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Tuesday, 13 September 1983
Page: 688

Mr MOORE(6.21) —In the absence of the honourable member for Farrer (Mr Fife), who is in hospital, it is my pleasure this evening to lead for the Opposition in relation to this package of three Bills. It is the intention of the Opposition to divide the House not on the first two Bills but on the Housing Loans Insurance Amendment Bill, the reasons for which I will canvass later. The question of home ownership in Australia is particularly dear to the Liberal and National parties. It is something which the Liberal and National parties have always stood behind. They have made every possible effort to ensure the highest level of home ownership. That is contrasted with the approach of the Australian Labor Party over the years, starting with the late Jack Dedman who said that to create a lot of small home owners in Australia would only create a capitalist society. So it is no wonder that in 1947, when those words were used, the level of home ownership was 58 per cent-

Mr Jacobi —That is the Old Testament.

Mr MOORE —Even the honourable member for Hawker would recognise that by 1971, after a long period of Liberal-Country Party government, that percentage had risen to 68 per cent. A substantial effort was put into the area by ensuring adequate funding was available. After the brief period of the Whitlam socialist Government this figure dropped back to 66 per cent. Following the return of the Fraser Government, once again the level of home ownership went up to 68 per cent . This only points to the obvious intention of the citizens of Australia and their marked preference to own their own homes. Why do they do this? In a sheer economic sense, they do it because it is a far cheaper investment than renting, because it is a capital investment and because it gives families great security, the freedom to express themselves in their own environment and the great satisfaction of developing their homes as they wish. Because of that, we in the Liberal and National parties are particularly proud of what has been done by our governments over time.

It might be worth while to point out the position prior to these legislative amendments. We offered a tax rebate to all those who purchased homes. A very significant amount of money was saved by the person who bought a home and took this tax concession. On top of that, there was a grant of $3,500 to those who had a savings record. This in itself contributed something like $550m in a full year to the housing sector. On top of that, the previous Government, through negotiation with the banking system, made an extra $400m available to ensure that money was available for those in the housing sector who needed it. This is reflected in the number of home loans approved in the period December 1982 to March 1983 for people who took up the benefits of the previous Government's offer. The result is shown on a chart which came to me only today from the Real Estate Institute of Australia. The chart points to a very significant improvement in that period when people took up the policy of the previous Government and put it into place. Since then there has been a dramatic fall-off in the whole of the building sector.

The commercial area, no doubt, has experienced a sizable reduction. This reduction in commercial activity reflects the very high levels of interest rates prevailing throughout 1982 and into 1983. No doubt, high interest rates will inhibit investment. They certainly inhibit the ability of people on fixed incomes to meet their repayment schedules. In some cases the terms of the loans were extended by years; sometimes the home owners were forced to give up other areas of their consumption patterns in order to meet repayments. This brought about the fall in real estate values between 1980 and 1982. In some cases the high interest rates brought about a series of bankruptcies or mortage foreclosures. So the impact that interest rates have on housing is dramatic.

Let me relate that briefly back to the question of the tax rebate. The benefit of that rebate, depending on one's tax scale, probably was of the order of 1 per cent to 2 per cent. It was under those circumstances that the previous Government looked at the initiatives taken by this Government in its celebrated statement of 19 May. That statement contained glowing comments about this Government's initiatives in housing. The net effect was that the Government knocked out the tax rebate. All of those people who had bought houses on the understanding that they would receive the tax rebate were left with an interest bill which was not tax deductible. They had to pay an extra $300 a year or, alternatively, the higher interest rate to which I previously referred.

It is worth recalling the famous campaign pledges by the Australian Labor Party . It is almost history now how the Labor Party went around the country making speeches and promises about this, that and the other. It has not kept those promises since it came to office. That is the last thing it does. The Prime Minister (Mr Hawke) said that this Government would retain the rebate scheme. The Labor Party told people right across Australia that it would retain that scheme. What did it do? On 19 May it knocked out that rebate. The Labor Government believes that it can say anything, do the opposite and get away with it. Because of that promise people bought homes; they bought homes on the understanding that the rebate system would be retained. However, this Government has blindly walked away from its promise and has left those people wondering what is going on. Thousands of people will not forget that broken promise.

In announcing the housing initiative on 19 May, the Government not only knocked out the tax rebate but it also said that its new proposals would not apply until 1 October. Of course, needless to say, those who were interested in buying homes thought that they would defer the purchase of those homes until after that date. They put it off. The market was affected in that respect.

