David Hawker (Speaker) Share this | Link to this | Hansard source

I have received a letter from the honourable member for Prospect proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The failure of the Government to accept responsibility for the impact of the seven back to back interest rate hikes since May 2002 on the household budgets of families with mortgages.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

Yesterday in question time we heard the revelation that repossession orders in New South Wales have reached record levels. They are 50 per cent higher than they were in 1991, and they are even higher than they were in 1982, when interest rates hit 21 per cent under Treasurer Howard. In fact, repossession rates are higher now than they have been at any time in our history. During 2005, 4,873 repossession orders were issued in New South Wales—that is 59 per cent higher than in 2004—and there has been a nine per cent increase in the first six months of this year. When did these rates of repossessions start to rise? In 2002, when interest rates under this government started to rise.

Yesterday the Prime Minister was asked about this by our colleague the honourable member for Banks. He gave a long and rambling answer that was Castro-like in its length. He came back to add more to it, but he completely—and I suspect rather conveniently—missed the point. What was his answer to the problem of the increasing number of repossessions—the increasing number of people having their homes repossessed? When in doubt blame the states. ‘I have an answer,’ he said. ‘Release more land; that will drive house prices down.’ And to a small degree I do concede that he has a point. Releasing more land would create a small amount of downward pressure on land prices. But what would reducing land prices do to struggling families in Western Sydney struggling with higher mortgage repayments, higher petrol costs and high debts that are out of control? What that would do is beyond me.

Families in Western Sydney, in the outer areas of Melbourne and Brisbane and in other areas have gone into massive debt, facing increased mortgage repayments and higher interest rates and dealing with rising petrol prices, but the Prime Minister has a plan. Is it to put downward pressure on interest rates?

Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

No.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

No. Is it to put downward pressure on petrol prices?

Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

No.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for Fowler!

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

No; his plan is a very cunning plan. It is to put more downward pressure on housing prices. He is going to reduce the value of their land even further so they get driven further into negative equity and the size of their mortgages will be even bigger compared to the value of their homes. But the Prime Minister just does not get it.

Research commissioned by the Sydney Morning Herald found 90 per cent of the 77 suburbs in south-western Sydney experienced falling house prices in the last financial year, and 83 per cent of the 93 suburbs in greater Western Sydney had falling house prices. The Prime Minister does not get it, but there is one person in the House on the other side who does get it. I have to say it will come as no surprise to somebody on the other side of the House that house prices in Western Sydney and increasing mortgage repayments are a big problem. On Saturday, 26 August I was at home reading my Sydney Morning Herald, as many of us are wont to do, and I came across a very interesting article. It starts like this:

The battler-belt Liberal politician Pat Farmer was having so much trouble selling his mansion on Sydney’s southwestern fringe he slashed the price by $300,000.

And it goes on:

But that’s not Farmer’s only property headache. He wanted to sell a three-bedroom investment property at Campbelltown he paid $315,000 for 18 months ago, but his agent warned him it might fetch only $285,000.

And it goes on to quote the honourable member for Macarthur. He said:

I said, ‘You must be joking’, but he said there was no way I’d even get $300,000 for it.

When the member for Macarthur heard the Prime Minister’s answer yesterday he must have been muttering to himself again. ‘You must be joking, Prime Minister,’ he must have said—because it is no joke.

And the member for Macarthur’s constituents know it is not a joke; they would be even more upset than he is. For, as the Sydney Morning Herald went on to say:

The options are more limited for many in the mortgagee killing fields of the west and south-west, where price falls of 40 per cent have become common at weekend auctions.

These are strong words. They are not my words; these are the words of that well-known, august, socialist journal of record the Sydney Morning Herald. And it gets worse. The Herald goes on to report:

Residents in crucial federal Coalition electorates, such as Farmer’s seat of Macarthur and the Liberal Jackie Kelly’s seat of Lindsay ... are experiencing falling property values, rising interest rates and soaring petrol prices all at once.

But, as I say, the Prime Minister has an answer. Well done, Prime Minister! His answer is to reduce housing prices even further. Western Sydney government members of parliament should be telling the Prime Minister he is out of touch and out of line. They should be telling him that it is unacceptable for interest rates in Australia to be the second highest in the OECD.

Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

Stand up for your electorate!

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

But I do not like the chances of that happening.

