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Wednesday, 31 March 1965

Senator MCCLELLAND (New South Wales) . - Senator Sir William Spooner during the course of his remarks said that one of the interesting aspects of the Commonwealth and State Housing Agreement has been a complete rejection by all State Governments in Australia, whatever their political colour might be or might have been at the time, of the original approach of the 1945 legislation. But I remind the honorable senator that the 1945 Housing Agreement was made immediately after the cessation of hostilities. It was made after a period of five years of war when the nation's complete war effort was geared and devoted to winning the war; when men were returning from the front; and when men and women, who had been thrown apart for years as a result of the war, for the first time were re-united as husband and wife and were searching for homes. At that stage, of course, there was a complete shortage of tradesmen and of materials.

It was in this atmosphere and against this background that the 1945 Commonwealth and State Housing Agreement was negotiated. Tt remained in existence until about 1956 - some six years after the present Government came into office. With the expiration of the original agreement in June 1956, there came into being, at the insistence of the Commonwealth, an Agreement which provided for the allocation of a certain percentage of funds to co-operative building societies; the utilisation of a further proportion of funds in the provision of housing specifically for serving members of the defence forces: elimination of the rental rebate provisions and loss sharing arrangement of the original Agreement: and determination of the interest rate on moneys to be made available under the Agreement at 1 per cent, less than the long term bond rate.

The effect of these new conditions, which were made at the insistence of the Commonwealth and carried into later Agreements, was to reduce the amount of finance available under the Agreement for housing of ordinary applicants through State housing authorities. The new conditions also brought about an increase in economic rentals because of what was. in effect, an increase in the interest rate, to the order of some 10s. a week. But they are things of the nast. Our attention is now directed to the Bill before the Senate.

At the outset let me point out that I, as a Labour man, together with each of my colleagues on this side of the House, hope that the day comes in Australia when every man who wants to own his own home will be able to do so. We are dealing with the Housing Loans Insurance Bill 1965. In his second reading speech the Minister for Housing (Mr. Bury) said, amongst, other things, that the purpose of the bill is to establish a Housing Loans Insurance Corporation to insure lenders against loss arising from the making of loans for housing.

The Bill authorises the Corporation to insure loans made for the erection of dwellings, the purchase of existing dwellings, additions to homes, repairs and renovations, and the discharging and refinancing of existing mortgages on homes. There can be no doubt in the mind of anyone who has made a detailed survey of housing generally that this is a great national and social problem. While we of the Opposition have grave doubts that this Bill will alleviate to any extent, the present grave national problem, we do not oppose it. That housing is a growing national problem is beyond doubt.

I think it fair to. say that it is only since the 1961 Federal election, after which the Government had a majority of only one in the other place, that it has decided to try to tackle this problem at last on a national basis. Indeed, despite an ever increasing shortage of homes since the commencement of the Second World War. in 1939, it was not until last year, after the 1963 Federal election, that the Government decided to establish a Commonwealth Ministry of Housing. One does not now envy the Minister for Housing who is confronted with the problem of trying to cope with the great backlag that has developed over the years, plus the ever increasing demand for housing as a result of the growth of population and the desire of the younger generation to marry at a comparatively early age.

There could be no doubt that with the post war population explosion and the influx of migrants into Australia the demand for housing will be greater in the future than it has been in the immediate past, and one cannot help but feel that the present proposal advanced by the Minister, is a mere skimming over of the whole problem. According to the annual reports of the various State housing authorities, last year approximately 45,000 people registered with them for accommodation. Clearly these are people, ordinary humble people in the community, who will not receive any advantage from the mere passage of this Bill.

In his second reading speech the Minister said that at present the average cost of a house and land is in the vicinity of £5,000. Frankly, I doubt this very much. Indeed, I think it is a most conservative estimate because if one takes £400 a square as the average cost of erecting a timber dwelling, one finds that a 10 square home costs £4,000, leaving only £1,000 for the purchase of a block of land in any metropolitan area. This is a very conservative basis having regard to present day costs of land and home construction. A more realistic and accurate amount, even on a conservative basis, would be of the order of £6,000.

