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Wednesday, 31 March 1965

Senator SCOTT (Western Australia) . - I rise to support the Bill. I want to deny, straight away, the statements of Senator McClelland to the effect that the Minister for Housing (Mr. Bury) is half-hearted about this Bill. He certainly is not halfhearted. As a matter of fact, the Government, in its policy speech for the last election for the House of Representatives, foreshadowed this Bill and said that if it were re-elected this would be one of the measures enacted. If I remember correctly there were some 13 or 14 promises made in the policy speech of the Prime Minister (Sir Robert Menzies). Two promises related to housing. As honorable senators will remember, one of those promises concerned a homes savings grant to people under the age of 35. years who would receive up to a maximum of £250 if they were prepared to save £750. The Government said that those people would be entitled to a free gift from the Government of £250, or part thereof, and with the £750 they saved it would make a total of £1,000. For every £3 they have saved, they are entitled to receive £1 from the Commonwealth. The relevant bill was introduced about 12 months ago. Since the enactment of that legislation, 25,000 applications have been received, of which 17,700 have been determined. A total of 16,200 claims have been paid, the total amount of Commonwealth money paid out being in excess of £3i million. As I said earlier, the measure we are discussing tonight is the fulfilment of the second of the Government's promises in relation to housing.

Before discussing the Bill further, may I say that of the 14 promises that were made by the Prime Minister during the election campaign in November 1963, 12 have been honoured. One of the remaining two promises - the equalisation of fuel prices throughout the Commonwealth - will be honoured during this sessional period, and I believe that legislation to give effect to the promise in relation to unfair trading practices will be introduced during this sessional period or early in the next session.So, if the legislation we are now discussing is passed during this period, almost all the Government's promises will have been honoured within 18 months of its being returned to office.

The Bill provides for the establishment of a Housing Loans Insurance Corporation which will consist of five members, including a Chairman and a Deputy Chairman who will be appointed for a period of seven years. The other three members will be appointed for terms of up to three years, one being appointed to serve for one year, one to serve for two years and the other to serve for three years. After the legislation is passed the Corporation will be given a sum of £100,000 with which to commence business. As provided in the Bill, the Corporation is not to make a profit; its function will be merely to insure loans, for which it will charge a premium. That premium will cover its operating costs. As the Corporation will not be a profit making organisation, it is envisaged that it will be operated at a minimum of expense.

The purpose of the legislation now before us is to give to the people of Australia an opportunity to borrow sufficient money on first mortgage to cover almost the total cost of their dwelling. Provision is made for up to 95 per cent, of the total cost to be insured, but it is envisaged that loans of up to only 75, 80 or 85 per cent, of the total cost will be insured. Only in rare cases will loans of 95 per cent, of the value of the home be insured. Let us assume that a young married couple who wish to build a home have saved £750 between them and under the Homes Savings Grant Act have received from the Commonwealth an additional sum of £250, making a total of £1,000. If the husband is in receipt of an average or slightly above average income, he and his wife will be able to approach a financial house for further assistance. No doubt they will be referred to the Housing Loans Insurance Corporation with a view to ascertaining whether they are a good risk. I should imagine that, as the husband has a good job and they have £1 ,000 in the bank, they will be entitled to borrow up to 85 per cent, of the total value of their home. Thus they will be enabled to obtain a block of land and build a home to the value of £6,000. That would give them an equity of 15 per cent. If they built a home with a total value of £5,000 they would have an equity of 20 per cent. This means that, in the case of the £6,000 home, the Housing Loans Insurance Corporation would insure the lender to the extent of 85 per cent, of the total value or, in the case of the £5,000 home, to the extent of 80 per cent, of the total cost.

Under this legislation, the whole of the sum borrowed could be obtained from the one institution. That is an important aspect of this measure and that is why the Minister is so keen about it. Moreover, the interest would be charged on the reducing balance of the loan. Before the introduction of the Homes Savings Grant Bill and the measure now before us, if a person who wanted to build a house costing £6,000 had a deposit of £750 and was able to raise only 70 per cent, of the total cost by way of first mortgage at the ordinary rate of interest permissible under this Bill-

Senator Cooke - Has a rate been set?

