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Thursday, 4 June 1970

Mr BENNETT (Swan) (12:38 PM) Mr Speaker,a number of petitions have been presented to this Parliament by Western Australian members of all Parties, including myself and the honourable member for Perth (Mr Berinson), in support of the Housing Loans Reform Movement of Western Australia. They request this Parliament to reduce the interest rates on Government bonds to 6% so as to correct the situation created by the Government's recent increase in the bond rate, which has produced an increase in interest rates on housing loans which, in turn, has affected almost all home purchasers in Western Australia, particularly those obtaining homes through building societies. It has resulted in an increase of 5 or 6 years in the period for the repayment of home loans. A home loan repayment period of 30 years will now become a repayment period of 35 to 36 years. The only way in which the buyers can keep the repayment period down to its former length is to increase substantially their monthly repayments. However, as most of the people concerned are not in a position to do this it is obvious that they will be burdened by another 5 or 6 years of repayments. That is to say, they will pay rent for that extra period at the whim of this Government because of its failure to maintain economic stability.

Most home purchasers did not realise that a clause in their agreements permitted increase of the rate of interest they had to pay. I suspect that many members of this House did not know of the existence of such a clause in home purchase agreements. But what about the person who is intending to purchase a home. He also is affected. A letter I received from a prospective home buyer states:

We wish to express our dissatisfaction at the increase in interest rates for housing loans and the general unavailability of housing loan finance. This recent setback in housing finance will prevent us from acquiring a house for approximately 2 years more. It will take this length of time to save the additional finance towards a house as we can now only afford to borrow a smaller loan.

So people in that position must continue to pay rent for two or more years because of this Government's action, and the rents are being increased because of the flow-on of interest rates. Even the State Housing Commission has to increase rents because of these factors. Every sector of the community is being affected, which is causing hardship and distress. The scandalous situation is that many young people who looked to this Governments recent homes savings grant scheme to help them now find any benefit absorbed by this increase in the rate of interest and because of high land prices and high building costs. The homes savings grant scheme has been of little benefit in Western Australia to date. The situation is made even worse by increased interest rates.

To their credit home owners are not letting the matter rest there. They realise that the notices issued to them by the building societies in the main give only 21 days in which to accept the increased interest rate and increased repayment on their housing loan or face losing their homes. They have acted by forming themselves into a self protection organisation and they hope, as I do, that people throughout Australia will take up the call for self defence in this matter and form other organisations in other States to help themselves, firstly by collecting signatures for a petition to Parliament and secondly by taking what other necessary action may be required. Th.s is one petition people queue to sign. In fact, in what we call the better suburbs with bigger homes and bigger mortgages to repay people are even more enthusiastic to sign and more indignant about the increase of half of 1% in interest rates which approximates 8c per week increase per $1,000 borrowed. As it is extremely likely that there will be a general 1 % increase ail round most people will have to pay 16c per week per SI, 000.

This is not the end of the cost to the home owner, however, for the Australian Loan Council has notified that as from 1st May 1970 the rate of interest charged to shire councils for loan money will be increased by I % where the borrowing is from private sources, the situation being that they will now borrow in the private sector at a minimum of 7.1% for a 4-6 year term or a maximum of 7.4% for a 15 year or longer repayment period, lt is in this higher field that shire councils do most of their borrowing. No doubt the costs will be passed on to the home owner in increased land rates. The overall result of this indiscriminate increase of interest rates to the home owner is higher home costs, higher repayments, longer periods of repayment and higher rates and service costs. But this is not the end of it for it is reported by the 'Independent' newspaper of Sunday last that the home building slump that has resulted in Western Australia because of the increase in the rate of interest will continue and the industry will remain in the doldrums until 1971 because of the prospective shortage of skilled tradesmen and other factors.

The State's rapid recovery to pre-slump levels - even if Government financial restrictions are eased - will be sabotaged by a loss of tradesmen to other industries and other States and a cut-back in the migrant worker flow. Building companies are collapsing and sub-contractors are going bankrupt. Supply companies are carrying large irrecoverable debts. Only last week the Western Australian Clay Brick Manufacturers' Association instructed the Department of Immigration to defer the movement of new bricklayer applicants. A major sponsor of migrant bricklayers, the Association has told the Department that there was lit* lc work for recent arrivals and some were unemployed. A building industry spokesman is reported to have said: "After this finance trouble here, it could take years to instil confidence in prospective migrants.' This is disastrous, for the restricted money available and the higher interest rates will not create a buyer's market for the young people. The National President of the Housing Industry Association stated:

Skilled staff and tradesmen are being dismissed and many of these will not return to the industry.

He complained that excessive if not usurous interest rates had caused great hardship to families seeking homes. The authoritative economic bulletin 'Building Outlook' last week added strength to the black outlook for home building in Western Australia, lt stated: lt is now expected that the remaining 8 months of 1970 will see continued falls in the number of dwellings commenced, taking the level to around 2,500 units for the December quarter. 1 1 forecasts an even greater downswing in the building of \va flats because of the more speculative nature of this activity. This will mean an even greater shortage of homes and home units to our young people. lt is still not too late to take some definite action to give relief, lt is still not too late to remove the increase in interest rates before new agreements to purchase are entered into, before building society loans are revised, before further building companies collapse to add to the number which already have gone into bankruptcy and before the building industry slows up lo such a degree that it will take a major collapse to bring action by the Government for relief. The National President of the Housing Industry Association, one of the top men representing the industry, had this to say:

Mousing commencements in all Slates are now at least 25% below normal levels. The fall in some States is much greater and in WA will exceed 45%. Confidence has been shaken, and with secondary effects appearing the level of activity in the housing industry will fall even further unless corrective action is quickly taken

The Association presented the following proposals to correct the situation: Firstly, remove or modify the regulations requiring savings banks to invest 65% of any increase in deposits in Government securities. This would leave more funds available for housing loans. Secondly, make an immediate grant of from $50m to $100m under the Commonwealth-State Housing Agreement at special rates of interest. This would help to provide much needed housing loans for the lower income earner. Thirdly, release cash to the trading banks from the special reserve deposits for housing loans and advances to building societies. Fourthly, the Reserve Bank should take action to restore the liquidity of the financial system, and fifthly, the Government bond rate should be reduced immediately.

Even as late as today it was reported in the 'West Australian' that the Federal Government had received a recommendation from the Institute of Applied Economic and Social Research which was contained in its latest quarterly review. The newspaper report went on in this way: lt suggested some relaxation of interest rates, matched if necessary in :he Federal Budget by a slight taxation increase or lower Government spending, rather than an increase in overall restraint.

Having regard to all of those recommendations I believe that the situation should be looked at wilh a v ew to affording relief urgently to the people concerned.

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