For the sake of the argument, however, let us accept the Minister's statement that the average cost of constructing a dwelling and purchasing an ordinary block of land is about £5,000. We have been told that a person's income will be the factor which will determine the size of the loan to be insured under the proposed scheme. Since the scheme was announced references have been made to the fact that the Corporation to be set up under the legislation will consider that three times the annual income of the applicant will provide a good yardstick on which to base a loan. I think it was Senator Cavanagh who pointed out that in this case a loan to be repaid over some 25 years at 6 per cent, reducing interest would involve repayments very close to one-quarter of the applicant's income. On this basis, in order to obtain a 95 per cent. loan on the average cost that the Minister cited, namely £5.000, which I suggest to honorable senators is a most conservative estimate of cost, having regard to present day prices, the borrower would need a net income of about £31 a week. Because, according to the Commonwealth Statistician, the average take home pay of the Australian worker these days is about £23 a week, one can see that not many ordinary wage and salary earners will receive much assistance from the passage of this legislation.

I know it is not the intention that tha Corporation should itself engage in money lending. It will merely insure loans against default by the home buyer. Because the Government has allocated only £100,000 for this purpose, this seems to me to indicate that not much tangible assistance will be forthcoming to the home hungry citizens of Australia, especially when one appreciates that the scheme is designed to insure loans that are made not only for the purchase of dwellings but also to cover the cost of repairs to and renovations of existing buildings.

The Minister also stated that, quite justifiably in his opinion, major lenders have rarely been willing to lend where they see a possible risk of loss. He went on to say that he hoped the major institutions that lend money for housing would be willing to make loans up to a high proportion of the value of a dwelling. Frankly, I doubt that very much risk capital would be involved in lending money to people for the purpose of building or buying a home, especially when one remembers that as a result of the ever increasing demand for homes the value of the existing dwellings is appreciating considerably. But because there is no specific requirement that anybody making a loan must insure the loan with the Corporation - since the Minister merely expressed a hope that they would do so and nothing else - there can be no guarantee that this legislation will operate efficiently. Indeed it would appear from the Bill and the Minister's second reading speech that the scheme will rely entirely on the willingness of traditional lending institutions or authorities to make high ratio loans available.

I have the impression that similar housing indemnity schemes were introduced in New South Wales and Victoria several years ago but that they had little success because of boycotts by banks and insurance companies. The real hope of success for this scheme lies in the Commonwealth Government bringing pressure to bear on those financial institutions to ensure that they do provide loans in accordance with the provisions of the Bill. However, as I have said, it is pointed out by the Housing Industry Research Committee of Victoria, an organisation sponsored by a number of associations connected with the building industry, that there is no provision for this at all in the Bill. AH the Minister has said in his second reading speech is that he hopes the major institutions that lend for housing will be willing to make loans up to a high proportion of the value of a particular dwelling.

Then, of course, there is the question of the charge and the premium involved. 1 suggest that the charge to the borrower for this service will add to the cost of housing loans and give home buyers an even greater burden to carry. We do not know what the premium will be but I notice from the newsletter of the Housing Industry Research Committee that it has been suggested that the premium will be about 2 per cent, of the amount insured. The newsletter adds that this premium will be paid to the Corporation by the lender who will then add it to the loan to be paid for over the period of the loan by the borrower.

As I have said, the Minister has not indicated in his second reading speech what the amount of the premium will be. The legislation merely provides that the Corporation shall charge a premium for insuring a loan, the premium rates to be determined by the Corporation. This should not be, because having regard to the great national problem involved - the housing of the people - the Parliament should be devoting its attention to this matter to ensure that the rate of premium will not be greater than a certain percentage. We should ensure that those who borrow money will not have an even greater burden to carry. Those who are badly in need of housing, such as those who have registered with the housing commissions in the various States, will not be able to seek any benefit from this legislation, and having regard to the added burden that will be imposed on borrowers under this scheme, I suggest that there will be very little beneficial result from it at all.

Sitting suspended from 5.45 to 8 p.m.

