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

The Housing Loans Insurance Corporation (Transfer of Pre-transfer Contracts) Bill 2006 and the Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Repeal Bill 2006 seek to finalise arrangements in relation to the winding up of the Commonwealth Housing Loans Insurance Corporation in 1997. The Housing Loans Insurance Corporation was established by the Menzies government in 1965 to address structural deficiencies in the highly regulated financial system. Its primary purpose was to assist low-income earners with small deposits to obtain housing finance. It did this by insuring lenders against the cost of mortgage defaults.

At the time its purpose was articulated by the then Minister for Housing, Mr Bury, as follows:

The scheme aims to assist people to borrow, by means of a single loan secured by a first mortgage, the difference between available personal savings and the cost of a home suited to their requirements. The amount of the loan would, of course, be related to the ability of the borrower to repay it over a reasonable period. It is our hope and intention that this scheme will progressively remove the present need for many creditworthy borrowers to obtain a second mortgage loan, frequently on oppressive terms and conditions.

Since the introduction of the scheme and financial deregulation during the 1980s, the market for mortgage insurance matured considerably, progressively making a Commonwealth funded scheme redundant. The HLIC was at that time the largest mortgage insurer in Australia, having insured more than 1.3 million loans.

In the early 1990s, the former Labor government proposed to transfer the corporation to the private sector. However, the transfer process itself became untenable due to the lack of competitive neutrality in the regulations under which the corporation operated. Its liabilities were guaranteed by the Commonwealth and its exemption from supervision by the industry regulator meant it did not have to comply with the capital adequacy arrangements applying to its competitors. As a consequence, the former Labor government proposed restructuring the Housing Loans Insurance Corporation as a company incorporated under the companies law and subject to the regulations of its competitors, as well as those of the states and territories. It was proposed that the corporation cease writing business on the day before the new company came into existence. The then existing insurance policies—the so-called old book—would then be directly taken over by the Commonwealth. Finally, the Commonwealth would then contract with the new company to administer the old book insurance obligations, with the Commonwealth making any payments arising from this old business

A bill was presented to and passed by the House in October 1995 to achieve this but lapsed in the Senate. Upon coming to office, the current government reintroduced the bill in 1996. Upon the bill passing, the new entity, HLIC Ltd, was sold to the private sector in 1997. However, pre-transfer contracts remained under Commonwealth ownership. These contracts are currently managed on behalf of the Commonwealth under a management agreement that is due to expire on 31 December this year. The principal amount covered by the Commonwealth’s guarantee was estimated in 2005 to be $5.087 million, considerably less than the outstanding amount of $19 million in 2003.

The government has stated that it no longer has a desire to continue to be involved in the business of mortgage insurance through its ownership of the pre-transfer contracts. Labor is of the view that this is a reasonable position and is an evolution of policy advocated by successive governments. The bills we are debating today do not commit the Commonwealth to transfer its ownership of the residual contracts but would enable the transfer to occur if required.

Labor notes that in divesting itself of the pre-transfer contracts it is likely the Commonwealth will need to compensate the new owner of the contracts for risk involved. These bills propose that a standing appropriation be used for this purpose, as it is not possible to estimate what the risk is valued at by a new owner. However, given that the total balances outstanding on the pre-transfer contracts are now worth less than $5.4 million, it is unlikely that any compensation for risk will be significant.

It is worthwhile noting, however, that the risk associated with mortgage defaults has increased in recent times. A sharp increase in repossession action against borrowers has occurred, following the seven back-to-back interest rate hikes since 2002. Figures from the Supreme Court of Victoria show that in the first half of this year there were 1,474 repossessions, or more than 2½ times the 563 in the first half of 2003. In New South Wales the figures are also striking. The data from the Supreme Court of New South Wales clearly show a rapid and concerning acceleration of mortgage repossessions in New South Wales since 2002—precisely when interest rates started rising. The figures show mortgage repossessions in New South Wales have more than doubled since 2002 and are now 50 per cent above levels recorded in 1991. In the ACT, similar figures are available which show a marked pick-up in repossession actions since 2002.

