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Wednesday, 19 June 1996
Page: 1814

Senator COOK —My question is directed to the Assistant Treasurer. I refer to a statement made by the Prime Minister, and reported in yesterday's Australian , where he claimed that wage restraint would be justified because interest rates on home mortgages are coming down. Does this mean that the government will encourage wage claims if home mortgage rates go up?

Senator SHORT —I do not think Senator Cook is aware of what has been happening to home mortgage rates in this country. I am pleased to have this opportunity to inform him and the Senate of the fall in interest rates for housing that has occurred over recent weeks as a result of increased competition in the banking industry.

On 31 May, the Commonwealth Bank cut its variable home mortgage rate from 10.5 per cent to 9.9 per cent. ANZ followed suit shortly thereafter. The National Australia Bank did it also, as did the Commonwealth and Westpac by varying degrees. Almost 70 per cent of all home lending comes from those four banks. That means that the cuts in rates from 10½ per cent to 9¾per cent has led to a benefit of $53 per month for a household with a 25-year $100,000 home loan. That is of major benefit to most Australian families.

It ought to be welcomed by the opposition. It is certainly very warmly welcomed by the government because it is in stark contrast with the interest rate record of the previous government over more recent years. The Labor government had home mortgage rates at 17 per cent in 1990 as part of its quite deliberate policy to engineer a massive recession—the greatest recession we have had since the 1960s.

That caused a whole range of problems through the economy, including pushing unemployment to rates that would never have been believed in this country—that is, above 11 per cent, above a million people unemployed. In terms of the movement in interest rates, they are unequivocally down, which is welcome news. So the premise on which your question is based has no substance.

Senator COOK —Mr President, I have a supplementary question. I am entitled to ask, `Which bank,' but which government was it that actually introduced the competition that has created the reduction in home mortgage rates—yours or ours? More importantly, would you answer this question: if you slug battlers with tax, are they not able to claim it in wages; if you slug battlers with high interest rates, are they not able to claim it in wages? It has been claimed that if interest rates go down, they ought not make wage claims. So what do battlers do to protect their standard of living?

Senator SHORT —There were a couple of good questions there. So far as his first one is concerned—which government?—the origin of the increased competition in the banking industry, I remind Senator Cook, came from the Fraser government through the establishment of the Campbell committee which led to everything that was formed in the 1980s.

Opposition senators interjecting

Senator SHORT —I know they do not like to hear it but the Treasurer at the time who established the Campbell committee of inquiry, which led to the deregulation of the financial industry in Australia, was the now Prime Minister, John Howard. So that is pretty good news. For Senator Cook and those opposite to talk about tax increases when under their regime and their incompetence over the years before they went out of government they racked up tax increase after tax increase, and broke every tax promise they ever gave to maintain or reduce taxes, is the height of hypocrisy and deserves the answer it received.