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Tuesday, 17 March 1987
Page: 904

Mr WEST (Minister for Housing and Construction)(3.32) —Cunningham is the name of my electorate. The temporary Leader of the Opposition, the honourable member for Bennelong (Mr Howard), tried to make a little of the nature of interest rates during his misguided speech to the House. During Question Time today and during his speech he tried to raise the issue of the forecasts in the report of the Indicative Planning Council for the Housing Industry to the Australian Housing Council last Friday. I might just start by referring to the general situation regarding interest rates.

Mr DEPUTY SPEAKER —Order! I interrupt the Minister for a moment. There is far too much noise in the chamber. Those honourable members on my left who are holding mini- meetings might do so outside.

Mr WEST —Let me refer, firstly, to the report of the Indicative Planning Council to the Australian Housing Council last Friday concerning housing starts and interest rates. The first thing that that report states is that the figure for 1986-87 is predicted to be 118,000 with 126,000 housing starts for 1987-88. Because it is illuminating just to study what has happened over the last six years let us have a look at what has happened. In 1982-83-obviously the last year of the previous Government-there were 105,000 housing starts; 137,000 for the next year; 152,000 for 1984-85; 135,000 for 1985-86; 118,000 predicted for 1986-87; and 126,000 predicted for 1987-88. The Indicative Planning Council, which the Opposition tends to call to its aid when quoting figures on housing starts and interest rates, predicts as part of the forward estimates for lending by savings banks and all significant lenders, that we will get $9.5 billion for savings bank lending in 1987-88 and an all-time record high of $12.1 billion by all significant lenders. Honourable members opposite never got near that figure back in their last year of government. Honourable members opposite got less than $4 billion for savings bank lendings compared with $9.5 billion for savings bank lending this year. So much for their record on housing starts.

I turn now to interest rates. Obviously the level of interest rates for housing will be determined by the level of general interest rates and they, in turn, will be dependent upon what action occurs in the current account deficit. We were heartened today by a result of a $750m deficit. Of course, if we look at the breakdown we see, as the Treasurer (Mr Keating) said today at Question Time, that in the three months to February the current account deficit averaged $860m compared with $1,033m in the same period a year ago and this has occurred despite a continued adverse movement in the terms of trade.

I might also point out-without trying to overstate the position, and we obviously cannot do that on one month's figures-over the last four months on only one occasion was the figure over $1,000m. So I suggest that, as far as general interest rates are linked to the future of the current account deficit, there is some cause for cautious optimism and similarly with regard to the state of the Australian dollar which I understand today is running at about US68.50 cents. Obviously other factors that will be important with regard to the general downward trend of general interest rates are the status of monetary policy and the time at which that can be relaxed and, as far as interest rates and their future are concerned, the current status of fiscal and wages policy.

We know that there will be a May statement. The Prime Minister (Mr Hawke) has assured the House that it will be a tight mini-Budget, so to speak. As far as wages are concerned I am always puzzled by the attitude of honourable members opposite. They say that they are concerned about the low and middle income earners with regard to paying off their mortgages yet despite the fact that there has been a cut in real unit labour costs they strenuously oppose even the most moderate of wage increases. Hence we get the hysterical reaction to what was a quite widely accepted very moderate wages policy decision by the Australian Conciliation and Arbitration Commission for a flat $10 per week with a second tier to be taken not earlier than September with a 2 per cent ceiling and in July 1988, next year, a further second tier of 2 per cent with the alternative of full negotiations for those unions and employers that willingly enter into negotiations. Similarly, on the superannuation side, in January 1988 and in January 1989 the Commission will arbitrate the 3 per cent in two stages. I think the Australian trade union movement would be extremely responsible when and if it accepts that decision. The Opposition, in attacking that decision and at the same time deploring the fact that mortgages might be up temporarily and in deploring the effect on high income earners, is simply, in its usual vein, not being consistent at all.

I have said that, as far as interest rates are concerned, the timing depends upon the factors I have just outlined; that is, future reductions in the current account deficit, the state and stability of the Australian dollar, the future status of monetary policy and the success with which we implement tight fiscal and wages policies. As we do all this there will be a downward trend in general interest rates and housing interest rates will decline in due course. We will not say that there is a quick fix or a snake oil remedy as the Opposition appears to be saying. We are saying that it will probably be a hard tough road to get interest rates down but when that occurs it will be a sustainable fall.

Before I move off the question of interest rates let me just refer honourable members to a table for comparison's sake. In June 1982-we all know who was in office then-rates for 180-day bills were 18.35 per cent and rates for 190-day bills were 18.75 per cent. Currently they are on a downward trend and the latest figures are 16.4 and 16.5. Providing those other assumptions remain in place I think we will see a continued steady downward trend in bill rates. However, we will find that bill rates will have to decline significantly past what they are now before that is reflected in housing interest rates. That is the fact of the matter. As I said, there are no snake oil remedies over here-just steady, tough policies that will result in a sustainable decrease in housing interest rates in due course.