This is a deeply concerning trend and serves to highlight the impact on families of the government’s seven back-to-back interest rate hikes. It is nothing new to the Prime Minister. Figures on foreclosures show that there was an almost fourfold increase in mortgage repossessions when he was Treasurer, from 246 in 1978 to 952 in 1981. Those opposite might find it uncomfortable, but the fact is that there was a fourfold increase in repossessions under Treasurer Howard. We can add that to his record interest rate of 22 per cent on 8 April 1982.

There is a complacency evident in this government’s recent stewardship of interest rates. Families have taken on a lot more debt relative to their incomes and, as a consequence, prevailing interest rates today can no longer be considered low. This government arrogantly suggests that it can hit the snooze button until interest rates hit double digits. I do not believe that it can afford to do any such thing. Households are becoming increasingly stretched.

Official RBA figures show a record proportion of household disposable income is now consumed by mortgage interest repayments. In fact, the share of income consumed by mortgage interest today is 50 per cent higher than it was under Mr Keating. The Reserve Bank, in their most recent Financial Stability Review, talked at some length about this surge in the debt servicing ratio and the factors behind it. They highlighted the increased prevalence of owner occupied and investor housing as well as an easing in credit standards that has resulted in an increase in overall levels of debt. However, the conclusion they reached is important:

Nonetheless, the increase in the aggregate servicing ratio does mean that the financial position of the household sector is more sensitive to changes in the economic and financial climate than was the case a decade ago.

In this environment the government should be doing everything it can to put downward pressure on inflation and downward pressure on interest rates. Sadly, there is little evidence of that occurring. On that note, I wish to conclude my remarks. As I said earlier, Labor will be supporting these bills. They will lessen the contingent liabilities of the Commonwealth into the future and there is every chance the private sector mortgage market will readily accommodate the pre-transfer contracts that are currently guaranteed by the Commonwealth.

Mark Baker (Braddon, Liberal Party) Share this | Link to this | Hansard source

I also rise to speak on the Housing Loans Insurance Corporation (Transfer of Pre-transfer Contracts) Bill 2006 and the Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Repeal Bill 2006. The passage of the Housing Loans Insurance Corporation bills will enable the government to bring a long-running process to an end and its involvement in the mortgage insurance business to a conclusion. The bills represent a significant step forward in ensuring that the Commonwealth can now divest ownership of the remaining mortgage insurance contracts written by the Housing Loans Insurance Corporation prior to its abolition in 1997.

The Housing Loans Insurance Corporation was established as a statutory body over some 40 years ago to meet a structural deficiency in the availability of mortgage insurance at that time. The corporation insured lenders against the costs of mortgage defaults, thereby providing important assistance to low-income earners with small deposits to obtain housing finance. However, since 1979 successive governments have recognised that there is no justification for the Commonwealth’s continued involvement in the mortgage insurance business because the private sector has the full capacity to undertake this function. In addition, government involvement was distorting prices and inhibiting the growth of the market, as well as imposing a burden on the budget.

As has been stated, a number of attempts to sell the corporation and exit the mortgage insurance business have been made. An exit was first attempted by the then coalition government in 1979, but processes were overtaken by the election in 1983. Following the election, the then Labor government made two further attempts at a sale, neither of which was successful. In 1996 the Australian government restructured the corporation to place it on a more commercial footing, the intention being to make it a more attractive sale proposition in time. The Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Act 1996 gave effect to this restructure. The restructure involved abolishing the corporation and establishing a new company to continue the mortgage insurance business.

Contracts written by the corporation prior to its abolition, known as pre-transfer contracts, remained under the Commonwealth’s ownership. Claims against these contracts are managed on behalf of the Commonwealth under a management agreement. In 1997 the corporation was abolished. The new company and rights to the renewal business were sold to a private purchaser. To this day, the government remains involved in the business of mortgage insurance via its continued ownership of these residual pre-transfer contracts. The Commonwealth’s involvement is no longer financially viable and will only become increasingly burdensome to administer over time. The passage of these bills will allow the government to reduce the amount of moneys currently being spent on management costs.