Jackie Kelly (Lindsay, Liberal Party) Share this | Link to this | Hansard source

Miss Jackie Kelly interjecting

Julia Irwin (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

Mrs Irwin interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Fowler will remove herself from the chamber under standing order 94(a).

The member for Fowler then left the chamber.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

We saw a few weeks ago the spectacle of the honourable member for Greenway saying that increasing interest rates are not a big issue in her electorate. I am not sure where she has been, but she has not been in her electorate if she says they are not a big issue.

And the honourable member for Lindsay is in the chamber; she said it was not yet time to press the panic button. It is time to press the action button. But the honourable member for Macarthur, who I am glad has joined us, and the honourable member for Macquarie have been struck dumb. They should be telling the Prime Minister to do the things that the RBA, the Reserve Bank, say need to be done to put downward pressure on interest rates.

Pat Farmer (Macarthur, Liberal Party, Parliamentary Secretary to the Minister for Education, Science and Training) Share this | Link to this | Hansard source

What about interest rates under Labor?

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for Macarthur!

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

They should be telling the Prime Minister to fix the skills crisis and to fix the infrastructure crisis.

Pat Farmer (Macarthur, Liberal Party, Parliamentary Secretary to the Minister for Education, Science and Training) Share this | Link to this | Hansard source

Mr Farmer interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Macarthur is warned.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

But of course they will not say that. They will be struck dumb, just like they have been each of the last seven times interest rates have increased since 2002. They will be struck dumb just like they have been for the last three times interest rates have increased since the last election, when the Prime Minister promised to keep them low. They will be struck dumb if interest rates go up again this year.

Pat Farmer (Macarthur, Liberal Party, Parliamentary Secretary to the Minister for Education, Science and Training) Share this | Link to this | Hansard source

What about the councils?

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Macarthur will remove himself from the chamber under standing order 94(a).

The member for Macarthur then left the chamber.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

What would the impact of another interest rate increase be? Again, the House does not need to take my word for it; it does not need to take our word for it. Louis Christopher of Australian Property Monitors says this of the prospect of another interest rate increase:

It very much could be the final straw for the property market. We would see an additional 10 per cent price decline in Sydney ... I hate to imagine what it would do to defaults, given they are already on the rise.

Of course another interest rate increase will put more downward pressure on house prices, not only increasing families’ monthly repayments but reducing the equity in their homes. Every economist knows that as interest rates go up housing prices go down, but the Prime Minister does not seem to care what that means for families in Western Sydney and other areas. These are families who took his word for it when he said he would keep interest rates low. Perhaps they should have listened to the Treasurer, who knows you can never take the Prime Minister’s word.

Abraham Lincoln once said that God must like common people because he created so many of us; the Prime Minister must like battlers, because he is creating thousands of them. He likes them so much that he is creating more of them through his high interest rates and high petrol prices and through his mismanagement of our economy.

He has introduced a complete furphy into this debate. The Prime Minister has introduced the land release issue. He talks about taking the pressure off new homebuyers and he ignores the pressure on people already with homes struggling to pay off their existing mortgages as the value of their homes fall and their monthly repayments rise. If he wanted to do something about new homebuyers, he could do something about construction costs. The ABS house price survey shows that construction costs alone have increased 56 per cent over the last eight years—twice the rate of inflation. Why? Because this country has a skills crisis and tradesmen are not available to build houses.

What is this government’s answer? To build a TAFE college in Africa. The Minister for Vocational and Technical Education is probably the least competent minister this government has. But that is not good enough for him—he wants to be the least competent minister in all of Africa as well. But, given his track record, building a TAFE college in Africa would not meet the high standards of public administration that those nations have come to expect.

The Prime Minister’s furphy on land release shows just how out of touch he is. He pretends no land is being released and that no land has been released in many years in Sydney. But in Sydney, for example, we have seen thousands of lots of land released in the north-west around Kellyville. Admittedly it was done by a coalition government, without any infrastructure, without a rail line or public transport, but they were released. The north-west growth sector now will contain 66,000 new homes and the south-west growth sector will contain 115,000 new homes. In Sydney right now there are 5,700 lots approved by the state government available for sale, but the interest rate increases have meant the market cannot afford them. This shows how out of touch this Prime Minister is—he does not even know what is going on in his home town.

