Michael Hatton (Blaxland, Australian Labor Party) Share this | Hansard source

It may be novel but I intend to speak to the Defence Force (Home Loans Assistance) Amendment Bill 2006, though I will engage in some rebuttal as I do so. The fundamental purpose of this bill, which deals with a program that has now run for 15 years—since 1991, when the Australian Labor Party in government initiated this process—is to allow for an extra year to take stock of and review the situation of Defence Force housing loans. The Labor Party’s criticism with regard to timeliness is entirely apt. The scheme finishes at the end of this year, so this bill is necessary to give an extra year to the program so that the review can be conducted.

What is the review fundamentally about and drawn to? The review was announced on 10 May this year. Its broad objectives, as the chair of the defence committee and I, as deputy chair of that committee, well appreciate, are to support recruitment, retention and resettlement. The review is also looking at the scheme being cost-effective for Defence, and it recognises the benefits that homeownership provides to both members and Defence. It is a necessary review at the end of a 15-year program. It should have happened a year ago. That is our one fundamental criticism of this process. There are a series of other shortcomings here in terms of the process and the actual operation of this, and they have already been canvassed at some length by the shadow minister. I will reiterate those if I have time.

The core of this is that time and circumstance change just about everything. In 1991 it was responsible and reasonable to have the first $80,000 of a home loan given to a member of the services—to provide them with a subsidy for that $80,000—when the average cost of a home loan for a person in Australia was much lower than today. That was an important contribution then but, with the effluxion of time, the change in circumstance and the fact that it now costs much more to buy in, even for a married couple with $160,000 that can be subsidised there is no longer a situation where that is the core part of the loan. It is a part, but now a relatively much smaller part.

Although this is within the context of being able to get a full loan from an institution—here it is the National Australia Bank, and has been since 1991, and part of the review will be how to spread that out further to enable more people to participate or more institutions to participate—it is also indicative of what the situation was prior to the banks coming fully in, prior to the reforms that were made by Paul Keating when he was Treasurer.

The ADF home loan situation is now the one that applied when John Howard was Treasurer, when the only way people could afford to buy was to take out a cocktail loan. They would go to the bank and get part of the loan from the bank, but they would have to go off to another set of lenders to get the rest of the money they needed to buy. Whatever the banking institution’s interest rate was, there was a much higher interest rate with those other lenders, so the total price of the cocktail was significantly high.

The fundamental change in putting banking institutions into first place in home loans and having a pegged rate—13½ per cent when that initially came in—was to not only peg down the price but also put banks in first place. As part of that process for the Australian Defence Force, doing a special deal with the National Australia Bank to provide subsidised loans allowed people to get a loan and, crucially, be able to take that loan from one property to another. The nature of serving in the Defence Force is such that people have to move from one end of Australia to the other, or be posted overseas. They could spend time, for instance, at HMAS Cairns. At HMAS Cairns the current accommodation is just off base. Young people have moved into that and a lot of people are in rented accommodation there. Some people have chosen to buy. But you will find that people throughout the service in the past 15 years have quite often taken a very long period of time to finally buy a property and take advantage of this loan. One of the reasons for that is the very nature of defence service—its peripatetic nature. People move around so much that they do not settle on a place to finally stay, and therefore mentally see themselves as buying a home, for quite a long period of time.

Part of the problem with this process is the effluxion of time and circumstance and now the relatively much greater interest burden that is faced by people in Australia’s defence forces under the Howard government, compared to the interest burden that was faced under the Hawke-Keating government. It is the cost of that loan, and the amount of their income that has to be directed towards it, that not only leads to this review, and therefore the extension of time in this legislation, but is the fundamental core of the problem at base. The shortcomings of this bill—I quote the shadow defence minister and will, hopefully, come back to this issue when I continue my speech—are as follows:

... firstly, the upper limit of the subsidy in no way recognises the real cost of housing or the average size of mortgages these days ... secondly, it pays no heed to the comparative advantage and cost of rental accommodation and the subsidy implicit in those rents; thirdly, the scheme also restricts ADF personnel to the very limited range of home loan products negotiated by the government with the National Australia Bank; and, finally, it fails to recognise the needs of ADF personnel who are shifted from pillar to post almost annually with enormous disruption to their family life.

Mr Deputy Speaker Scott, with your past ministerial experience and from your current role as chair of the Defence subcommittee, you know and understand the full ramifications of those issues for the Defence Force—as do I, serving as deputy chair of that subcommittee. I seek leave to continue my remarks later.

Leave granted; debate adjourned.

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