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Wednesday, 31 March 1965

Senator WILLESEE (WESTERN AUSTRALIA) - I am not aware of that. Even that is not quite germane. The point is that Senator Sir William Spooner implied today - and Senator Wright listened to him - that the homes were for rental only and that there was no intention that the occupiers should be able to purchase them. It was not until 1955 that there was a slight amendment and not until 1956 that a change was made in the whole setup.

The Opposition supports the measure, but with reservations. Since the Federation of the Commonwealth the most important single step in the history of housing occurred in 1945 when the Commonwealth entered the field and a new concept arose. In 1945 it became quite moral and completely in accordance with the legislative programme to say that Commonwealth money should be devoted to housing the Australian people. That was the important housing news of that day. Today, Senator McClelland very adequately pointed out what Senator Sir William Spooner and many other people seem completely to ignore. In 1945 Australia was at war and many people completely ignore the fact that the internal economy at that time had to stand still. They judge the economy as though there were nothing unusual occurring at that time.

Prior to 1939 hundreds of people were not able to obtain houses because of the money situation, but the scheme was so good and was so well carried out that people began queueing up in their anxiety to get into houses. The scheme has been well carried out by this Government also since it came to office. A situation of greater demand was created and action had to be taken. Any Government would have taken the same action and it is at best irrelevant to take snide shots at the scheme 20 years later. It can only serve to cloud the atmosphere in a debate on housing. A tremendous programme lies in front of the Government because of the great increase in the costs of land and home construction. I have spoken to builders who operate in a big way in building houses for speculation in Perth in the last few years. They have said to me: " Quite frankly, it is impossible for us to obtain land at suitable prices to build houses that we would be proud to put our names to and sell them to working class people. It is a financial and physical impossibility for us to come down to that section. So we are building for the middle class people houses valued at about £5,500 ". These homes are built on land costing about £2,000 and when the cost of furnishings and other extras are added the total amount required is about £10,000. Another type of home at an even higher cost is also built. This inevitably means that the people on low incomes must come flooding back to the Governments.

The considerations I have stated influence the Opposition to support the Bill tonight. We regret that we could not engage in a more detailed debate because of the nature of the Minister's second reading speech which, incidentally, was delivered on 17th November last. Today we receive our first chance to debate the measure. Although I support the Bill I regret some of the things that have been said during this debate. To adopt the phrase used by the Minister, we hope that the legislation will prove to be a success. We certainly hope that other legislation will be introduced to grapple with the basic problem of housing the Australian people. We are a nation of home owners and home lovers and we do not want to get away from the achievements of the States prior to the war. In my home city of Perth the old workers' homes scheme did marvellous work. It is almost unbelievable that prior to the war a home could be purchased on a deposit of £6 10s. Od. Home ownership is a tradition of the Australian people. The Opposition supports the Bill and hopes that it is the forerunner of legislation which will keep the Commonwealth vitally interested in the basic desire of the Australian people to own their own homes.

Senator PALTRIDGE(Western Australia - Minister for Defence - r9.45]. - in reply - Despite the fact that this Bill is unopposed, the debate has given rise to a surprising measure of pessimism and gloom. I think we should approach this housing legislation with the knowledge very firmly in our minds that this country enjoys one of the highest home ownership rates in the world. Over 75 per cent, of the homes in existence are owned or are being purchased by the occupants of those homes. Having regard to that fact, we should be able to put it into its proper perspective and regard this Bill, not as an omnibus bill covering the whole ambit of housing in Australia, but as a bill which is directed - and, I submit, very effectively - to the solution of a problem, or possibly a group of problems, but basically one problem, which we set out to alleviate and, ultimately, to cure.

