Laurie Ferguson (Reid, Australian Labor Party, Shadow Minister for Multicultural Affairs, Urban Development and Consumer Affairs) Share this | Hansard source

This is the Howard government’s 11th successive budget and predictably there is virtually no allocation for consumer groups and advocacy on behalf of consumers. Since its inception the Howard government has adopted a virtual scorched earth policy when it comes to consumers and advocacy and assistance for them. The Howard government abolished the consumer affairs portfolio and condemned its residue to the backblocks of the federal Treasury.

Consumer protection falls within the Markets Group of Treasury. In that section its purported ideal is defined as:

Well-functioning markets contribute to the achievement of high sustainable economic and employment growth and the wellbeing of Australians by enabling resources to flow to those parts of the economy where they can be used most productively.

Well-functioning markets [supposedly] operate when investors and consumers have confidence and certainty about the regulatory framework and can make decisions that are well informed and free of market distortions and impediments.

So in fact the concept is that the markets will solve everything; there are no difficulties and everyone will be happy ever after in having that access.

The Markets Group has four outputs. Consumer affairs fall within output 4.1.3, which is ‘Competition and consumer policy advice’. The Treasury portfolio budget statements for 2007-08 indicate that output 4.1.3 has had a budget increase from $13.61 million to $20.86 million. Those same budget figures indicate that for the last period, 2005-06, the output was $13.276 million while expenditure was $11.818 million.

According to the Treasury annual report of October 2006, the Consumer Affairs Unit promotes consumer protection and financial literacy. Activities seem to fall into five categories, including the provision of advice on consumer related matters—for example, the unit provided advice on the review of the Product Safety Framework—undertaking research for the Ministerial Council on Consumer Affairs; the provision of secretariat services to that Ministerial Council on Consumer Affairs and to the Commonwealth Consumer Affairs Advisory Council. The unit was the—

A division having been called in the House of Representatives—

The unit also acted as a secretariat for the Consumer and Financial Literacy Task Force, which was formed to establish the first national strategy for consumer and financial literacy in Australia. Other activities include providing advice to consumers on financial matters through the Financial Literacy Foundation and representing Australia at OECD meetings on consumer affairs and ensuring compliance with OECD guidelines. As pointed out, the Treasury’s most recent report reveals that only $11.82 million of the allocated $13.26 million was spent. However it seems that, whilst not spending its allocated budget, it has again received a budget boost of some $6.5 million to that total of $20.86 million. I understand that the increased funding is principally a one-off payment to the Financial Literacy Foundation.

Labor supports the provision of financial literacy information. We believe that financial literacy is essential in building up long-term financial security and wealth. But, in view of the Howard government’s attack on consumers and its total neglect of any policy development to counter the increasingly contested consumer market, we believe that that $6½ million would be far better spent elsewhere. Federal government funding for financial counselling totals a mere $2.46 million in the current budget. This funding is intended to cover the majority of the Australian continent. The handful of institutions that receive funding from the Commonwealth Financial Counselling Program are expected to provide the following services: negotiation—if someone with a loan, mortgage or credit card is having difficulty maintaining repayments, a financial counsellor can assist in negotiating with creditors to reach an acceptable agreement; advocacy—where a person feels overwhelmed by a personal financial problem and would like help in effectively communicating with government or non-government organisations, a financial counsellor can advocate on their behalf; bills—if someone cannot pay an outstanding bill, a financial counsellor can help them look at their options and explain what they can do; debt recovery—where a person has received a letter of demand, a summons, a warrant of execution or a judgement summons and is not sure what to do next, a financial counsellor can explain the debt recovery process and assist them to take the appropriate course of action; budgeting—if someone is having difficulty making ends meet, a financial counsellor can assist them to develop a budgeting plan to suit their own personal circumstances and gain financial management skills to enable them to take control of their finances; and bankruptcy—a financial counsellor can give information on bankruptcy and assist people to explore alternatives.

Clearly, these are essential services that must be provided. Again I repeat: the entire federal budget for this essential service is $2.45 million. In theory it is supposed to cover, as I said, virtually the total population of Australia. I now contrast this with the efforts of the Victorian government, which annually provides more than $6 million in financial counselling budgeting. Frankly, the Howard government commitment is a disgrace and this merely underpins the fact that this is a government dedicated to the big end of town that has lost contact with Middle Australia. It does not care about battlers and merely relies on the whims of the free market to correct any instances of poor market behaviour.

The 1995 Community Service Industry Training Board (Victoria) financial counselling training needs project, by White and Delaney, defined financial counselling services:

... as being the full range of intake, assessment, research, advocacy, advice, and referral, community education and policy reform, knowledge in bankruptcy, credit and debt recovery law, income maintenance and social security, personal financial management, the financial system, casework and administrative skills and professional ethics.