Perhaps the Prime Minister could share with the House exactly where he thinks these land releases should be. Should they be in the Blue Mountains, in the electorate of the honourable member for Macquarie? Perhaps they should be in the farmlands of Hawkesbury, which are now in the electorate of the member for Greenway. We all know how popular land releases would be there. If the Prime Minister cares so much about land releases, why doesn’t he reinstitute the office of the minister for housing and urban development, which he abolished in 1996? If he wants to be involved in land releases, why doesn’t he get involved? Why doesn’t he get the federal government involved again in urban planning, which this government has neglected for 10 years?

It is not just mortgagees who are suffering. The repossession figures that I referred to earlier also apply to small business. Many small businesses are highly geared, they have borrowed 100 per cent of the cost of buying a small business, and they are dealing with increased prices just as much as mortgagees are. Couriers, for example, are dealing with higher petrol prices and they will also have to deal with the government’s unfair independent contractors act. But the so-called ‘friends of small business’ on the other side are presiding over increases in interest rates at times of record small business debt. They should be ashamed of themselves.

We read earlier this week that the Prime Minister told his party room that people on this side of the House, and we heard it again today, are out of touch, that they are inner-city elitists and that his party is the party which understands the people who live in what he so delicately calls McMansions. I live in one of those houses that he so delicately describes as McMansions. I represent thousands of people who have borrowed heavily to buy the house of their dreams—they have borrowed massive amounts of money and taken the Prime Minister at his word. It is the Prime Minister who is out of touch with those people. It is the Prime Minister who says, ‘Release more land.’

Jackie Kelly (Lindsay, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order on relevance. How anyone in the ALP could be relevant on interest rates is beyond me.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order on relevance on an MPI.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

I thank the honourable member for Lindsay for her intervention. She is out of touch as well. The Prime Minister is out of touch. The Prime Minister says, ‘Release more land.’ Releasing more land will do nothing. Instead of putting pressure on the states for land releases, the Prime Minister should be putting downward pressure on interest rates, and the member for Lindsay should be telling him to do it. The member for Lindsay, who claims that she is in touch with the people of Western Sydney—unlike the Treasurer, she honestly admits—should say it is time to press the action button.

This Prime Minister is out of touch, his government is out of touch and his Western Sydney MPs are out of touch. The member for Macarthur has experienced what is happening in Western Sydney for himself, yet he has done nothing about it. He has not brought it to the attention of the Prime Minister. He has done nothing to tell the Prime Minister to get interest rates down. The Prime Minister is out of touch, he is out of ideas, he is out of line, he is out of time and, at the next election, he deserves to be out of office.

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I listened with interest to the diatribe that came from the opposition ranks. In a matter of public importance which purported to be about Australia as a whole, he decided that he would try to make some cheap points about his home state of New South Wales. If I recall correctly, the member can best be described as a bit of a slippery customer. He begins by saying that housing interest rates under John Howard were 21 per cent. Home interest rates in 1982 were in fact 13.3 per cent because they were fixed interest rates. They were not deregulated until much later in the eighties. In 1982 they were fixed, and his assertion that home interest rates were 21 per cent when they were in fact just over 13 per cent is indicative of the accuracy of the rest of his speech. It is totally and utterly misleading in every aspect.

Let us take him on on what he had to say. He said that in the west of Sydney it was the policies of the federal government that had caused land prices, or rather home prices, to slip. What he failed to tell you was that one of the brilliant initiatives of the New South Wales government, which has presided over New South Wales having the most sluggish economy in the country, was to introduce a vendor tax, which plummeted house prices like you have never seen. When I said that the member for Prospect was a slippery customer, I said it precisely for the reason that he likes to distort the truth. The text of his matter of public importance says that the government failed:

... to accept responsibility for the impact of the seven back to back interest rate hikes since May 2002 on the household budgets of families with mortgages.

Let us debate that. This government takes responsibility for a soundly managed economy, which has resulted in Australians being better off than they ever were before—

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

Mr Hatton interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

My records show that the member for Blaxland has been warned, and he should know what the chair does from there.

