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Wednesday, 31 March 1965

Senator WRIGHT (Tasmania) .- I wish briefly to supplement what I have said in the light of what has fallen from the Minister. I emphasise that in his second reading speech the Minister said that classes of approved lenders will include banks, life insurance companies and building societies. Those are the three classes that he approves and that he tells the Parliament specifically that he approves. He also said -

As time goes on other classes of lenders will almost certainly be approved.

That means simply nothing. As a parliamentary operation it means nothing. What other classes will be approved? When will they be approved? In what circumstances will they be approved? On what criterion will they be approved? As to the three chosen classes, let me return to the book to which I have already referred. I prefer to quote the printed word rather than rely upon impressions or opinions of my own, but I point out that the printed word corresponds with the impressions that I have gained from my own experience. It states -

Between 1945 and 1955 the housing outstandings of the major trading banks increased steadily at about the same rate as outstandings of all the institutions. However, the 1955 figure of £106 million was a peak; since then outstandings have fluctuated just under £100 million. The £95 million at June 1962 represented only 7 per cent, of the total institutional outstandings; in 1955 the proportion was 17 per cent.

So since 1955 the first of the chosen three has reduced the proportion it has contributed to housing loans from 17 per cent, to 7 per cent. We all know this has been done under insistence that trading bank advances should be turned over rapidly with advances of six months or perhaps 12 or 18 months at the most. The result has been more money available for fringe finance institutions and subsidiaries running on commercial hire purchase propositions in the motor car industry and the machinery industry.

Then we come to the life insurance companies. I support all these companies operating in their particular way but I oppose the Minister's choice of the first three organisations which have gained his approval. The publication " Studies in the Australian Capital Market " to which I have previously referred contains this reference to the life insurance companies -

.   . there interest rate is somewhat higher - in September 1963 it was generally 6 to 6} per cent.

I would think that now the rate is certainly 7 per cent. The publication continues -

Except in exceptional cases lending is restricted to policyholders or to persons willing to become policyholders. Some companies normally require endowment of whole-of-life cover for the full amount of the mortgage, but others consider 50 to 75 per cent, sufficient. The company treats the life policy as collateral security, taking a charge over it as well as a mortgage over the property. Normally repayments plus insurance premiums can mean a fairly heavy commitment for the borrower, so again this precludes the lower income earner.

Anybody who has had experience of borrowing from life insurance companies during the rampage of the last eight years will know the cost of insurance. Insurance is a facet of commerce that I support thoroughly but not as an adjunct to be forced on a borrower through the power of lending money and making it too expensive for the borrower. He has to take out insurance and if he repays the loan after getting money on more advantageous terms at the end of three, five or seven years, he has to cancel the insurance.

But having pointed out .the objections to the favoured three, I support the purpose of the Bill to attract money from the private sector through the benefits of the insurance provided by the Bill. As I have said, the private lender is now lending more than any one of these favoured three. But I want to add something further. It has been said repeatedly in the course of this debate and by the Minister in another place that it is hoped to encourage a market in housing securities through the insurance given on these loans. So what do we foresee if we have any commercial acumen at all? If the benefits of this Bill are to be channelled to the favoured three - .the big commerical complexes - as has been stated by the Minister for Defence in closing the second reading debate, they will be expected to get their money from the public. They will make their profit in lending and then will make their profit in buying and selling securities. But who will the buyers and sellers of the securities be? The answer is: The ordinary Bill Smiths who have £2,000 or £5,000 to lend.

It is wholly contrary to any purpose I ever dreamed was implicit in this Bill that it should be channelled in favour of approved lenders only. What Liberal will permit the benefits of legislation like this to be given, by the discrimination of the Minister or the Corporation under statutory power, only to certain classes of people who will lend for home building? It is completely contrary to the idea of free enterprise especially when the purpose of the Bill is to get such money from the private sector for housing finance.

I submit that the Corporation, by its own administration methods, is left completely free to determine the soundness of every risk, and that can be determined upon the report as to the security and the terms of the loan. It is completely contrary to that business judgment which the Minister properly suggested in his closing speech should be left to the Corporation, to say that the Corporation shall insure the loans only in the first instance to approved lenders who shall be banks, life insurance companies and building societies, while excluding all other people who are now lending money for home finance. It is for these reasons that I submit the provision for approval is quite inappropriate.

I want to refer to only one argument of the Minister and that concerns administra- tion. He said that advice from all quarters showed that the arrangement would run more smoothly if the Corporation had to deal only with certain classes of lenders. It might be convenient to operate in this way but I suggest that the purpose of the Bill is to give the benefit of proper terms to all bona fide lenders. The Corporation should manage its business so as to cope with all the business offering. If the provision of this insurance means a reduction in the cost of housing finance, as we confidently hope, from 7 per cent, on mortgage to 6 per cent., the proposal will be justified. I simply cite those figures. I do not know what is the anticipated figure but that seems to be a reasonable anticipation of the probable margin of advantage to be gained through this Bill. Why then limit it to banks, insurance companies and building societies? Why not make the benefits available to all those other people who provide money for the benefit of this industry?

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