government debt in recent years has trebled in the space of just a couple of years.

  It stands to reason that when the government borrows large amounts of money the price of money will go up, and the price of money is the interest rate. The government is out there greedily soaking up the savings that Australians have put away—very small amounts of savings, I hasten to add. The consequence of too much demand for money and not enough supply is that the price goes up.

  It is just like the price of spuds. If lots and lots of people want to buy spuds but there are not many available, the price of spuds will go up. If there is lots of demand to borrow money—in this case, mainly coming from the government—but very little capacity to save it, to make that money available, because the budget papers themselves admit that saving is at an historic low in Australia at the moment, it stands to reason that the price of money will go up as well. That is why this government's last budget made it inevitable that interest rates would go up and that struggling Australian families with mortgages and struggling Australian farmers would pay the cost for this government's economic folly.

  It is folly because this government has a hypocritical policy when it comes to the economy. At the same time that it is busily spending far more than it actually receives—spending $11 billion or $12 billion more than it will receive—

Senator Tambling —$12,000 million.

Senator O'CHEE —As Senator Tambling rightly interjects, $12,000 million. The government is saying to the ordinary Australian, `We are going to put up interest rates because we think you're spending too much and we're going to make it more difficult for you.' The government says to ordinary people trying to buy a house, `We think too many people are buying houses. That's why we are going to put up interest rates.' Yet, at the same time, it does nothing to curtail its own out-of-control spending.

  Is it not hypocrisy for a government to say, `We will spend without regard for our capacity to bring in income, yet you, in the Australian community, must curtail your spending because we think you're spending too much.'? Are people spending too much on houses? I think the answer is no. Certainly there has been a big drop in the rate of growth in home finance in this country. It has slowed down quite remarkably, as Senator Tambling's motion ably says.

  Let us look at the consequence of this government's increase in interest rates. Let us take a hypothetical couple who have just bought a house. We will call them Greg and Di. They have been saving for two years. They have made the deposit on their house, probably with money they borrowed from their parents. They can fund the loan at the moment and they fix the loan for the first 12 months.

  However, there is a common clause in fixed loans, when they are capped for the first 12 months, that they cannot be repaid at a faster rate. So they have just signed the papers on the house. They are spared the increase in interest rates for 12 months, but what is their first thought? Their first thought is, goodness gracious, interest rates are going up three-quarters of a per cent now, what will they be in six months time? Another half a per cent? So they start to save every penny they have so that as soon as the 12 months is over they can make a big payment to reduce the mortgage—$3,000 or $4,000—so that they do not have to pay a higher rate of interest on a big loan.

  The consequence of that inevitably will be that a lot of demand will be taken out of the economy, not just in the housing sector, but elsewhere. I think one of the real dangers of this increase in interest rates is that it is going to stop the spending on consumer durables. In other words, people will not buy a washing machine, a dishwasher or a drier. They might save that money to put into the mortgage, which will result in fewer jobs and fewer opportunities for people who are unemployed. That is the consequence of this government's policy and that is why its policy is so hopelessly flawed.

  Let us turn to the rural sector. What impact will this increase in interest rates have on the rural sector? The government congratulates itself on having made $15 million available to help farmers who are struggling with the drought to meet the interest payments on their farm loans because they have no capacity to pay at the moment. As Senator Crane has so ably said, many farmers have made losses year after year because of the drought and this government's failed economic policy. But what will this interest rate increase do to those people? It will wipe out the value of that $15 million that the government has offered in drought relief, because a three-quarters of a per cent increase in interest rates will add $120 million in interest to the amount which the farm sector has to pay this year. So the government is saying, `Aren't we wonderful, generous, compassionate people? We're going to give you $15 million to help you with the drought.' In the very same week we see interest rates go up by three-quarters of a per cent, which will add $120 million to the amount which struggling farmers will have to repay this year.

  I hasten to add that much of that farm debt exists in states which are drought stricken. The despair in my state of Queensland is frightening, as is the despair in New South Wales, which will shortly be 80 per cent drought stricken, and down into western Victoria—

Senator Tambling —And Western Australia.

Senator O'CHEE —And Western Australia, too. All of those people have no capacity to pay because the drought has forced them in many cases to take all the stock off the property. Many of those people will have a big task in front of them in trying to rebuild their herds and flocks. They have had to cull the females because they cannot carry them any more and they are desperate for the money. If people look at the price of culled cows, they will see what I am talking about. Those people will be hit by higher interest rates and a higher interest bill which far outweighs anything the government has done to help them. In fact, the government's response to this drought has been pitiful and disgusting. The despair is added to by this increase in interest rates. That is the consequence of this government's policy, and it should be condemned for it.

