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Action needed to minimise interest rate pain.

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Media Statement


6 November 2003

Action needed to minimise interest rate pain

With every market economist in Australia now predicting a series of interest rate rises in 2004, the Federal Government needs to act quickly to minimise the damage for Australian families, homebuyers and small businesses.

Yesterday’s $30 interest rate rise was bad enough. A series of rises next year will cruel the household budget for many Australians. The debt servicing ratio for home loans in Australia has never been higher.

I urge the Government to meet urgently with the Reserve Bank to address its concerns about the Australian economy - specifically, the housing bubble and the excessive level of household debt.

The RBA has already advanced one policy recommendation: the national regulation of the real estate promotion industry. I am sure it has many other proposals for smoothing out the housing cycle and building a savings culture in this country.

If the Government acts now interest rate rises next year may be avoided. Jaw-boning the Reserve Bank is not a solution. The Government needs to work with the RBA to make urgent policy changes. Action, rather than talk, is needed to overcome Australia’s housing affordability crisis.

If the Government brings forward sensible changes then they will have the full support of the Labor Opposition. We don’t want to see families feel the financial pain of interest rate rises next year.

I again urge the Treasurer to adopt Labor’s proposals for smoothing out the housing cycle:

• Developing urban policies to influence housing supply and land releases in our major cities.

• Adopting a national population policy - specifically, the redirection of migration growth pressures out of the Sydney housing market.

• Ensuring that the release of Commonwealth land holdings (such as disused military sites) has regard for the state of the housing cycle - that is, they act in a counter-cyclical way to stabilise the market.

• Amending the Corporations Act (in co-operation with the States) to ensure that ASIC has the power to regulate property investment advisers. Despite calls by the RBA Governor for national regulation, the Government has said that it regards this as a State and Territory responsibility.

• Ensuring comprehensive national regulation of mortgage brokers and originators, plus preventing the recent practice of lending against car equity (“Liberty loans”).

• Abandoning the Prime Minister’s plan for a second mortgage market which would further overheat the housing sector.

• Introducing new savings programs and incentives for Australian families, thereby improving the household balance sheet and lowering the risks of excessive household debt.

This is a strategy for economic stability and downward pressure on interest rates.

Contact: Michael Cooney 0411 591 120 mob