I now want to compare the economic and tax policies, leading to a comparison of the housing policy, of the Opposition and the Government. What we are all about is fairness and restraint with equity. Honourable members should have a look at the Opposition's tax policies or, rather, lack of them because it is very hard to follow yet what they are. Maybe we will get a tax policy in a concise form fairly soon, but we have not had it yet. Let us look at the fairness and equity of the Government's tax policy. We have a fringe benefits tax and a prospective capital gains tax. We have quarantined negative gearing with regard to investment in property to stop the tax rorts in which write-offs funded by the ordinary wage plugs and the consequential loss to revenue were written off not only against income from the property or properties concerned but also against all other income. Of course, we will be implementing the imputation of company tax. In addition, there are the new tax scales which are not pie in the sky but which will be funded in a responsible way in terms of the May statement and the Budget. When the second stage comes in on schedule on 1 July 1987, the scales will be 24c, 29c, 40c and 49c. The 60c scale will come back to 49c.

We should compare this responsible tax package with what we get from the Opposition-irresponsible tax statements and no sign of an overall tax policy which pulls the whole thing together. First of all we hear the Opposition saying that it will abolish the fringe benefits tax. It will restore tax deductibility for entertainment expenses, abolish the capital gains tax and restore negative gearing. All of this will cost about $1,400m. The Opposition will repeal the assets test. I understand from the wild statements made by the Leader of the Opposition that the Opposition will introduce some sort of two-scale income tax process that will probably cost it $6,000m or $7,000m. That, of course, does not include the flat tax proposal put forward by the Premier of Queensland; it is just a flatter tax proposal. So, just on the matters that I have mentioned, the Opposition is looking at a loss to revenue of $7,500m.

Again I must ask: How will the Opposition pay? What is the future of the consumer tax that we have considered and firmly rejected? If the Opposition does not do that, will it introduce a retail turnover tax or will there be increases in wholesale taxes? Can the Opposition please tell us how it will fund this $7.5 billion worth of promises that it has made? Of course, I have mentioned only the tip of the iceberg-not the lot. Will these proposals be funded by a consumer tax or some form of increased indirect taxes or will there be cuts past what we envisage in the May statement? If so, where will the cuts fall? Will they be made in the areas of health or education?

So far we know nothing of the Opposition's plans except when we turn to this remarkable document, the Opposition's policy statement on housing and construction. The first thing I can say is that there are two good measures in this document which are a direct pinch from our policy-my policy. The first is the retention of the 13 1/2 per cent interest rate ceiling. I am glad that the Opposition agrees with us on this point because certainly this will mean that the 900,000-odd loans that fall in that category will be protected. They will be protected because we are going to protect them. We will make certain that we remain in office in order to do so. The Opposition also says that it will retain the first home owners scheme and by that statement it implicitly infers that the first home owners scheme is the best housing ownership assistance program ever offered to first home seekers.

Mr Hurford —Hear, hear!

Mr WEST —My colleague, the honourable member for Adelaide, who is a former Minister for Housing and Construction, says: `Hear, hear!'. So he ought to say that because he was the one who introduced the scheme. I have only made sure that it remains. And, of course, it will remain. The Opposition took three years to write this remarkably light and inferior document which takes about three minutes to read.

Mr Robert Brown —Once you have finished it you find it was not worth reading.

Mr WEST —That is right. When one reads the document a bit further one finds, as the Prime Minister said today, that the Opposition would abolish the Commonwealth-State Housing Agreement. It would abolish the public housing agreement. The Opposition has placed itself in a delicious and exquisite contradiction. In one breath it says how terrible it is that the Government has reduced housing starts to 118,000. This is despite the fact that there were 105,000 housing starts in the Opposition's last year of office. However, it is whingeing about the number of starts. In the other breath it turns around and says that it will abolish the Commonwealth-State Housing Agreement which, of course, is instrumental in delivering public housing to those on low incomes and pensions who cannot afford to rent on the private market or to buy their own home. So there we have it: The Opposition whinges about 118,000 starts and yet it would abolish the agreement. Let us see what the agreement delivers. The public housing agreement, over which my colleague the former Minister and I have presided, will add 22,000 starts this year-that is, there will be 118,000 starts of which 22,000 will come from the public housing agreement. The Opposition is whingeing about the 118,000 starts as being too low yet it would remove over 20,000 of them by abolishing the Commonwealth-State Housing Agreement. How stupid can one be?

Let me just give the Opposition some facts about the people that it will be putting out in the cold, so to speak. At the moment the Commonwealth-State Housing Agreement is placing some 44,000 families in housing accommodation each year. As I have said, it is contributing 20,000 to 22,000 starts as part of the total number of starts. It is increasing the total rental stock by new starts and acquisitions at the rate of 18,000 this year. So that is what the Opposition is going to knock out. The Opposition has put itself in a contradictory and deplorable position. It supports tight monetary policy yet it whinges about the resulting high interest rates. It slides into contradictions. It supports as being necessary the policies which result in high interest rates and then it says that high interest rates are deplorable. It whinges about the number of commencements and then it continues to talk about abolishing the Commonwealth-State Housing Agreement. It proposes tax cuts and then it whinges about the size of the deficit. It is in a totally contradictory and untenable position.

Mr DEPUTY SPEAKER (Mr Leo McLeay) —Order! The Minister's time has expired.