This Bill represents a positive approach to the serious problem facing many home seekers. I refer to the problem of obtaining loans at reasonable Tales of interest without having to resort to costly second mortgage finance. We confidently expect that the Bill will be of great benefit to the community as the scheme develops over the years. One line of criticism that has been made seems to indicate that unless the morning after this measure becomes law the problem of second mortgage finance disappears, it will have been a failure. I want to emphasise that the financial habits of a nation do not alter overnight, and that it will take time for this measure to become properly embedded in the housing finance structure of the nation. It will take time for lenders and borrowers to accept it as a normal facet of housing finance. If we accomplish this result, as .1 confidently believe we will in the years to come, this legislation will be appreciated as a very useful addition to the armoury of housing finance which, over the years, this Government has sought to set up in Australia.

I was very disappointed that Senator Bishop in leading for the Opposition should have said that this legislation is merely picking at the problem. It is not picking at the problem, it is breaking completely new ground in Australia in respect of this matter of reducing the need for second mortgage finance. As I have said, the aim of this measure is to provide for finance to be available on first mortgage from a single lender to the extent of up to 95 per cent, of valuation, so that a man may borrow, up to that maximum, all he needs and can reasonably expect to repay. That is the prime object of the Bill, but the second object, and one which in its own area is as important as the first object, is to encourage the provision of more money from the private sector of the economy for housing finance at reasonable rates of interest. This I believe to be a very desirable aim indeed. The Bill is directed straight at that objective - the objective of more money from the private sector for housing purposes.

If I may anticipate an amendment that is to be presented by the Opposition, let me make the comment that there seems to be a good deal of confusion in the minds of members of the Opposition as to the purpose of this Bill. It is directed at private finance. The provision of low interest Government finance .through Housing Commissions, the War Service Homes Division and similar Government authorities is one thing. This is one direction in which the Government has moved over the years and in which it will continue to move. But the measure before us is directed at attracting private finance into home building, and this, I repeat, is most desirable. It was, of course, at one time a characteristic of the Australian economy that private finance in large quantities was available for home finance. But in the postwar years the provision of private finance for this purpose became unfashionable and for a period quite unprofitable. However, the Government considers it desirable and I believe the people now see that it is desirable to 'attract private money back into this field. This is the second object of the measure before us.

I was very pleased today to hear my colleague, Senator Sir William Spooner, say that this is not only desirable on philosophical or political grounds, but also that it makes good commonsense economically. I firmly believe that it does. Having in mind all the projects' which are being undertaken or to be undertaken in Australia these days and which can only be undertaken with the aid of Government finance, it is proper that private finance should be allocated to areas in which it can perform the most useful function.

We embark on this scheme with not a great deal of direct experience of it. We have made inquiries in those parts of the world in which we thought inquiries would be profitable. We have closely consulted the United States of America and Canada, in which countries schemes of this kind have been in operation for some time. We embark upon this measure admittedly in a modest way. One of the criticisms which may be levelled at the Bill is that it does not at once undertake to do all the things that it might conceivably do in a period of years. If this is to be a criticism, my answer is that it is far better to start in a modest way and, in the light of experience, develop and expand the activities of the Housing Loans Insurance Corporation than to embark hastily upon a programme which may prove to be over-ambitious. It must not be forgotten that the Department of Housing is not at the moment richly endowed with personnel with the experience to undertake the kind of work required by this measure, but as time goes on the necessary administrative resources will be built up and .there will be an opportunity for greater expansion.

The Opposition has had a good deal to say about the fact that there is no stated or indicated interest rate or premium rate to be charged by the Corporation. Let us consider the reasons why. It is interesting to note that one of the criticisms levelled in another place, and I think repeated here, was that at the point of time when we are introducing this legislation it has been found necessary to make a slight increase, in interest rates. If anything, this merely gives point to the prudence of not stating now what the interest rate may be. The interest rate will depend on a number of factors. First, the various transactions will differ one from another. A reasonable interest rate, for example, in the case of a new cottage might well be different from that charged in respect of the erection of a large block of home units or in respect of providing a second mortgage in an old home for installation of electricity and sewerage. Secondly, while it is obviously desirable to keep borrowing rates charged to home owners as low as practicable, the maximum rate must be high enough to encourage the flow of funds into housing. This is particularly relevant to the point referred to or implied by Senator Willesee, who referred to the possibility of setting the rate either at the same rate as or in consonance with the long term bond rate. If the maximum rate is set too low for the main potential lenders, most of whom will have to borrow from the public, the Corporation will clearly make very little contribution of a practical nature to the housing problem. As the maximum insurable interest rate is a matter for determination by the Corporation in the first instance, subject to later concurrence by the Minister, it would not be proper to commit the Corporation some time in advance of its operations and before its members have been able to tender the Minister for Housing (Mr. Bury) appropriate advice. The three reasons I have given will, I am sure, all be recognised as hard, practical, matter-of-fact reasons why interest rates should not be stated at this time.