Senator MCCLELLAND - Prior to the suspension of the sitting I had pointed out to the Senate a number of deficiencies in the Housing Loans Insurance Bill which is now before us and stated, on behalf of the Opposition and along with my colleagues who spoke earlier this afternoon, that I did not think it would achieve much, if anything at all, towards a solution of the great national shortage of housing. As I have already said, I believe that this legislation is merely skimming across the surface of this great national problem. Indeed, if anyone doubts the scheme it surely is the

Minister for Housing (Mr. Bury) himself. Just from a cursory examination of the Minister's second reading speech one sees that it is full of aims, hopes and expectations without direct evidence of tangible result at all. I will quote one or two sentences at random from the Minister's second reading speech. He said -

Ii is our hope and intention that this scheme will progressively remove the present need for many creditworthy borrowers to obtain a second mortgage loan . . .

.   . the scheme aims to assist people to obtain low-deposit loans . . .

The Minister said that the Government hopes -

That the major institutions that lend for housing will bc willing to make loans up to a high proportion of the value of a dwelling.

He continued and said -

We hope that our offer to insure the repayment in full of housing loans will stimulate private enterprise . .

.   . we hope to attract additional oversea capital . . . Our offer to insure the repayment of housing loans . . will, we trust, go a long way towards achieving these important aims.

A little further on, the Minister said -

We have spoken to builders and housing project developers who will, we hope, be encouraged to expand their private enterprise activities . . . lt is expected that the premium to be charged will be in the form o'f a once-and-for-all payment for insuring a loan up to its maturity date.

As I have said, the Minister's speech seems to be full of hopes, aims, and expectations, but it contains nothing more than that. Even the Minister himself, from his own speech, seems to be uncertain what results will eventually accrue from the passage of this legislation. If the Minister himself is of that frame of mind surely we of the Opposition cannot be blamed for being somewhat of the like opinion. 1 have already dealt at length, along with my colleagues, with what I believe are the main deficiencies in this Bill. In the few minutes remaining to me I want to deal with one or two things that I believe the Government could well be doing something about in order to overcome some of the great demand of the people of Australia for housing. In this regard, I want to refer to the 1964 Commonwealth "Year Book". In this volume it is stated that the total amount spent on new buildings last financial year was £616,400,000. Of that sum barely half, or about £342 million, was spent on house and flat construction. I believe that the Commonwealth Government could well act quickly in this regard to check the huge diversion of funds that are obviously going into the construction of new banks and office blocks in the large metropolitan cities. Frankly, to me it is ludicrous to see these rather salubrious and substantial office blocks - these box like structures - being erected in all the capital cities of the Commonwealth while ordinary people are in want of reasonable accommodation. I think the Commonwealth should act in this regard and urge a two year break in what might be termed skyscraper construction in the large cities in order to divert some of this capital and the labour working on the construction to the building industry as ordinary people know it, especially at this stage. Recently, the Minister for Labour and National Service (Mr. McMahon) said that housing development would be likely to be retarded as a result of the increasing impetus of the Government's defence projects.

I, too, along with my colleague, Senator Bishop, who mentioned this matter this afternoon, support the opinion of the Australian Labour Party that the War Service Homes Division could be expanded considerably to ease the financial situation of those who seek assistance from other money lending institutions. The war service homes scheme has been a quite profitable undertaking on behalf of the Commonwealth. If my memory serves me correctly its profit has been of the order of £40 million. The interest rate charged to people obtaining loans from the Division has been 3i per cent.

If this Bill will assist people to acquire homes the Opposition does not oppose it. However, we say that, having regard to the matters outlined by Senator Bishop, Senator Cavanagh and myself, we do not expect it to achieve much, but perhaps it may assist some people. Bearing in mind the existing housing shortage throughout the length and breadth of the Commonwealth, bearing in mind the actual increase in population that is taking place, having regard to the expanding migration programme, the steady build up of the number of age pensioners in the Commonwealth, as is shown in the Commonwealth " Year Book ", the number of people whose employment is itinerant, the people who are displaced from slum clearance and redevelopment projects in the capital cities, and the needs of expanding country centres, I believe, along with my colleagues, that despite the passage of this Bill those who are sorely in need of assistance to acquire accommodation for themselves and their families will still be found in search of a solution,

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