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Wednesday, 26 September 1973
Page: 1511

Mr O'KEEFE (PATERSON, NEW SOUTH WALES) - My question is addressed to the Prime Minister. It concerns the use of the bond rate to force up interest. Is it true that Australia's largest life assurance companies have frozen loans and in many instances are refusing to complete loan transactions? Is this because they cannot lend money because intending borrowers cannot be quoted terms? Have some of these companies stated that until the position clarifies they will not be making housing loans? Will the Prime Minister and his Government give some lead and decision in this field so that normal lending operations can be resumed with benefit to the nation?

Mr Whitlam - The Acting Treasurer will answer the question.

Mr HAYDEN - 1 do not know of the particular case to which the honourable member refers. The only information I have is advice which I picked up from a comment in one of the newspapers, that there is much more activity in the short term money market than there is in the long term money market. At this stage perhaps that is not a. bad thing because it means that people are holding assets rather than spending them. I would suggest that at this stage the crucial need is to soak up excess liquidity in this community. In the last 6 months of the last calendar year the increase in the money volume in the community exceeded 17 per cent, which surely must be a record in this community. There is a lag between when the increase in the money volume occurs and when the effects on increased liquidity take place with spending propensities in the community. Those are the effects we are now experiencing.

The Government has inherited these problems from the rather reckless behaviour of the last Government in a desperate and panicstricken bid to try to buy back favour as the election date closed in on it. I will investigate the suggestion that the honourable member has made. As I mentioned yesterday, the Government is conscious that in adjusting interest rates, which is a perfectly legitimate exercise for soaking up excess liquidity and an exercise to which previous governments frequently referred when it was appropriate, it must be mindful that, insofar as the housing sector is concerned, those people about whom the Government must be most concerned - the moderate and middle income earners - should not be asked to carry unreasonable burdens. We are moving to a speedy conclusion in the arrangements there. I suggest that any pause which may occur as a result of these transition arrangements, which are occurring over a very short period, will be more than outweighed by the concern which we are displaying for the moderate and middle income earners and by the benefits which they will achieve as a result.

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