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

Let us take a look at the real indicators. Let us begin with wealth in Australia. Since this government has been in office in the last 10 years, the level of household real net wealth has doubled from $2 billion to $4.6 billion. In the last seven years of the Hawke-Keating government, the growth in wealth in Australia amounted to a measly 2.9 per cent. Let us take a look at household debt. For every $1 of debt households have, they have more than $6 in total assets and almost $2 in financial assets. This is an indication of a well-managed economy. If we ask the question, ‘Do we take responsibility for the management of the Australian economy,’ what test ought we to use? From my way of thinking, it is a simple one: are Australians better off? The answer is clearly yes. Let me give you an example. A couple with children where one partner is earning 100 per cent of average wages and one is earning 33 per cent of average wages, which is not an uncommon phenomenon these days where both parents are working, would have a real disposable income of $64,000, which is a real increase of 31 per cent since we have been in office. In simple terms, that means that the first $51,800 that that couple earns is effectively tax free.

The tax-free threshold across the board is $6,000 but, when you look at the policies that we have introduced to assist families and families with children—the member for Prospect is leaving the chamber; what a shame; he cannot handle it—the very people who he has just said are worse off are the same people who are benefiting from the policies that we have put in place to enhance the income and standard of living of families, including those living in greater Western Sydney, where the members for Lindsay and Macarthur live. We see the hopes and aspirations of those people recognised by the policies of this government, as distinct from the people across the chamber, who saw no growth in their prospects and no aspirational growth in what they thought they could achieve for their children. And they have the hide, when debating a question which relates to interest rates and taking responsibility for the management of the economy, to say that the policies of this government have somehow been to the detriment of people who live in Western Sydney.

Let us look at a couple of other things that are relevant to this debate. Let us look at interest rates. Over the 10 years of this coalition government, the home mortgage interest rate averaged 7.15 per cent versus an average under the previous Labor government of Hawke and Keating of 12.75 per cent. I reckon that indicates that we are very much better off. If you want to look at the interest rate for small business, you have an average rate under us of 8.8 per cent versus an average under Labor of 14.25 per cent. As I said, the test in this debate is: are Australians better off? The answer is yes. People well remember that interest rates under Mr Keating were 17 per cent for home mortgages, 22 per cent for small business and some as high as 29 per cent. Don’t we remember the terrifying words of Mr Keating that he would ‘juggle the levers’? He juggled them all right; he sent thousands of people tumbling into an abyss of despair, many of whom were small business people who could have withstood a correction at any time. But the levers were juggled by that economic genius Mr Keating and small businesses that could have withstood a correction were tipped into the abyss of despair.

At the time of that abyss of despair, the member for Prospect would have been about 19 years old. He may not remember the impact of those disastrous policies, but I will tell you what: the vast majority of his electors will well and truly remember the impact of those policies. And he has the temerity to come in here and say that this government does not take responsibility for the good management of our economy. We do take that responsibility, and we take it by showing that the average Australian is better off under our sound management than they were under Labor.

Let us look at some other indicators—unemployment, for example. Unemployment is now at a record low since 1974. Unemployment figures are at 4.8 per cent, with many electorates having almost full employment, with unemployment rates as low as 1.8 per cent. We have seen the long-term unemployment rate dramatically reduced, with people being assisted back into the workplace. We have seen realistic policies put in place—for example, the introduction of the Job Network to assist people to get back into jobs. And when people get into jobs it starts to restore their self-esteem. The number of families that have no member of the family working has diminished. These are very positive things that build the strength of a nation.

We have seen, however, as the Prime Minister pointed out in question time, a very disturbing factor. He pointed out to us that the problem with home prices and the new entrants to the home market is the fact that the cost of land has increased in the period from 1973 to 2003 by a staggering 700 per cent. Why is this so? Because we have seen a change in policy. We have seen a change in the way land is released. When a developer goes to develop land the cost of the infrastructure and of providing many amenities for a subdivision are put back onto the developer and passed on to the purchaser before that purchaser then engages someone to build the home. Over that same period the increase in building costs has been just over 40 per cent. How, in this day and age, when you see the reforms that were brought in by this government with our new tax policies, when we brought in the GST and gave all that money to the states, guaranteeing them a growth tax, is it that they so mismanaged their states that they have not been able to release land that is affordable?

The member for Prospect said that the release of land would not help the process. The point is that it is not the release of land per se; it is the release of land and the amenities and infrastructure that accompany it that are presently eschewed by the state governments, and they pass it on to be paid by the purchasers themselves via putting the cost onto the developer. Once again the member for Prospect, who really did not feel the impact of the bad management of the Hawke-Keating government because he was too young, wants to tell us at this great age of wisdom that he believes that simply releasing land was what the Prime Minister was talking about, when it clearly was not.

