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Thursday, 5 March 1970

Mr KILLEN (Moreton) (Minister for the Navy) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to amend the Homes Savings Grant Act 1964-1967 in a number of ways. As was promised by the Prime Minister (Mr Gorton) in his policy speech last October, the limit on the value of a home that may attract a grant will be raised from $15,000 to $17,500. Other amendments will widen the forms of savings that are acceptable for purposes of the scheme, and extend the classes of persons who may become eligible for a grant.

The major purpose of the scheme is to encourage young people to save steadily for a period of years for the first home they own after marriage. Since the inception of the scheme in 1964, some 164,000 home savings grants totalling about $71m have been paid to assist young couples, and widowed persons with dependent children, to own and establish their homes. The amendments now proposed will permit more young people to qualify for a grant, and allow others to receive larger grants by making some presently excluded savings acceptable for purposes of the scheme. I propose now to draw to the attention of honourable members the signficant proposed changes in the scope and application of the scheme, and to give the reasons for these changes. I may explain that notes explaining the purpose of each clause and sub-clause of the amending bill are being made available.

The value of a home, including the value of the land, in respect of which a grant may be paid will be raised from $15,000 to $17,500. As we all know, the cost of many homes has been rising. The most significant reason for this has been the widespread upward movement in the value of developed residential land in many cities and towns. Another reason is that the average cottage being erected today for young families is much better equipped, and is therefore a better home than it was a few years ago. The increase in the limit on the value of a home by $2,500 approximates the rise that has occurred in the cost of the average home acquired in Australia since the limit was last raised. The cost of some homes has, of course, risen by more than this amount, but the cost of many others has risen by much less.

Another amendment will extend the forms of saving acceptable for purposes of the scheme to include moneys held in savings bank accounts and on fixed deposit with trading banks that have not been designated as home savings accounts. The great majority of young people who apply for a grant have held their savings in a designated bank account or in one of the other acceptable forms for the required period of 3 years. But there are some who, even though they have been deliberately saving to obtain their own homes and have been depositing their savings in a bank account, have either not requested the bank to designate their accounts as home savings accounts, or failed to have had this done for the minimum period of 3 years before taking steps to acquire their homes. Under the existing provisions these young people, who have been saving for homeownership for the minimum 3-year period and have deposited their savings with a lending institution that makes sizeable and long-term loans for housing, are ineligible to receive a grant. Amongst their number are many newcomers to Australia who, possibly because of language difficulties, have been unaware of the acceptable forms of saving until it was too late for them to become eligible for a grant.

Our decision to abolish the statutory requirement that acceptable savings with banks must be in accounts that have been designated as home savings accounts does not mean that we no longer wish young people to put their savings into a home savings account. In our future publicity about the scheme we will continue to urge young people to open a home savings account, because a passbook so designated is a continuing reminder to them of the desirability of saving to own a home. On average, applicants who designated their accounts when they commenced to save have saved more than those who failed to designate, or delayed designating, their accounts.

A further amendment will extend eligibility for a grant to divorced persons aged less than 36 years with one or more dependent children. The eligibility and other provisions relating to these persons will bc broadly similar to those applying to young widowed persons with dependent children who were admitted to the scheme in November 1966, There will also be a transition period, in this case up to 31st December 1970, during which the acceptable savings of eligible divorced persons may be held in a wide variety of forms.

One difference concerns the treatment of savings held at times prior to the dissolution of the marriage. In the case of a widowed person, savings held at times before the death of the spouse are acceptable where those savings were held in the name of the widowed person or the deceased spouse, or in their joint names. However, both parties to a divorce may later become applicants for grants either in respect of a home acquired on remarriage, or of a home for the accommodation of the divorced person and the dependent children. In the case of divorced persons, the treatment of savings held before the dissolution of the marriage will be the same as that which applies in the cases of married applicants, that is to say, savings that were held in the name of the divorced husband will be regarded as his savings, those held in the name of the divorced wife will be regarded as her savings and those held in their joint names will be regarded as having been held in equal shares by the then husband and wife.

Under the existing provisions, where savings were held jointly with a person other than the present spouse, no part of these joint savings is acceptable. It is proposed that this provision be amended to permit the acceptance of one-half of savings that were held by a person jointly with a former spouse. This amendment will have effect whether the person is applying for a grant as a divorced person caring for dependent children, or as a remarried person with or without dependent children.

All the amendments referred to so far will take force on or after 27 October 1969, the first day of business after the recent general election. With respect to the prescribed date, it will be the date on which the applicant entered into a contract to buy or build a home or, as an owner-builder, commenced its construction. It marks the close of a person's savings period for purposes of the scheme.

