Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

At the last election, the Howard government promised to keep interest rates at record lows. ‘Record lows’ was the commitment. Since that election, we have had three interest rate rises. These three interest rate increases have cost the average new mortgage holder $108 a month. The Prime Minister has presided over seven consecutive interest rate increases. These seven interest rate increases have cost the average new mortgage holder $250 a month. Of course, I know the member opposite thinks that we are being dramatic about this, but I can tell you that it does have a dramatic impact on the household budget.

Australians are now paying the highest interest rates of virtually any comparable country in the Western world. Last week Labor asked the government 10 times to explain their interest rate failures. First, Mr Beazley asked Mr Howard why he had broken the trust of the Australian people on interest rates. Of course, the Prime Minister denied that he had ever made any commitment, saying:

Well I don’t seek to give guarantees ...

Well, he did give a guarantee of keeping interest rates at record lows. Capital L, capital O and capital W was the commitment that was given by the Prime Minister.

Secondly, I asked Mr Howard to at least admit that we all know that the Reserve Bank’s measure of debt servicing shows that a bigger share of household income is being consumed by mortgage interest payments today than ever before. Mr Howard responded that loans are larger today because the value of homes is higher—a very bright man, to make that observation, but it was a slippery deception to cover up the fact that a greater proportion of interest repayments, as a proportion of household disposable income, is now being paid than in 1989, which seems to be the reference point of this government in this House. It is greater now than in 1989. Following on from that answer, the next day Mr Beazley asked ‘Honest John’:

Is the Prime Minister suggesting households could borrow even more just to pay their mortgage?

Of course, the Prime Minister suddenly understood that he had to be very careful in this terrain. Mr Beazley tried again, asking Mr Howard to tell the truth about interest rates and admit that, according to the Reserve Bank, a bigger share of household income is being consumed by mortgage interest payments on his watch than under Mr Keating’s. The fact is that not only is it a bigger proportion; debts are higher. Debts are certainly higher. The Prime Minister said, ‘Oh, well, assets are higher.’ He said, ‘People are comfortable; that’s why they’re borrowing more.’

We reminded Mr Howard the next day of this absolutely essential fact: household debt has consistently outpaced growth in housing assets, and the housing debt-to-asset ratio has increased from 10 per cent in 1989 to more than 25 per cent today. So, many people, far from being comfortable, far from being relaxed about this bigger proportion of payments, are actually being crushed by higher debt repayments and are under tremendous financial pressure. This is the equation that the government does not get: the fact that people are paying a higher proportion of their incomes than they were in 1989. What that really means is that there is no such thing as a small interest rate rise, because there is no such thing as a small mortgage. That is the difference. That is the new interest rate equation.

We then went on to ask the Treasurer to name any comparable country other than New Zealand that has mortgage interest rates that are higher than Australia’s. Of course, there is no such country. The next day I asked the Prime Minister why families in the US and the UK pay less mortgage interest than Australian families. Again, he was asked to admit that Australians are paying amongst the highest interest rates in the world. Mr Beazley asked the Prime Minister about Debbie Bridgman, who made the observation that she had actually gone out and borrowed more money as a result of the commitment that the Prime Minister made during the election campaign when he took personal responsibility for the level of interest rates in the Australian community. (Time expired)

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