Senator SCOTT - No, a rate has not been set, but it has been stated that it will be reasonable.

Senator Cooke - -But no rate has been set.

Senator SCOTT - That is quite correct.

Senator Cooke - What would the honorable senator regard as being a reasonable rate?

Senator SCOTT - I have heard members of the Opposition mention a rate of 6 per cent. 1 should say that that would be a reasonable rate.

Senator Cooke - A flat rate of 6 per cent.?

Senator SCOTT - No, reducible. If he wished to purchase a home valued at £6,000 he would be able to borrow about 70 per cent, of that amount - about £4,200. Alter paying a deposit of say, £800, a balance of £1,000 would need to be raised by a second mortgage loan. As honorable senators know, - interest rates varying from 10 per cent, to 15 per cent, are payable at present on second mortgage loans. The intention of this measure is to eliminate entirely the need for home purchasers to pay high rates of interest on second mortgage loans. Providing the home purchasers or home builders are approved by the Cor poration, they will be able to obtain up to 85 per cent., or sometimes 95 per cent., of the total amount they require.

I believe that the legislation before us now is one of the greatest pieces of legislation introduced in this Parliament since I have been a member of it. I know that members of Government housing committees have made studies throughout the world of schemes of this type and have found that such business is transacted both in Canada and in the United States.

Senator Ormonde - How long did it take such schemes to get going in other countries?

Senator SCOTT - A similar scheme has been operating in Canada for 10 years. Before the Government introduced this measure in this Parliament it invited the director of the Canadian scheme to visit Australia and explain how it operates. Information was also obtained from other countries including the United States of America, and from the big Australian finance and housing agencies. I therefore believe that we can take it that this legislation has the approval of most of the finance and housing concerns in Australia. This legislation deserves the full commendation of both sides of the Senate. As the Opposition is not opposing it, the legislation must have its approval. Honorable senators opposite have said that it is a bit weak, but this criticism we can understand because it is necessary for them to say something critical about it, or they would not be an Opposition. Senator Cavanagh said that this Bill, when it is passed, will not provide another house in Australia.

Senator Cavanagh - Will it?

Senator SCOTT - I draw Senator Cavanagh's attention to the. related legislation, the Homes Savings Grant Act, which has given to our young people from the taxpayers £3£ million since its inception. Senator Cavanagh implied that that sum of £3-} million will not build a house.

Senator Cavanagh - I say that because of the way in which it is distributed; it will not build a house.

Senator SCOTT - 1 presume that the legislation before us can be taken in conjunction with the related measure which, although it has been enacted for less than a year, has provided £3i million for our young people. This amount has been placed in their bank accounts so that if they wish they can approach the Corporation when it is set up and obtain practically all the finance they need for home building. They can obtain amounts up to £7,000, depending entirely on the type of home that is to be constructed and the amount of salary earned. In some instances persons earning £25 a week, which is about the average weekly wage today, may borrow almost three times their annual salaries. After payment of a deposit, a person on the present average weekly wage will be able to buy a house valued at almost £4,000. Many people today earn more than £25 a week. I understand that many men working at Mount Isa are getting £60 a week. If approved of as borrowers, they may obtain loans of about three times their annual salary - about £9,000.

Senator Cavanagh - How many men at Mount Isa own a home?

Senator SCOTT - Many of them do not need to own a home, because they are provided with homes at cheap rentals, by the mine management. The honorable senator who has interjected knows that hundreds of homes have been built at Mount Isa. Senator Cavanagh is just against the Government. He began his speech by saying: " I want to say a few things about this measure that show it cannot be any good ". The first thing the honorable senator said was that this legislation will not provide one extra house in Australia. I have already explained to him to the best of my ability that in conjunction with the Homes Savings Grant Act, which has been passed by the Parliament, the legislation before us will provide hundreds of houses in Australia. They will be provided through loans at low rates of interest - rates much lower than the rates at present being charged on second mortgage loans.

Senator Ormonde - In the sweet by and by.