The current management agreement expires on 31 December 2006. Actuarial analysis undertaken by the Australian Government Actuary shows that there will be few, if any, claims coming through after 2006, when all policies will be at least 10 years of age. In addition, the Australian Government Actuary has advised that present market conditions and the current profile of the portfolio provide the Commonwealth with the best opportunity it has had to complete its exit from the lenders mortgage insurance business. Any delay in amending the current legislation may diminish the government’s negotiating position in the interests of the Australian public. For these reasons, the government considers that it is timely now to consider transferring ownership of these contracts to a private insurer to manage the run-off of the remaining contracts.

This package of bills will enable the government to finally remove itself fully from this business. That makes good sense. The HLIC has achieved its purpose. It has fostered the creation of a market for lenders mortgage insurance in Australia, and conditions suggest that the best opportunity to negotiate a transfer of the remaining pre-transfer contracts is now. The pre-transfer contracts are in run-off and have no remaining premium value, thus creating a legislative environment for the divestment of these contracts, which is fiscally responsible because management of the contracts is exceeding the value of the claims.

The bills and any disposal of the pre-transfer contracts will not affect homebuyers in any way, as the disposal relates to contracts between the Commonwealth and the lenders. Any transfer would be subject to final agreement between any interested parties and the government. The bills do not create a disposal but, very importantly, give the flexibility required to ensure that disposal in the future can occur. There has been bipartisan support for this measure since 1979, and these bills give effect to that longstanding commitment. I commend these bills to the House.

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

I take the opportunity to make some brief remarks on the Housing Loans Insurance Corporation (Transfer of Pre-transfer Contracts) Bill 2006. This bill enables the government to transfer to private ownership the pre-existing mortgage insurance policies that were in place before the privatisation of the Home Loans Insurance Corporation. The total amount of the premiums that we are talking about is $5 million, approximately. This bill enables the government, as previous speakers have said, to negotiate a consideration for the transfer to the private sector of these existing policies. The explanatory memorandum says that there is no fiscal impact to this bill. I am not sure that is the case, and I will return to that point shortly, but I do acknowledge that any fiscal impact is likely to be relatively minor. This is a sensible approach. The previous government began the process and this government has continued it. The ALP have supported it at each stage and we will continue to support it.

Mortgage insurance is a very important issue in my electorate and elsewhere in Western Sydney and in other areas, particularly capital cities. During the peak of the housing boom many families had to take out mortgage insurance to finance the purchase of their home. Commonly, if you need to borrow more than 80 per cent of the value of the house that you are purchasing, you need to have mortgage insurance. We can be talking about very significant amounts of money. We are not talking about premiums of $500 or $600. We are talking about premiums of $10,000 to $15,000 not being uncommon in parts of Sydney. In some circumstances you can get this money back if the proportion of your loan falls below 80 per cent. In some circumstances you can reclaim a percentage of the premium. But the easiest way for that to happen is for the property price to increase through some combination perhaps of you making extra repayments on your home loan and property prices rising. Many people, hopefully, will be able to reclaim their mortgage insurance premium, or a percentage thereof, some time within the first two years of their mortgage. But we are seeing this become harder and harder. In Sydney, property prices have fallen by two per cent. In Fairfield and Liverpool, the area that I represent, property professionals are very clearly of the view—and you do not need to be a genius to work it out; all you need to do is look at the prices in the newspaper or get your house valued—that property prices have fallen by 20 per cent in the last two years.

There is a very real connection between mortgage insurance and defaults. I have referred to defaults in this House previously. There was a 58 per cent increase in mortgage repossessions between 2004-05 and 2005-06 in Victoria—a 58 per cent increase. In New South Wales, repossession orders have also reached record levels: they are 59 per cent higher than they were in 2004 and there was a further increase in the first six months of this year. They are even higher than they were in 1982, when interest rates hit 20 per cent. In the ACT, the Consumer Law Centre reports that repossessions increased by 39 per cent between 2004-05 and now.