The current funding base with Consumer Affairs Victoria places financial counselling in a consumer rights-consumer law context, acknowledging the development of the profession towards specialised individual and systemic advocacy on credit and debt issues. The federal government, on the other hand, funds financial counselling through the Department of Families, Community Services and Indigenous Affairs and hence places the sector primarily in a welfare context. Labor is not necessarily opposed to this; nevertheless, the highly successful Victorian experience leads us all to believe that financial counselling should be an arm of consumer protection as opposed to being another desperate last-minute welfare provision.

Getting back to the money allocated to the Financial Literacy Foundation, Labor has been on record as seeking to reverse this funding. We anticipate that funding will instead come from the financial services sector, which has the most to benefit from the funding. The ALP has no problems with private sector funding for financial literacy campaigns. We have already seen the ANZ Bank dedicate an enormous effort to their financial literacy campaigns. In fact, in October last, ANZ were actually recognised with the Prime Minister’s award for their work in this sector.

The funding of the Financial Literacy Foundation contrasts sharply with the minimal attention that financial counselling receives from the Howard government. It highlights their twisted priorities. Seemingly, when confronted with a choice of funding to enable people to keep their homes, John Howard has opted for a choice which educates people on how to build a portfolio of houses. As I indicated in a recent speech, the importance of financial counselling was driven home to me when a constituent approached me regarding the imminent loss of her home. She initially purchased it for less than $80,000 in 1987—$80,000. Today she owes lenders a total sum of $470,000. She is a single parent with little prospect of finding employment which could overcome or go close to meeting a fraction of her loan repayments.

This constituent’s debts began to accumulate after the breakdown of her marriage and subsequent numerous attempts to refinance. Her tale indicates a poor comprehension of debt matters and even poorer lending practices by numerous institutions that were only too happy to lend to her at inflated interest rates. Some of these groups actually rush to exploit the vulnerable, vague and naive. My constituent and her son will be evicted from her house within a matter of days.

I refer to this matter as I believe that, had she had access to appropriate financial counselling, many of her problems would simply not exist today—and she would not be on the verge of eviction. Sadly, in all her years of this poor financial management, she simply never came across a financial counsellor nor was directed or referred to one. Her story is not unique. There are literally thousands of Australians suffering from the very same problems. Sadly, my electorate seems to be one of the hardest hit. According to the Daily Telegraph, New South Wales Supreme Court figures for the top 10 suburbs for repossession include the Reid electorate suburbs of Merrylands, Auburn, Guildford and Granville. Also included are the neighbouring suburbs of Bankstown, Greystanes and Fairfield. So quite clearly there is a belt which, because of income levels, because of the period at which they actually financed and because of the collapse of the market in some of those suburbs, particularly Granville, has been impacted by these forced sales.

This makes a mockery of the claim by the Prime Minister that we have never been better off. Whilst the Howard government crows about the success in the economy, which was largely inherited from Labor and fuelled by the raw materials demands of India and China, there is an alternative reality of an out-of-control personal debt spiral. Steve Keen from the University of Western Sydney writes:

Australia’s household debt to GDP ratio has risen from 57 per cent of GDP in 2001 to over 86 per cent in 2005 or five fold from the mid 1970s. With the exception of a dip in 1985-87 period, when the Stock Market was the focus of a speculative frenzy in Australia, the housing debt to GDP ratio has been rising exponentially for at least 25 years. The focus of RBA concern today is therefore on borrowing by households.

Australian household debt was five and a half times higher in 2005 than it was in 1990. The American growth rate of eight per cent translates into 3.2 times as much household debt in 2005 as in 1990. So we see that the situation of Australia has markedly worsened as compared with the United States. Furthermore, whereas in the US debt weighs heavily on households and businesses, in Australia the pressure of debt is being exerted predominantly on households.

A potent indicator of the level of financial stress now being felt by Australian households is a ratio to household disposable after-tax income. This ratio has more than tripled since 1981. The explanation that this is due to falling interest rates ceased being viable about two years ago. The rise in debt has eclipsed the impact of generally lower interest rates since the early 1990s so that payments by households now consume more of household disposable income than they did when standard home loan rates peeked at 17 per cent in 1989, even though the average variable rate is now 7.5 per cent.

Since its election, the Howard government has presided over an almost threefold increase in personal household debt. The total personal debt in Australia has increased from about $46 billion in January 1996 to a staggering $133 billion in November 2006. The Insolvency and Trustee Service Australia reports that the December 2006 quarter saw a blow-out in bankruptcy numbers in all states except Western Australia. This includes a 30 per cent increase on the corresponding 2005-06 period in New South Wales and almost 28 per cent in Victoria.

Steve Keen’s analysis of rising personal household debt is underpinned by AFFCRA’s analysis showing that widespread use of credit cards for household and discretionary spending, driven by aggressive industry selling practices, has led to unhealthy financial thinking where card facilities are considered in the context of available credit rather than actual debt liability. Jan Pentland writes:

In the current consumerist hegemony and the increasing gap between the haves and have nots, where material goods can define self worth, easily available credit has been a trap for many clients of financial counsellors.