Senator SCOTT - The honorable senator knows well the record of this Government and he should not argue. In the past 30 years, for the last 15 of which the Liberal Party has formed or has helped to form the Government, a great number of homes have been built. The present number of dwelling houses in the Commonwealth is about 3,250,000. That figure represents almost double the number of homes in Australia 30 years ago and I believe that the present total will be doubled within the next 25 years. This has been said by the Minister. We can expect in the next 25 years to have within the Commonwealth about 6,500,000 homes. At present, on the average, each home is occupied by fewer than four people. That is a record to be very proud of and. as a government, we are proud of it. In normal circumstances we can expect that in another 25 years 6,500,000 homes will be built for a population of between 20 million and 25 million.

Returning to the measure before the Senate, I commend the Government for making provision for homes for farmers. It is stated specifically in the Bill that provided a farmer grants a first mortgage over a portion of his land, the Corporation can insure a loan for home building on that land. I think this will cause more than a little difficulty, because the Bill does not make any provision to speculate in land or to deal in land, except in the case of land on which a home will be built immediately. The Corporation must be convinced that the applicant has either started to build a home on the land or that he is intending to build a home on it.

I believe that we must pay some attention to our farmers. This is the first piece of housing legislation that has been brought forward in the Commonwealth to make provision for farmers who wish to erect dwellings on their properties. A farmer will have to negotiate a first mortgage with a lender. This is what the Corporation will require before the farmer borrower can benefit from this legislation.

Senator O'Byrne - The war service homes legislation has a similar provision.

Senator SCOTT - This is the first time, leaving aside the war service homes legislation, that the Commonwealth has actively assisted in a financial way in the construction of dwellings on farms. This measure now provides that a farmer may negotiate a first mortgage in respect of a portion of his land. I understand that it will be necessary for the farmer to subdivide and provide quarter acre blocks, with access to each block. Then the farmer will be entitled to obtain finance from a borrower to erect a house on one of those blocks and to avail himself of the guarantee which is available from the Corporation under this legislation.

Farmers these clays frequently have to provide accommodation for all their employees. In many cases it is most difficult for them to do so. This is particularly noticeable in the case of new properties in Western Australia and in other States. I believe that many farmers in Western Australia will be only too pleased to take advantage of this legislation, so that they can then carry on with the development of their properties and provide decent housing for their employees, probably better housing than they would be able to provide if it were not for this legislation.

Senator Wright - What is the practicability of a farmer getting a loan on the balance of his farm?

Senator SCOTT - I did not say that.

Senator Wright - No, but that is what he will be put to. He will have to get a separate mortgage.

Senator SCOTT - Yes, he will have to get a separate mortgage. He will have to negotiate a mortgage with the lender in respect of the quarter acre block. You might say that the land is not very valuable, but I believe he would have to pay a deposit of 15, 20 or 25 per cent, of the total cost of the building. Although the land might be worth only £10 or £20 an acre, the Corporation would take into consideration the value of the home. No doubt the farmer would not be entitled in those circumstances to obtain as much as 95 per cent, of the total value, but I believe he could expect to get something between 70 and 80 per cent. That is how I think it will work out in practice. I might also remind the Senate that many farmers now employ men who live in nearby towns and drive to the farm properties daily. There will be nothing to prevent a farmer buying blocks in a nearby town and obtaining money from a financial institution, covered by a guarantee from the Corporation, to build homes for his employees in that town. I believe a farm employee is entitled to as good a home as a person working in any of the more favoured industries.

There is another feature of the Bill which I believe is vitally important. I refer to the provision which prevents the Corporation from guaranteeing loans granted to persons who are building or intend to build substandard homes. This provision in itself will help to improve housing standards throughout the Commonwealth, which I believe is of vital importance.

I would like to conclude my remarks by saying once again that the Government has not acted haphazardly in respect of this piece of legislation. We are wholeheartedly behind it. We know full well that the first leg of the Government's housing proposals, the homes savings grant legislation, has already made available £3,500,000, and I can assure the Senate that the second leg, the setting up of this Corporation, will be as effective as the first has been.

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