This has several ramifications for the bill under consideration by the House tonight. Firstly, the increase in repossessions indicates an increase in risk for whoever holds those premiums. If they are transferred to a private sector operator, I expect that the private sector operator will seek a higher level of consideration than they might otherwise have done to take over the risk. I do not want to overstate this. I think that it is fair to say that the majority of repossessions that are occurring would be of loans that were taken out in the latter part of the housing boom. I do not think that many of them would be mortgages taken out pre the 1997 privatisation of this government instrumentality. But I have no doubt that a private sector entity considering taking over these loans would say: ‘Repossession rates are at a record level and people are defaulting on their mortgages at record rates across the country. If we are going to take over the risk of these insurance policies, we want an increased level of financial consideration. We want increased compensation for taking over this risk.’ I have no doubt that any private sector manager would attempt that, and it would be their job to do it. So I do think that this bill will have financial implications. We are only talking about $5 million in premiums. I do not suggest that we are talking about sums that will break the budget, but I do think that there will be an increased level of compensation sought.

It is clear that many people have been placed under financial pressure because of the combination of the collapse in property prices—in Western Sydney in particular. Why have property prices collapsed? Primarily, as anybody in the real estate industry will tell you, it is because the seven consecutive interest rate increases we have seen since 2003 have put downward pressure on property prices. This includes the three that we have seen since the last election when, of course, the government promised to keep interest rates at record lows and many people considering taking out a mortgage took that promise at face value. They thought that the Prime Minister was saying that interest rates would remain at record lows. He was re-elected, so they did not build interest rate increases into their calculations. People should always do that; people should always build interest rate increases into their calculations. But, when you have the Prime Minister and Treasurer saying that, under them, record low interest rates would remain, you can understand that some people would take extra risks.

What is the impact of this financial pressure—the combination of the reduction in housing prices, the increase in petrol prices and the increase in repayments through interest rate increases? We have seen the figures from the Reserve Bank showing that the percentage of household income going to repay mortgages is the highest it has ever been, higher than under the Hawke or Keating governments, higher than under the Fraser-Howard government. Today it is the highest it has ever been, under the Howard-Costello government. In the area I represent we have seen unemployment double in the last 12 months. The government walk in here at question time and crow about the unemployment rate, but we never hear them talking about unemployment in Western Sydney having doubled over the last 12 months. It has now reached 11 per cent. The collapse in the property market has meant that new construction has also declined and that there is a general reduction in economic activity. Couple that with higher interest rates and increased petrol prices and you are seeing the economy of south-western Sydney contracting very significantly.

When we try to engage the government on this issue and ask the Prime Minister, he says: ‘I know what we should do. We should get the state government—it is all the state government’s fault—to release more land.’ That will reduce housing prices further, but I am still at a loss to know what it will do for somebody who bought a house when housing prices were a lot higher than they are, who has had seven interest rate increases, who is paying more for their petrol and has therefore had to reduce their expenditure, and who is also dealing with 11 per cent unemployment.

The Prime Minister says, ‘Blame the states; they should be releasing more land.’ I happen to think that releasing more land will not put massive downward pressure on housing prices, but it would put on some pressure. If there were a massive housing release, there would be a further reduction in housing prices in Western Sydney. And you know what we would see then? We would see repossession rates go even higher, we would see unemployment increase even more and we would see more pressure on family budgets.

The Prime Minister ignores the impact of unemployment in Western Sydney. The government responded to unemployment in South Australia—and I do not begrudge that; I think that it was a good decision. We saw a factory close down in Adelaide and that day the government announced a $30 million rescue package because 500 jobs, I think, were lost. We see unemployment in Western Sydney doubling in 12 months, and the government is struck dumb. Unemployment in Western Sydney has doubled because this government has done nothing to put downward pressure on interest rates by fixing the skills crisis and fixing the infrastructure bottlenecks, which the Reserve Bank governor has said are one of the major causes of interest rate increases. It has done nothing about them and nothing about the record levels of repossessions—

Sharman Stone (Murray, Liberal Party, Minister for Workforce Participation) Share this | Link to this | Hansard source

Dr Stone interjecting

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

which are higher than they were in 1990, for the benefit of the minister at the table, and higher than they were in 1982. We see the impact of this.