What does the First Home Owners Bill do for those people who wish to participate in the scheme? The Bill provides that the full grant may be paid, over five years if applicants wish, to first home buyers whose taxable income is $24,300 or less. Assistance is reduced for incomes above that amount and is totally phased out when a person's taxable income reaches $27,900. A married couple with a taxable income of $24,300 or less and with two or more dependants will receive $7,000 tax free. That is a very sizable contribution. Another benefit of the scheme, as I read the Bill, is that it allows people who transfer in their jobs, such as school teachers, Defence Force personnel and miners, to retain the benefit. That, in itself, is a very commendable benefit.

Sitting suspended from 6.30 to 8 p.m.

Mr MOORE —Before the suspension of the sitting for dinner I was referring to the difference in approach between the Labor Government and the former Liberal- National Party Government and to the impact that interest rates had on investment generally and on the housing sector in particular. I mentioned how these impacts had adversely affected the housing sector in the last two years. I said that I was pleased to see the recent developments in the interest market where lending institutions have reduced interest rates not because of Government policy, as I heard at Question Time this morning, but because commercial demand for money is just not there. The law of supply and demand means that there is far more money in the market than there is demand. As a consequence, the price of money goes down; witness for example, interest rates. As a consequence of that I hope that all those who have been disadvantaged by the disallowance of the tax rebate will reap some benefit in this area and that the housing sector as a whole will benefit from it. Before the suspension of the sitting for dinner I was also making some laudatory comments about aspects of the First Home Owners Bill such as the transferability of the grant, and the fact that people who have been advantaged in this area in the past will now be able to enjoy the same position as those who have a more settled life style. On top of that there are other aspects which I am sure will have enormous appeal to the first home buyer.

The Home Deposit Assistance Amendment Bill seeks to eliminate the savings requirement previously in place and imposed on people who sought assistance in the housing sector. The Opposition and I regret that this savings requirement has been withdrawn. I do so because benefits are certainly to be had from the discipline of saving-benefits to the individual, the financial system and in the general area of responsible financial management. If an individual were to buy his home with no savings whatsoever he would be committed to paying back a very sizable amount of money for which he would have to make provision. If he did not have a history of provision making that would be a severe discipline. To meet repayments would be a significant test and a significant give-up on personal consumption. The previous requirement struck me as being not a very arduous forced saving and one which certainly allowed people to come to grips with the responsibility of saving. Money that was saved was reinvested within the industry. To me a very significant factor was that people who were seeking funds and assistance would, in the future, be making a contribution and from their contribution would flow others from which they would ultimately benefit. So I regret the passing of this aspect of the legislation. I understand that in a depressed market the elimination of that aspect would certainly be of some assistance. But in my view it would not overcome the general beneficial effect of the discipline of saving which I think is desirable.

The effect of all those factors, plus lower interest rates and a very substantial growth in the amounts and numbers of loans that have been sought from the financial institutions, as I pointed out previously, might well add to the cost structures if they were quickly tipped into the market. In some areas of established homes there is some upward pressure on prices. While I have no doubt that those who own the homes are grateful for that, the pattern of pricing existing homes, the price of which is largely less than the cost of building a new home of comparable size, means that there would have to be some lift in the market before people took on the added burden of involving themselves in contractual building, which certainly carries with it some major problems and decisions.

The Opposition will oppose and advise the House on the Housing Loans Insurance Amendment Bill 1983. This Bill proposes two things. Firstly, it seeks to repeal the authority to sell the Housing Loans Insurance Corporation. Secondly, it seeks to extend the ability of the Corporation to guarantee loans across the board. You will be aware, Mr Speaker, that the previous Government had the view that the HLIC was a government body intervening in the market-place and competing against private enterprise from a completely advantaged position because it was able to offer government guarantees whereas the private insurance corporations could not. Even honourable members with a very slight degree of interest in financial matters will readily recognise that a corporation with a government guarantee has a natural advantage in the market-place.