This budget clearly fails Australian consumers. The government’s priorities are twisted. The government is pouring millions of dollars into financial literacy campaigns when it is clear industry is already doing so. Where money is scarce it should be directed where it is most urgently needed. Financial counsellors are being increasingly called upon to deliver services to gradually more desperate Australian consumers. These and many millions of other Australian consumers need financial counselling around keeping out of debt. They do not need counselling on how to get rich.

I turn to other aspects of this budget. Obviously, one of the failings was answered by Labor in its proposal for skills training in the secondary system in this country. It is proposed that between half a million dollars and $1½ million be allocated to public and private schools throughout the country to do something about the skills crisis which has led to the plethora of 457 applications for entry to this country, the desperation of employers to obtain skilled workers and the use of 457 visas by some of them to undermine conditions in this country. Behind that, of course, we have the government’s failure on training, research and development in this nation.

I will provide some of the indicators, which unfortunately all go in one direction. Australia’s business expenditure on research and development in 2005 was 0.95 per cent. The average in the OECD was 1.53 per cent, placing Australia at a glorious 14th out of 22. The growth of business research and development shows a singularly poor pattern as well. The growth between 1984 and 1995 was 12 per cent and in the decade since then it has been 6.5 per cent. When we turn to the question of this country’s investment in knowledge, we find that in 2002 Australia’s investment in knowledge to GDP was 4.1 per cent. In a league table of OECD countries, Australia came ninth, which compares particularly miserably with Sweden, the United States and Finland. In high and medium-high technology manufacturers Australia is one of the lowest ranked countries in the OECD. According to OECD research in 2002—and I quote that because it is the latest available—we had 3.2 per cent of total gross value added and were ranked 26th in the OECD. We know, of course, the figures on the take-up of broadband, and that is why the opposition has had issues on that front. In 2002 the proportion of graduates in the science and engineering sectors—so vital for the future, so vital for an alternative to dependence upon raw materials and so vital to finding a solution after China and India have reached a point where they do not need as much from us—was 21.5 per cent of total graduates in this country, less than the OECD average of 23 per cent. In 2003, Australian expenditure on tertiary education as a proportion of GDP was 1.5 per cent and ranked seventh in the OECD. More importantly, the proportion that we are spending on tertiary education has declined over the period since 1995. I talked earlier about the debt burden on Australians because of their dependence on credit cards and their inability to have secure employment and income, and I talked about the way in which education is funded in this country. As I said, we have had a decline in overall expenditure. Similarly, in 2003 19.5 per cent of education expenditure was borne by the household sector, yet back in 1995 it was 13.5 per cent. So we have seen a massive increase in the proportion of education expenditure that is the responsibility of the household sector compared to general taxpayer expenditure.

Another area that causes genuine concern in my electorate is the question of dental assistance in this country. I quote the response of the Australian Dental Association to the initiative in the budget. It said the initiative was:

$377.6 million to be spent over four years to enable chronically ill dental patients to access dental services in the private sector.

As I said, issues have different impacts in different electorates, but in my electorate an issue I constantly hear about is waiting times at public access points at Westmead Hospital in Western Sydney, one of the larger hospitals in this country. It is an issue constantly raised by residents. I note that the response of the Australian Dental Association was that, whilst the initiative is a positive move, it:

... will only have a minimal effect on the waiting lists that exist in the public sector.

The ADA’s report also indicated that there are 650,000 Australians on public dental waiting lists and that it is disappointing that the budget does not really tackle the problem. We know, of course, that one of the first actions of the government was to abolish the existing Labor government initiative in that field.

I will briefly turn to multicultural affairs. We see an allocation of more money in this budget but, quite frankly, it is an allocation that is understandable and overdue. In recent years the government has reorientated the refugee humanitarian intake to Africa, to people from the Sudan in particular. Many of these people have been living in camps like Kakuma, in Kenya, for the last decade or more. They are families that are illiterate in their own language, let alone in English, and they and their children obviously have particular needs. It is understandable that at last the government has woken up to the reality that there is a need for a greater allocation for refugee humanitarian assistance.

But we do see in this budget a parallel allocation of $123 million to a new citizenship test. One has to question not only the logic of this but the way in which such a serious matter—allegedly in a subterranean way to combat terrorism—was allowed to be not acted upon by this government for a year and a half. After it became urgent they sat around doing nothing about the need for this citizenship test or the other demands in that sector. In the last month or so we have seen a mad rush of people to beat the test anyway, with unparalleled numbers of people applying for citizenship in the last few months. As I say, this allocation of $123 million for a citizenship test is very questionable. There is a chronic need to expend money on migrant English and to help people with orientation information before they arrive in the country. We need to give people an Australian experience for employment. Quite clearly, everyone on both sides of this House knows the problem that we have with people coming to this country, supposedly for employment, who are driving taxis or working in Pizza Huts. As I say, it is commendable that something is happening in respect of this allocation but, in the light of the size of the problem in recent years, it is not enough.

See this speech in context