I noticed a very good article in the Sydney Morning Herald last week, on 4 October, by somebody who has shown an interest in what is happening in Western Sydney and has written a series of good articles about the economic impact of what is happening there. It is a very worthwhile quote by the economics correspondent of the Sydney Morning Herald, Matt Wade, who said:

... the rise and fall of house prices over the past decade has inflicted disproportionate damage on the most vulnerable parts of the city. In Sydney’s west and southwest, fragile suburban economies have been harmed, jobs have evaporated and lives have been ruined.

They are not my words, although they could easily be; they are the words of the Sydney Morning Herald, which I have referred to in the past as ‘that well-known socialist journal’. It is not always a newspaper which picks up the arguments of the ALP but, in this case, they have done a very thorough analysis of what is happening in the economy of Western Sydney, and I wholeheartedly endorse those comments.

It would be nice if the government turned its attention to this issue and recognised that there are major financial pressures, that more and more people in Western Sydney have had to take out mortgage insurance to purchase their home and that the skills crisis, for example, saw the cost of construction of a house increase by 58 per cent. We saw this property boom going on and people struggling to amass enough capital to buy a house and taking out mortgage insurance to do it, hoping perhaps that property prices would continue to rise and they could reclaim part of that premium, which, as I said before, was $10,000 to $15,000 in some cases—more in some cases and less in others, obviously. I am aware of lots of mortgage premiums of $10,000 to $15,000 that people have had to find in order to buy a house in the Western Sydney market.

The Prime Minister’s solution to all this is for the states to release more land. When in doubt blame the states—but blame the states in a way which makes absolutely no sense. There is not even a cover of respectability or logic; it is simply an easy political solution for the government to flick responsibility for this onto another level of government.

As I indicated at the outset to the House and whips, I only had brief remarks to make. The ALP will continue to support this bill, but it would be nice to see the government take a bit of interest in, do something about and show empathy towards the people dealing with the economic situation in Western Sydney.

Ms Catherine King (Ballarat, Australian Labor Party, Shadow Parliamentary Secretary for Treasury) Share this | Link to this | Hansard source

The Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Repeal Bill 2006 and Housing Loans Insurance Corporation (Transfer of Pre-transfer Contracts) Bill 2006 seek to finalise arrangements in relation to the winding-up of the Commonwealth Housing Loans Insurance Corporation in 1997. The Housing Loans Insurance Corporation was established by the government of Sir Robert Menzies in 1965 to provide a government backed housing loans insurance scheme. The main purpose of this scheme was to assist prospective home purchasers to obtain a loan at a reasonable rate of interest by providing mortgage insurance. The scheme was changed substantially in 1996 and then sold off to the private sector in 1997. The mortgage insurance products that we have today are quite different to those that existed in 1965.

The bills provide the opportunity to reflect on the context of housing at the time of Menzies in 1965 and the establishment of the HLIC, and what is happening currently in relation to housing affordability. In 1965 a couple in their late 30s bought their first home in the newly established suburb of Mount Waverley. Based on a 10 per cent deposit, the average mortgage at this point was $8,460 and the average weekly income at that time was $53.80. Buying a new brick veneer home for this family of five children was a significant step on a single income. It took this couple until they were 60 to pay this house off, not without some considerable sacrifices and yet another child. This couple were my mum and dad, and they still live in the house in Mount Waverley today. They were fairly typical of couples in the 1960s—the dream of homeownership required sacrifices and hard work but it was still affordable for families on single incomes.

Today the story of homeownership is very different. Home loan repayments, as a proportion of income, have skyrocketed. Today 33 percent of the family budget is eaten up by mortgage repayments. While figures were not kept measuring the proportion of income families paid towards the mortgage repayments in 1965, we can go back as far as 1979-80, when the proportion was only 17.4 per cent. Almost twice as much of a family’s income is now being swallowed up in mortgage repayments than it was in the 1970s and 1980s.

Over the past few months, I have travelled around Australia meeting families in suburbs, regional towns, shopping centres and markets as part of Labor’s Family Watch Task Force. I have heard from many families deeply concerned about their ability to meet mortgage repayments—families who have concluded that the dream of owning their own home is completely beyond their means, and grandparents who despair over the opportunities for their grandchildren to ever own their own homes. As the member for Lilley has already articulated, these concerns are backed up by figures from the Supreme Court of Victoria which show that in the first half of this year there were 1,474 repossessions, or more than 2½ times the 563 repossessions in the first half of 2003. This trend is being replicated in New South Wales. The figures show that mortgage repossessions in New South Wales have more than doubled since 2002 and are now 50 per cent above levels recorded in 1991.