I note that the HLIC has been operating since 1966. It is a substantial operation. In the 10 years from 1972 to 1982 the number of loans insured by the Corporation increased from 26,000 to 38,000. During that period the amount of loans insured has increased from $294m to $1,403m. This is a very substantial growth. But, to me, the most important aspect of the HLIC's accounts is the fact that on no occasion from 1972 to 1982 did it incur an underwriting loss. Indeed, in four years the underwriting profit exceeded $1m. On top of that, we find that because the Corporation paid no tax or dividend until 1977 the investment income of the Corporation is now just short of $6m a year against an operating profit in terms of premium income and operating costs of $917,000. That obviously has a substantial impact on the future. The Corporation runs a major operation which is very well sustained from its own resources. It employs only 48 people. However, I think it has made a contribution. In an area in which it is very doubtful whether one can contain government intervention, the HLIC has 60 per cent of the market and as such plays a dominating role within the market-place. In my view and in the view of the Opposition such corporations ought not to be the preserve of government because of the special advantages that accrue.

The Bill seeks to extend the powers of the Corporation. At the moment there are some restrictions on the HLIC. However, it is proposed to amend section 4 of the principal Act to allow the guaranteed rights of the Corporation to include the following:

(a) the development of the land for use for any one or more of the following purposes, namely-

(i) commercial, industrial, health care, cultural, educational, entertainment, recreational or community purposes; or

(ii) any purpose prescribed for the purposes of this sub-section,

. . . .

Those powers seem to me to cover everything but the rural sector. One can have a go and seek to get a loan guarantee from the HLIC. It seem to me that if we consider those powers together with the very substantial cash flow of the Corporation as set out in its annual accounts, which are very clearly presented, and I commend the corporation on that, over a five year period we will have a near monopolistic approach to mortgage guarantee. What is the Government up to? There was a great burst in the Whitlam years to turn this Corporation into some nationalised insurance corporation. This could well be the thin end of the wedge . The attitude is: 'Have a go at it. We have the cash flow; extend the power and see what we have in five years'. It is quite likely to be substantial.

That certainly would not be in the best interests of the private sector. Even the Prime Minister talks about how important it is to have the private sector in a good, healthy and competitive situation. In this case the Government is proposing to take a government-owned corporation with 60 per cent of today's market and a cash flow of nearly $60m and extend its ability across the board into all the areas I have just mentioned. What will we have in five years time? We will have a very substantial government domination of this area. If it is not nationalisation by announcement it certainly will be nationalisation in advantageous areas of growth through the use of government guarantees, which will not be to the benefit of the private sector. Because of that the Opposition will divide the House on the Housing Loans Insurance Amendment Bill.

I wish to refer also to the experiences of the HLIC. Some very commendable graphs in the report indicate very clearly the quite dramatic fall in the number of loans insured from 1979-80 to 1981-82 and the impact that that has had on claims upon the Corporation, which really has not been as effective as I thought it would be, bearing in mind the movement of interest rates. Because of that I suspect that in 1983-84 the level of claims will be up substantially on that shown in the report. However, I have no doubt at all that if one were to draw a line through the Corporation's income and its profits, which have risen from $3m to just short of $6m in four years, one would find that the impact in the form of extra claims will be short lived.

In summary, the Opposition, while it sees some very admirable points in the first two Bills before the House, would not see them as having any great advantage over the actions taken by the previous Government. It sees them as an attempt to shift the emphasis from home ownership into public sector housing. They seek to extend the powers of a government corporation. Its future influence will certainly exceed its present influence. In terms of healthy competition, the Opposition sees no reason why the Government should be intruding into this area. These measures are fraught with dangers for the future. The Minister for Housing and Construction (Mr Hurford) is a moderate in these matters. It would frighten me to have some of the left wing of the ALP-those with a more socialistic bent than the Minister-in control of these matters. There would be all sorts of goings on.

The House will recall the last effort in this area and the vast land purchases made by the Department of Urban and Regional Development under the present Minister for Territories and Local Government (Mr Uren). The then Government bought up swags of land around the countryside, most of which we are still paying for. We have not found a use for it. I well recall an agricultural company being consulted on what to do with the land until we found the people to use it. Such was the foresight in those magnificent purchases by DURD in years gone by.

Mr Braithwaite —Who did that?

Mr MOORE —It was the current Minister for Territories and Local Government. On top of that, it is very unlikely that the people will see beyond their personal interests. I hope that the Government will give private home buyers who have been disadvantaged by the disallowance of the tax rebate the real incentive to go on and, with the good luck that has come about, be able to use the lower interest rates to further their ambitions in the housing sector and home ownership.