I would like to point out, just while we are dealing with the good management that we have given to Australia as a whole, that with our new tax policy reforms—getting rid of the wholesale sales tax and putting in the GST—the result for the states has been that they are virtually awash with money. In 2005-06 the GST revenue for New South Wales was $10.94 billion. That was a windfall of $160 million. That was $160 million above and beyond what they could have anticipated if we were still in the business of the premiers coming to Canberra and asking for financial assistance grants.

Queensland received $7.96 billion, adding a windfall of $664.9 million. Yet Mr Beattie still cannot, as we heard in question time today, manage to keep maternity wings available in hospitals across Queensland. We hear the stories of people who cannot access hospitals for life-saving operations, and yet he got a windfall of $665 million from the Commonwealth government and still cannot provide for the state. We are talking in this debate about the Australian government taking responsibility for the management of the economy. Well may some of the state treasurers do the same thing. Perhaps at the election on Saturday Queenslanders can put a good statement about how they feel about Mr Beattie’s management of that state and the management of the money that comes from the federal government. To put that into perspective, New South Wales, for instance, has a total budget this year of $41 billion, and $20 billion of that budget came directly from the Commonwealth government. We have a major problem: it is called vertical fiscal imbalance. It means that state governments are spending money which they do not have to raise, and it results in bad decision making.

Back to this strict interpretation of today’s debate—do we take responsibility for the management of this economy? Yes, we do. Do we take responsibility for the fact that Australians are wealthier than they have ever been, that the economy is stronger than it has ever been and for the fact that we have put surpluses in place in budgeting as part of that management system? Do we take responsibility for the fact that families are so much better off because of our family assistance programs? Yes, we do. This is a proud government and it is proud of its record. It takes responsibility for the movement in interest rates because it knows that we do it better than Labor ever did, can or would do in the future. (Time expired)

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

The Prime Minister and his backbench simply do not understand the new interest rate reality; they simply do not get it. We have asked dozens of questions of the Prime Minister and the Treasurer over the past few weeks and it is apparent that they simply have not got a clue about the tremendous financial pressure that is hitting Australian families through rising interest rates, and the problems that is causing for those families—the leading edge of which is seen in those repossession figures that we questioned the Prime Minister about over the last two days.

The truth of the new interest rate reality is this: Australian families are facing record high mortgage repayments under the Howard government, the highest in our history. Every time John Howard, or for that matter Peter Costello, have been asked about the impact of rising interest rates their chant has been to blame the states and then to go on and argue that the solution to this problem must be large-scale land releases. Why are they doing that? It is very simple. They will not admit responsibility for rising inflation and rising interest rates, so they have to blame someone else. They will not deal with the capacity constraints that were so evident in the national accounts yesterday that are putting upward pressure on inflation and interest rates, so they have to find some other scapegoat out there. At the moment it is the state governments.

They have driven up interest rates to the point that Australians are now paying a higher proportion of their household income in mortgage interest repayments than they did under former Prime Minister Paul Keating. That is the new interest rate reality. But they are so out of touch that they have not woken up.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Mr Baldwin interjecting

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

You do not get it, Parliamentary Secretary. You simply do not get it because there is no such thing in John Howard’s Australia as a small mortgage, and there is no such thing as a small interest rate rise. We have had seven interest rate rises of one-quarter of a per cent—up on 8 May 2002 and 5 June 2002 and up in November 2003, December 2003, March 2005, May 2006 and August 2006. And the Prime Minister went to the last election and said: ‘Trust me with your interest rates. We will keep them at record lows.’ They have gone up three times and it is starting to cause real pain and distress in the Australian community. At the moment, according to the Reserve Bank of Australia—listen to this, Parliamentary Secretary; this is the new interest rate reality—almost 11 per cent of income is—

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Mr Baldwin interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The parliamentary secretary will not be baited.

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

consumed by interest repayments today—higher than at any time in history. It is higher under Howard than under Keating.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Mr Baldwin interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The parliamentary secretary is warned.

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

These are the figures from the Reserve Bank of Australia. Of course, the Prime Minister wants to deflect attention from this. We know about this Prime Minister: he is the doyen of deception, the master of misinformation. Every time he gets into trouble he has to find somebody else to blame. Of course, his latest tactic is to say, ‘If the states released more land, we would not have such a problem with such high house prices and such large mortgages.’ He wants to talk about anything other than interest rates. That is the Prime Minister’s new motto: ‘Anything but interest rates.’ You can see it on the whiteboard in his office: ‘Talk about anything other than interest rates.’ And it is interest rates that are really having a tremendous impact not only on people buying houses but also on small business—but that is a topic for another day.

