Brendan O'Connor (Gorton, Australian Labor Party, Shadow Parliamentary Secretary for Industrial Relations) Share this | Hansard source

It is true to say I was a late starter in the debate on the report of the inquiry by the Standing Committee on Economics, Finance and Public Administration into home loan lending practices and the processes used to deal with people in financial difficulty because this report—a very important one—has just been tabled in the parliament. I have just been listening to a number of government members and others speak on the report. Indeed, I listened to the member for Cunningham in the main chamber, when the report was tabled, refer to the importance of this particular report. I agree with her and I agree with the sentiments in general from the committee members that the report is timely and could also provide some assistance to people who could find themselves in some financial stress as a result of being highly geared or finding the mortgage being a difficult debt to service.

I listened to the member for Stirling say that it was a ludicrous proposition that a household paying more than 30 per cent of its income on mortgage repayments was under mortgage stress. He went on to say—and I was listening on the monitor—that it was ludicrous because he spent in excess of 30 per cent of his income on his mortgage and he did not find himself under financial stress. I am glad that the member for Stirling is not under financial stress, but I think it is important to distinguish parliamentarians, who are on a minimum of $130,000 gross per annum, from householders, for example in my electorate, whose household income is $50,000. If you are spending 30 per cent of your income when you are on $50,000, or even in excess of that, of course you are going to feel the strain compared with somebody on $130,000 or more, given there might be other householders deriving income in the member for Stirling’s household—and I do not know. I think he is right in saying that, if a person is paying 30 per cent or more, it does not necessarily dictate that they are under stress. But I think it is unequivocal that, if you are servicing a mortgage with 30 per cent or more of your income and you are on a household income of no more than $50,000, $60,000 or $70,000 per annum, there is enormous strain, because the discretionary income of somebody on half the pay of the member for Stirling or, indeed, me is far less than ours is. The capacity to pay that mortgage is far less given all the other necessities of life for families. Therefore, whilst I accepted the view that it did not necessarily dictate mortgage stress to be paying 30 per cent or more of one’s income to service a mortgage, it seemed insensitive of the member for Stirling—or, indeed, any other member—to conclude that people on low to moderate household incomes would not suffer some strain as a result of that proportion of the income being provided to the mortgage. I think the member, with respect, was wrong in blithely disregarding that assertion.

It is fair to say that there has to be some arbitrary measure to consider the strain that Australian householders are under. I think it is important to note that there was strain during the recession; there was strain on households when interest rates hit 17 per cent. In this debate it is important to remember the proportion of income to service the mortgage, not just the interest rate percentage. What we know is that, on average, a higher proportion of household income is being used to service a mortgage now than it was in the recession in 1991. That is for a variety of reasons and does not necessarily place everybody under strain, but I think it is important for the government to at least acknowledge there are people hurting out there. I do not think the government accepts that there are people who are unable to get into the housing market, firstly, because houses prices have gone up so fast and so high that people are outpriced and are excluded from buying a home. That is happening now more and more. It is also true to say that people are mortgaging themselves up to their eyeballs to buy a house and get into the housing market. The problem for people is this: there has been exponential growth in the price of houses but not the same comparative increase in salaries or wages.

On one hand, if you are the owner of a house or houses, you would feel comfortable with that situation because you could see the value of your property going up—there is equity. For those people who have found themselves in a position of having bought real estate prior to the increases, it is a bit like winning lotto—good timing, you could say, good luck. But the fact is that they are beneficiaries of the rate of increase in the value of land and houses. But for those people—singles or couples or families—who are seeking to enter the housing market now without equity and on an average wage, it is very difficult.

It is very difficult for people who have taken that plunge, knowing that it does not seem to be getting any better and that it is not going to get any cheaper. You have to get into the market to be able to build up equity in a house and hope the house will increase in value, so you build up some equity and you feel secure. There is advice being provided to people that they should take the leap and buy a house because things are not going to get better in this area, things are only going to get worse. People then find themselves very heavily geared and find themselves sailing very close to the wind financially and therefore under enormous strain to service their mortgage, their debt. It is important, therefore, for this committee to conclude, among other things, that there needs to be proper collection of statistics that would allow for a proper analysis of what is going on regarding repossessions.

In recommendation 1, the committee recommends that the ABS begin collecting and publishing annual data on housing repossessions and that the data should be disaggregated to include, as a minimum, breakdowns by loan type, lender type, primary cause and location. I think that is a very sensible recommendation and I would support it.

In recommendation 2, the committee recommends that the Commonwealth government regulate credit products and advice and this includes the regulation of mortgage brokers and non-bank lenders. There is no doubt—and certainly this report in its introduction concludes—that there has been a growth in the lending industry, which can be a good thing because it can bring about competition which should bring down prices. But there has also been some imprudent behaviour by lending institutions, for example, providing loans to people which are well in excess of what they can pay back. I know people say, ‘How paternalistic should we be? If people think they can pay back the loan, who are we to say they are not in a position to?’ But that is why you have experts and that is why you have people to make decisions in everyone’s interests to ensure people can pay the mortgage. The worst thing that can happen is to provide money to a couple and for that couple or family not to be able then to properly service the debt, let alone pay the debt off.

This report was timely. I do not agree with the member for Stirling, who says that 30 per cent of your income is not necessarily stress. Try living on $50,000 a year, not $130,000, and you will find that 30 per cent of that income being put off to service the mortgage is a difficult task for families in this country, no less than it is for the constituents of the electorate of Gorton. (Time expired)

Debate (on motion by Mrs Irwin) adjourned.

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