Surrounded by the spiralling cost of living, many families cannot make ends meet. Research shows that 30 per cent of Australian families have experienced some form of financial hardship in the last 12 months alone. The Family Watch Task Force, which I chair, as a part of its inquiry into the cost of living, is carrying out a national survey of financial pressures on Australian families. The comments that we are receiving in the surveys are illuminating and shine a light on the financial pressures that many families face. Responding to the Family Watch Task Force survey, a Queensland mother said:

My husband is doing more overtime to help cover increases to mortgage, fuel, healthcare and groceries costs. He is spending less time at home and family responsibilities fall on to me.

A second respondent said:

With the cost of everything going up we can not afford to live in our own home anymore.

And another said:

Even though my husband and I both work our son is not entitled to any benefits for being a full-time student. We totally support him as well as our daughter and try and pay the mortgage. We find this very hard.

Wherever we travelled, the stories were the same. A New South Wales family responded by saying:

These workplace laws are impossible to deal with when you have a mortgage, kids, school and childcare, rising petrol prices and increasing interest rates. Are we going to be out of pocket soon? I hope not.

Another family said:

I rely on my husband solely for income and we find we are the working poor. Mortgage, bills and food left nothing to save or get ahead.

It is not surprising that that low- and middle-income families are struggling to make ends meet. They have had to not only endure seven consecutive interest rate rises but also, under the Howard government, cope with childcare costs increasing by 95 per cent, petrol prices increasing by 90 per cent, education costs increasing by 77 per cent and dental costs increasing by 65 per cent.

The original purpose of the Housing Loans Insurance Corporation was to assist low-income earners with small deposits to obtain housing finance. It did this by insuring lenders against the cost of mortgage defaults. Ironically, the reality for many low- and middle-income families today is that they cannot afford to save even a small deposit. Owning a home has never been easy, and it certainly was not easy for my parents in 1965. However, faced with spiralling household debt and record health and transport costs, owning a home today has become almost impossible for many low- and, to some extent, middle-income families.

I note the presence in the chamber of the member for Isaacs, who has been travelling with our task force and meeting with families in shopping centres and markets across the country. A family from South Australia told the Family Watch Task Force:

Wages we earn just cover living expenses, no money to save, no holidays, live from week to week, wages too low. We would love to be able to save for a deposit to purchase our own home—but can’t.

Families right across the country have told me that in many cases they are faced with the unenviable choice of deciding between buying a home or increasing the number of children in their families. Buying a house or starting a family, or having more kids, should not be an either/or decision. While the Treasurer may lecture families about having a third child for the country, he has in fact created an interest rate reality—along with the rising cost of living—that is discouraging some couples from even having a child in the first place.

Official Reserve Bank of Australia statistics show a record proportion of household disposable income is now consumed by mortgage interest repayments. In fact, the share of income consumed by mortgage interest repayments is 50 per cent higher today than it was under previous Prime Minister Paul Keating. Housing affordability is one of the biggest problems facing Australian families today. However, instead of showing national leadership on this issue, we see blame-shifting to the state governments. While the Howard government is playing the blame game, families are struggling—struggling to pay household bills, struggling to pay footy club registration fees and struggling to pay off their family home.

The Family Watch Task Force has received hundreds of comments from families across Australia. While all of the results are yet to be tallied, it is clear that families are under increasing financial pressure under the Howard government. Families are struggling to save for deposits or make mortgage repayments. In some cases, they even rely on credit cards to meet basic household needs. The Prime Minister may claim to be a friend of families, but the reality for many families is very different from the Prime Minister’s rhetoric. They have been badly let down by the Howard government’s broken election pledge to keep interest rates at ‘record lows’. Many families are relying on credit cards to pay for life’s essentials. Groceries, school shoes and power bills are contributing to the growing debt burden of Australian families.