Labor is happy to have a balanced debate about all the factors that influence the housing market. In John Howard’s world, when things go right it is all down to him and when things go wrong it is always someone else’s fault. What are the real implications if the states and the private sector were to take John Howard’s advice seriously?

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Lilley will address members by their title or by their seat.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Mr Baldwin interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The parliamentary secretary has been warned.

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

What if they were to take the Prime Minister’s advice seriously? They would flood the market with land. What would be the outcome of that? There is a report from the Institute of Public Affairs. The Prime Minister has taken a shine to this report. He has been quoting from it all week—quoting in a way which I believe does not reflect the true facts—to back his argument. But this report makes it very clear that if there was a mass release of land to the market it would have a downward impact on prices for all existing homeowners. His solution, in effect—particularly in the outer suburbs of our cities—is to dramatically reduce house prices. People who are suffering from negative equity at the moment would be worse off, as the member for Prospect spoke about in his remarks.

What the Prime Minister is actually talking about would have a dramatic impact on the current median prices in different Australian capital cities. If you go to page 64 of this document you will see the median prices in our capital cities. On page 67 of this document you will see the expected median house price after the market was flooded with more land. It is sober reading. I know now why the Prime Minister does not quote the rest of this report. If you were to follow through—and I do not accept these conclusions necessarily from the IPA—you would see a reduction in the median house price in Sydney of 67 per cent. This is the report the Prime Minister is quoting from to validate his argument about what is going on in the housing market. This will be a report that will haunt our Prime Minister. As I said, Labor is happy to have a balanced debate about this matter. Land is part of the equation; we do not dispute that for a minute. But what we know is that seven interest rate rises, three since the election, is a huge factor in the new interest rate reality.

Why has the government ramped up this argument about land only in the last couple of weeks? I will tell you why. On 19 August the Governor of the Reserve Bank blew the whistle on the dishonesty of the Howard government and the lie of the last election campaign. They went to the last election campaign saying they would keep interest rates at record lows, and people in the western suburbs of Sydney and across this country went out and borrowed money. They said that the Prime Minister took personal responsibility for this. They believed him and now they are in trouble. On 19 August Peter Hartcher in the Sydney Morning Herald interviewed the Reserve Bank governor—perhaps the most independent, credible commentator and authority on interest rates not just in this country but around the world. His standing is that high. What did he say on 19 August? He said that the Prime Minister’s claims during the election campaign were incorrect and not plausible.

That explains why we have had this frenetic activity over the last couple of weeks trying to find a new scapegoat for rising interest rates because the Reserve Bank governor blew the whistle on the Prime Minister and put a torpedo into his credibility when it comes to interest rates particularly and economic management more generally. That is why we have had that activity. He has exposed our Prime Minister as the doyen of deception and the master of misinformation. That is why we are seeing these answers in this House from the Prime Minister, not only this week but over the previous two weeks of sitting. They are acutely embarrassed by what the Reserve Bank governor had to say.

Of course, before the Reserve Bank governor entered the scene, we had all of the other scapegoats rolled out when the interest rates went up in August and we had them back in May. If you want an example of someone being terminally out of touch in this government, try the Treasurer. The Treasurer said that interest rates with a single digit were low. He does not understand the new interest rate reality. And in August when interest rates went up the Prime Minister and the Treasurer were blaming bananas. They went out and said, ‘Oh, it’s the fault of bananas.’ We have had all of these other deflections; we have had them out there talking about the history wars, about facts and figures. Of course, when we pointed out to the Prime Minister that there had been a certain Treasurer who had had interest rates at 22 per cent he lost his memory. We have had all of these deflections because the government knows there is pain out there and it is not facing up to the responsible economic decisions that this country requires to put downward pressure on inflation and on interest rates. (Time expired)

Michael Keenan (Stirling, Liberal Party) Share this | Link to this | Hansard source

You really have to have some front to be a Labor MP and come into this chamber and talk about interest rates, because if you are a Labor MP you represent a party in this chamber that long ago abandoned any sense of economic responsibility in favour of a rabid opportunism. For 10 years this directionless opposition have done everything possible to hold Australia back. Chained down by their outdated ideology and their master-servant relationship with the union movement, the ALP have opposed the government every time we have taken a tough decision that benefits the Australian people.