Much the same criticism is made of the absence of a stated insurance premium. The explanation of this is that the Corporation will be covering varying types and degrees of risks and must be left free to decide, in the light of its own experience, the premium which it will charge in respect of each type of risk. As mentioned in the second reading speech, it is expected that the Corporation will normally charge an initial once and for all premium along lines that operate in theCanadian scheme. The Canadians operate* mainly on a 2 per cent, once and for all! charge, which is usually added to the loan and amortised over its life.

I particularly noted with interest the very valid point made by Senator Prowse. He said that the amount of premium that would be charged in order to secure these loans, set against the interest saving was - to use his own word - infinitesimal. It is envisaged that a scale of premiums varying according to the measure of risk involved will be charged. It would seem reasonable, for instance, to charge a lower premium on a loan of, say, 80 per cent, of property valuation, with a short period of repayment, than on a loan of 95 per cent, over a longer period. The Government is keen that the Corporation be not tied down on these matters. This is surely a matter for commercial judgment. The Corporation will be allowed maximum freedom of action, restrained only by business prudence and the particular limits of overall government policy. It must be free to deal with successive situations as they occur.

I think that most of the points which came from the Opposition were dealt with as they occurred by my colleagues on this side of the chamber. I noted particularly the interesting point made by Senator Laught in respect of strata titles. He referred', particularly to the fact that procedures la: the Australian Capital Territory, as distinct from procedures in some States, do not provide for strata titles and these, therefore, would not be eligible for treatment under our insurance loans scheme. I should like to take the opportunity of assuring him that I have particularly noted this point. 1 do not contest what he put. Home units of this type show an increasing trend on the Australian social scene. I propose that his comments be brought to the notice of the Minister for Housing (Mr. Bury.)

Senator Prowsereturned to a topic on which we have heard him formerly, namely, the position of the farmer. He spoke of the rural dweller in relation to the provisions of this Bill. I do not wish in any way to contest the validity of what he put. It is quite true that there is provision for this scheme to apply to farm properties, as was indicated by Senator Scott, but the practical problem was pointed up by Senator Prowse when he said that the difficulty was to get some one to lend against this particular type of security. Senator Prowse acknowledged that he had had discussions with the Minister about this and that he knew that the Minister had put the question under study. I want to add only that I noticed that when this matter was raised in the debate in the other place the Minister did in fact give the same sort of assurance, namely, that he proposed having a look at it, recognising it as a problem which required his particular attention and study.

In this quite brief reply to the debate, I end on the note that this piece of legislation, while not being a comprehensive, allembracing bill on the matter of housing, does bring a very practical, very realistic and what I believe will prove to be very successful approach to a particular housing problem, which is, I believe, the greatest single housing problem that we face today.

Question resolved in the affirmative.

Bill read a second time.

In Committee:

Clauses 1 to 3 agreed to.

Clause 4. (1.) In this Act, unless the contrary intention appears - "approved lender" means a person approved by the Corporation under the next succeeding section but, except in relation to a loan referred to in sub-section (4.) of that section, does not include a person whose approval under that section has been revoked; "approved security" means a first legal mortgage or a mortgage that will, upon registration under a law of a State or Territory of the Commonwealth, constitute a first legal mortgage and, in relation to such prescribed interests and for the purposes of such classes of loans as the regulations specify in respect of a particular kind of security, includes a security of that kind;

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