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

My question is to the Prime Minister. Is the Prime Minister aware of new figures from Deutsche Bank which estimate that household debt is now a record 171 per cent of household disposable income—double the level of a decade ago? Does the Prime Minister agree that this greater exposure of households to debt means that the slightest increase in interest rates hurts households’ budgets? Doesn’t this new interest rate reality explain why household debt servicing obligations are higher today after your seven back-to-back interest rate hikes than when interest rates were 17 per cent under Mr Keating?

John Howard (Bennelong, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

I am generally aware of that report. I am also specifically aware of a speech made by Mr Ric Battellino, the Assistant Governor of the Reserve Bank of Australia—a speech he made on 22 August 2006. He had this to say:

... in judging the health of household finances, we should not look at trends in debt in isolation; we need to look at the overall financial position of households.

If we do this, we see that households’ financial assets have increased by substantially more than their debt ... As a result, even though household debt has increased, the net financial position of households has improved noticeably.

In other words, Australians are much wealthier now than they were 10 years ago. They are much better off. You do not just look at the increase in debt; you look at the commensurate increase in assets. Anybody with a simple understanding of economics will know that. What Mr Battellino was saying was that, if you look at the overall situation, you find that the financial position of Australian households has, to use his words, ‘improved noticeably’—and that, of course, has happened over the last 10 years under the stewardship of this government.