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Wednesday, 7 December 1983
Page: 3377

Mr RONALD EDWARDS —My question is directed to the Treasurer. In the light of recent trends in the bonds on the Australian market as well as reduction in the rates of Aussie bonds, does the Treasurer see any capacity for bringing the interest rates on housing loans of the private banks such as Westpac Banking Corporation and the ANZ Banking Group Ltd into line with those rates charged by the State banks, the building societies and the Commonwealth Trading Bank of Australia?

Mr KEATING —I am not in the business of speculating on interest rates. I am not prepared to speculate about them. But I can observe that the Government has been encouraged by the recent fall in interest rates which was occasioned in the last bond tender. As I recounted to the House last week, when the Opposition had a burst of interest in the economy, interest rates at the short end of the market, treasury bonds, had fallen by 3 1/2 per cent since 1 July and by about 2 1/2 per cent at the long end of the market. I noticed also this week that a number of the trading banks have reduced their prime indicator rates. If I recall correctly, the Commonwealth Trading Bank has reduced its prime indicator rates to 12.5 per cent and Westpac to 12.75 per cent. I would need to check whether I am precise in respect of the figures for each institution. But there is a half a per cent decline. With the general level of rates declining, where housing rates will go will be an issue.

The honourable member correctly identified in his question that there has been some stickiness on housing interest rates. We saw a decline some time ago in the Commonwealth Bank of a half per cent and a lot of the other State banks followed suit. The two institutions mentioned by the honourable member did not follow suit because, in their view, their deposit rates had fallen and they were already having difficulty in handling the demands for housing finance. Suffice to say that I expect that a further decline in inflation, which I think we will see as the December quarter statistics come out, could underpin further declines in interest rates. I also observe that the Government has accomplished quite a large proportion of its bond selling task within the first half of the finance year. I might say, however, that that task would now be complete had we not had substantial capital inflow during the course of the year and, indeed, some inflow in the last week. That will mean that the Government will have to continue its bond selling operations into the second half of the year. But again the judgment has been all along that we can do so simultaneously with falls in interest rates. The terms of the honourable gentleman's question will be a matter for the two institutions he mentioned, the ANZ Bank and Westpac. They, along with other banks, will make their own judgments about their deposit rates, whether their lending rates should fall and whether they can see their housing rates respond to the general decline in interest rates.