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Wednesday, 7 June 1989
Page: 3540

Senator McGAURAN —My question is directed to the Minister for Finance. Is one of the consequences of Labor's high interest rate regime the fact that the Government must automatically pay by way of subsidy to Westpac Banking Corporation an additional $17.5m for every one per cent interest rate increase under the defence service home loan arrangements? If so, in view of the precedent of these subsidies to Westpac by the Government, is the Government considering other assistance to offset the additional costs to thousands of other Australian home owners?

Senator WALSH —Under the agreement with Westpac, the Commonwealth subsidy is tied to the prevailing rate of interest. That is in practice no different from the pre-existing arrangements under which loans were made at a rate of, I think, six and seven-eighths per cent, I think it was-that was the rate charged the borrower-and the Commonwealth borrowed directly from the marketplace to provide the loans. So under both regimes, although there would be different timing effects, the Commonwealth was underwriting interest rates above six and seven-eighths per cent.