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Friday, 16 August 1974
Page: 1062

Senator McLAREN (SOUTH AUSTRALIA) - Is the Minister representing the Treasurer aware that the Home Buyers Association of South Australia has organised a meeting, to be held at the Adelaide Town Hall on 19 August, in protest against the high home loan interest rates? Can the Minister say why the increase in interest rates on home loans has been necessary? Can he also say what steps the Government intends to take to ease the burden of interest rates on home buyers, particularly those buyers in the lower income bracket?

Senator WRIEDT (TASMANIA) (Minister for Agriculture) -I am not aware of the proposed meeting referred to by Senator McLaren. I can answer the question only in general terms. The Government has found it necessary, over the last 12 months or more, to apply the mechanism of increased interest rates in order to get rid of some of the excess liquidity in the economy. It is one mechanism available to the Government. We realise that institutions that are lending money for housing purposes naturally must pay a higher rate of interest for the moneys borrowed. In turn, of course, home buyers must pay a higher interest rate. Irrespective of the rights or wrongs of the use of this mechanism, it is one which I think we all recognise has to be taken into account.

The repayments as a result of those higher interest rates must be compared with the increase in principal repayments which would occur if the Government did not take the step of increasing interest rates. Every time we consider the higher interest rate argument we have to bear in mind what it would mean to home buyers, as far as their principal repayments are concerned, if in fact the inflation trend were not arrested by means such as interest rate increases. The Government proposes during the forthcoming Budget session to introduce a tax deductibility system for mortgage interest repayments on homes which, I understand, will apply during the course of this current financial year. The Government believes that that would be a fair and equitable way of relieving some of the pressure which exists on home buyers now, especially those in the lower and middle income brackets.

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