In conclusion, Labor will be supporting these two bills. They will lessen the contingent liabilities of the Commonwealth into the future, and the private sector mortgage market will most likely be able to accommodate the pre-transfer contracts that are currently guaranteed by the Commonwealth. However, the bills should also act as a reminder of the plight that many families are in with regard to paying off their home loan or, in fact, merely saving for a deposit to achieve the dream of having a home in the first place. It is not that buying a home and raising a family was easy when the Housing Loans Insurance Corporation was established back in 1965, but it was possible. There is no easy fix to the problem of housing affordability. These are complex problems which will involve a multipolicy and cross-portfolio approach. In contrast, the Howard government wants to deal with this very important issue by yet again shifting blame to someone else: state and, to some extent, local governments. And, yet again, the Howard government has failed to show national leadership in relation to housing affordability.

Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

in reply—The government would like to thank those honourable members who have taken part in the debate on the Housing Loans Insurance Corporation (Transfer of Pre-transfer Contracts) Bill 2006 and the Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Repeal Bill 2006. To start with, I think it is important that I rebut some of the—frankly—nonsense that we have just heard from the member for Ballarat and, before her, the member for Prospect and, before him, the member for Lilley. They raised issues about housing affordability and mortgage defaults and all that sort of thing. What is important to understand first is that these bills do not affect homebuyers. That said, the Howard government has done more to assist homebuyers than the opposition did in its entire 13 years of government.

The Reserve Bank found in its recent Financial Stability Review that aggregate measures of household finances are sound, are supported by solid growth in household disposable incomes and continued growth in net wealth, and that the unemployment rate is at 30-year lows. Real wages have increased by 16.4 per cent since March 1996. This compares with a 0.2 per cent decline in real wages recorded over the whole 13-year term of the previous government. We did not hear that figure from those members opposite, did we?

Over 1.9 million jobs have been created by the Howard government since March 1996. Arrears in bank home loans remain low by both historical and international standards. The rise in mortgage arrears has largely been in low-doc and sub-prime loan areas—products for which the Treasurer has been very active in reminding lenders to maintain credit standards.

Increases in the value of land have increased house prices. Housing prices in general have outpaced construction costs. State and territory governments need to do more to release land for housing. This is central to the housing affordability issue. What is also central, and which we did not hear from those members opposite of course, is that state government stamp duties impose significant additional unnecessary costs on home purchasers and particularly impact first home buyers. That said, household borrowing is occurring in an environment of greater confidence after 10 years of consecutive economic growth; unemployment is at around 30-year lows; and households are enjoying better standards of housing than ever before. This is all backed by net wealth that has nearly tripled over the term of this government.

Having cleared up those facts, it is important to remember that these bills will bring to an end the long-running process of ceasing the Commonwealth’s involvement in the mortgage insurance business—and this makes perfect sense. When the Housing Loans Insurance Corporation was first established in 1965, the government was responding to a gap in the housing finance market—a gap that if left unfilled would have prevented lower and middle-income aspirational homeowners from achieving their dreams. The HLIC fostered the development of the mortgage lenders insurance market in Australia. In this, it has served its purpose very well. But, as can be expected, much has changed since the HLIC was established, and the financial sector in Australia is now characterised by multiple financial services providers and numerous products. Indeed, since 1979, successive governments have recognised that with the entry of private insurers in the market there was no longer justification for the Commonwealth’s continued involvement in the lenders mortgage insurance business.

In 1997, the Australian government commenced its formal exit from the housing loans insurance market by abolishing the Housing Loans Insurance Corporation and successfully selling a new company, the Housing Loans Insurance Corporation Ltd, which would contain the renewal business. However, the pre-transfer contracts—the ones written prior to 1997—remain vested in the Commonwealth under the existing legislation.

These bills propose to amend the existing legislation to allow the Commonwealth to divest itself of ownership of these contracts, without which an exit from the lenders mortgage business is impossible. Importantly, the bills do not commit the government to a divestment of the remaining contracts but instead provide the necessary framework to enable any transfer to occur.

The Australian Government Actuary advises that current market conditions suggest we have before us now the best opportunity to negotiate the sale of the pre-transfer contracts. I look forward to the completion of this endeavour in the interests of the Australian public. I commend the bills to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.