Most recently, we have seen their sleazy attacks on the Work Choices legislation—sensible measures that are required to provide a bit more flexibility within our labour market. The ALP opposed welfare reform. They opposed tax reform. They even opposed tax relief for every single Australian as part of last year’s budget. And yet we have the member for Prospect come in here with his shabby little matter of public importance which attacks the government for failure to take responsibility. I can tell him that nothing could be further from the truth. This government is more than happy to take responsibility for the Australian economy, an economy that is the standout of all developed economies, an economy that is the envy of our OECD partners and continues to deliver increases to our standard of living.

In 13 years of Labor government housing interest rates averaged 12.75 per cent. In 10 years of coalition government they have averaged 7.15 per cent. Under Labor interest rates peaked at 17 per cent for housing, 21 per cent for small business and 23 per cent for farmers. The crippling effect of those 17 per cent mortgage interest rates plus a huge government debt will forever be Labor’s legacy from the Hawke-Keating years. Labor occasionally claim that during their time in government they were happy to embrace economic reforms—reforms which, at the time, the then opposition supported because they were in Australia’s interests. This claim is partly true. The Hawke-Keating government did take some admirable steps and do some admirable reforms during this period. Yet this history is an even more damning indictment of today’s opposition. Because of weak leadership and a lack of any policy direction they have descended into a predictable opportunism that will never allow them to take any hard decisions that benefit the Australian people. The Australian Labor Party spurn Australia’s national interests in favour of unprincipled political point-scoring.

I see that this week the current fashion for Labor MPs is to cry crocodile tears about housing affordability. But, of course, we all know that the reason for the crisis in housing affordability is state Labor government planning policies, particularly land release policies. State Labor governments have failed to grasp the basic law of supply and demand. If you are not going to release land then obviously that is going to drive up its price. Yet this basic economic concept seems totally beyond the wit of our state Labor governments. The latte set that run these outfits look down on the great Australian dream of the block of land and a house in the suburbs. They think they have better ways for us to live, and they are using their planning policies to impose their inner-city vision. They derogatorily refer to ‘McMansions’, as if aspiring to own a home on a decent sized block of land was somehow wrong. The housing affordability crisis that the ALP have suddenly discovered is actually a deliberately created land shortage. Rather than bleat about interest rates, the ALP members should talk to their state counterparts and request that they do something about it.

The member for Prospect attempted to argue that the huge increases in the cost of housing related back to the increases in construction costs. I doubt that he would actually believe that, because in the past 10 years construction costs have increased by about 40 per cent whereas housing prices have increased by substantially more than that. On top of the land release policies of the state governments, what about the outrageous tax regimes that they are currently running in the Labor states? In my home state of Western Australia the Carpenter government is gorging itself on taxes generated by the property boom. It jacked up stamp duty for three budgets in a row to make it one of the highest levels in Australia. In other parts of the country it is the same story, yet speaker after speaker got up here and tried to find other reasons for this problem of housing affordability. I say to all the Labor members of parliament that they need to talk to their state Labor counterparts and beg them to put some more land on the market. If we are going to address this problem we at least need to be honest about it. We at least need to identify what the true causes are and then ask the state Labor governments to address them.

The Howard government has worked hard to increase prosperity of Australian families in the 10 years that we have been in office. In my electorate of Stirling unemployment continues to fall. The local unemployment rate now stands at 5½ per cent, which is a decrease over the past 10 years of about four per cent. When the Labor government left office in March 1996, Stirling’s unemployment rate was almost 10 per cent. These are the results of economically responsible policies. Sadly, not all Australian governments have been so responsible. At a state level, as the retiring Governor of the Reserve Bank pointed out, state deficits and state borrowings are now placing upward pressure on interest rates. He said:

“I have been lucky—for most of my time, fiscal policy has consisted of small surpluses.

“So the movement in the government account has not been big enough to be important in the consideration of monetary policy.

“It might become an issue because the states are now part of the equation.”

State fiscal balances and cash balances are forecast to move into deficit in the next financial year. Collectively, the states and territories are forecasting deficits of almost $5 billion, compared to a surplus—