Another amendment will permit the Secretary, in exceptional circumstances, to determine that an applicant's prescribed date was a date other than on which construction of the dwelling was commenced. In some cases, an applicant obtains approval from the local government authority to build a small section of the dwelling, such as a single room or the garage, for use as a temporary home until he is in a position, some time later, to proceed with construction of the remainder of the dwelling. At present the applicant's savings period ends on the date on which construction of the room or garage commenced. The proposed amendment will permit the Secretary to determine that the date on which meaningful construction of the dwelling commenced be regarded as the applicant's prescribed date in these cases.

The Australian Federation of Credit Union Leagues has recently renewed its request that savings with credit unions be acceptable for purposes of the home savings grant scheme. Lending by credit unions is still predominantly by way of loans of less than $1,000 for such purposes as the purchase of furniture, household equipment and motor vehicles and meeting the cost of medical and educational expenses and home repairs. However, a few credit unions are making loans of $4,000 or more over periods of up to 10 years or even longer to their members to assist them to acquire a home of their own.

Our offer of a home savings grant has always been regarded as being made for two main purposes. These are to encourage young people to save to acuire their own homes after marriage and to hold their savings with the major institutions that make relatively high-ratio and long-term loans for the acquisition of a home, and thus increase the volume of savings available for lending for home-ownership. And we see no reason to alter these purposes. Acceptable savings for purposes of the scheme should be savings deposited with institutions that make large and long-term loans at a reasonable rate of interest in connection with the acquisition of a home. Consistent with this, we have so far made no provision - other than in respect of the initial transitional period that ended on 31st December 1964 - to accept savings with a credit union, because no credit union was close to being able to do this.

Included in the Bill now before the House are a number of amendments that will permit savings with a credit union to become acceptable, provided the union can satisfy a number of conditions. These conditions are set out in clause 5 of the Bill. Broadly, they are that a credit union regularly makes a significant number of loans for the construction or purchase of homes, and that these loans are comparable in size, interest terms and repayment periods with loans made for these purposes by banks and building societies. The Bill will permit a credit union to be approved for purposes of the home savings grant scheme. The conditions of approval include that at least 20% of its total lending in its most recent financial year was lent to assist its members to own their own homes, that a minimum of $50,000 was lent for these purposes and that these loans were made at an effective interest rate of not more than H% per annum on a reducing balance basis. As applicants for the grant are required to hold their savings with institutions that make relatively large and long-term loans for the acquisition of a home, it is reasonable that a credit union, wishing to have savings with it accepted, should have made in its most recent financial year a significant number of such loans. One condition of approval of a credit union will therefore be that at least 15% of its total lending in its most recent financial year, that is to say, about three-quarters of the 20% of its lending that must be in loans for the construction or purchase of a home, shall be loans of not less than $7,000 and be repayable over a period of not less than 12 years. Needless to say, a credit union seeking approval will be asked to give an undertaking that it will continue to meet these conditions during each subsequent financial year. Failure to meet these continuing conditions will mike a credit union liable to have its approval withdrawn. The Bill permits approval to be withdrawn, but only after 6 months notice.

The Bill also provides that savings held by an eligible applicant for a home savings grant with an approved credit union shall be acceptable for purposes of the scheme where his prescribed date was not earlier than the first day of the financial year during which the credit union met the conditions necessary for approval. To assist honourable members let me give an example. Suppose a credit union meets the necessary conditions during the financial year which ends on 30th June 1970 and that the Secretary of the Department of Housing is satisfied shortly after the end of the year that it has met those conditions in its 1969-70 financial year: savings held with this credit union by an eligible applicant for a grant where the applicant's prescribed date was as far back as 1st July 1969, that is to say, the beginning of the financial year in which the credit union met the conditions for approval, would be acceptable not only at his prescribed date but also at his earlier savings dates. These are the conditions on which the Government is willing to accept savings with credit unions for purposes of the home savings grant scheme. It is appreciated that very few, if any, credit unions are as yet in a position to meet these conditions. But once these amendments are approved by Parliament, the door will be open for savings with a credit union to become acceptable if it wishes to make a reasonable effort in lending to its members for the acquisition of homes.

The amendments proposed in this Bill will, I am sure, be welcomed by the many thousands of young people who are acquiring their first matrimonial homes or who are saving for that purpose. The amendments are in keeping with the practical and positive programme that has been outlined by the Government. I commend the Bill to honourable members.

Debate (on motion by Mr Uren) adjourned.

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