  Let us also look at what it is doing to investment, particularly in the housing sector. I refer, for example, to Cairns, where I live. Finally, we are seeing some increase in housing in Cairns. Senator Tambling well knows that housing in Cairns has been unaffordable for many people for a long period. In fact, a friend of mine who moved there with his wife—he was working at Qantas; his wife was working at David Jones until she had a baby—was forced to move out of Cairns because he could not afford the rent. His wife was unable to work because she was looking after the baby and he just was not bringing in enough money to pay the bills. So finally, we have seen an increase in the amount of available housing and that increase will be wiped out by these high interest rates.

  People who have made an investment in the housing market in Cairns will see their investment annihilated by these increases in interest rates. I suspect that many of the people who bought investment properties and who were guaranteed a certain rate of return may find that that guarantee is worthless. Obviously, unless there is a demand for that housing, there will be no way that the housing company can meet that guarantee and people will lose money.

  That is the consequence of this government's failure—people will lose money. I am not just talking about speculators; I am talking about honest people who borrowed to buy their first home. What could be more disheartening, what could be more frightening, than to be a young couple who saved to buy a house, who find interest rates going up, who have a child and who find that their capacity to pay is reduced and, ultimately, find that they have to sell the house and suffer a loss because of a heartless government policy?

  That is what we are talking about, and that is why this government roundly deserves to be condemned by the Senate and by all Australians for the callousness and heartlessness which it has shown towards people who are saving to buy their own homes. What we see today inevitably had to follow from the budget, but what worries me even more is that this government has not learnt from the last recession it induced in this country.

Senator Murphy —Don't shout, Bill. We can hear you. You don't have to shout.

Senator O'CHEE —We see honourable senators on the other side shouting and interjecting because they do not want to listen to the truth. The truth is that Senator Murphy's government brought this economy to its knees and it is about to repeat that same crime in the next couple of years if the Australian people are foolish enough ever to re-elect it. That is the crime which it has perpetrated and that is the crime we on this side of the chamber are fighting.

  Senator Watson argued month after month, year after year, against increases in interest rates which the government imposed on the Australian economy. Senator Watson was here sounding the warnings. Did we hear the government heed the message? Of course not, because it has no understanding of what it is like to be an ordinary Australian.

  This government is so pitifully out of touch that Senator Murphy even now finds it a joke that we are debating the high interest rates which his government is imposing on young Australians saving to buy houses, the high interest rates which his government is imposing upon farmers. Senator Murphy can laugh because he is not dependent on the farm sector any more; Senator Murphy is no longer dependent upon what happens in the shearing industry. Senator Murphy has his comfortable seat in the Senate. But there are a lot of station hands and a lot of shearers and a lot of wool classers who will not have jobs this year because of the increase in interest rates.

  A mate of mine is a wool classer. He cannot get a job. He knows very well that this increase in interest rates makes it more difficult for farmers to make ends meet, which means more and more people will do the shearing or the classing themselves and there will be fewer and fewer jobs out there in the farm sector. So much for the care and compassion that Senator Murphy once held for the workers in the farm industry. Once he gets in here he finds the invitation of the red leather all too appealing.

  Enough of Senator Murphy. Enough of despair. I believe that we should offer Australia an alternative. The alternative will be on offer at the next election. The honourable senators on the other side will see exactly what Australia thinks of their failed economic policies when they get thrown out on their ear at the next election. But until then I endorse this motion. I endorse Senator Tambling's solid and cohesive condemnation of this government and urge the Senate to adopt his motion.

  The ACTING DEPUTY PRESIDENT (Senator McKiernan)—Order! There are a number of amendments before the chamber. I intend to deal with them in the following order. I will put the amendment moved by Senator Crane to part (e) of Senator Kernot's amendment first. Then I will proceed to part (a) of Senator Kernot's amendment, then to part (b) of Senator Kernot's amendment and then to the motion, whether it is amended or not.

  Amendment (Senator Crane's) agreed to.

  Part (1) of Senator Kernot's amendment, as amended, agreed to.

  Part (2) of Senator Kernot's amendment negatived.

  Question put:

  That the motion (Senator Tambling's), as amended, be agreed to.