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

My question is addressed to the Treasurer. Would the Treasurer update the House on developments in the housing credit markets? What are the implications for economic policy?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Braddon for his question. The Australian property market, which showed substantial growth in the early part of this decade, has shown considerable moderation in recent years, with the exception of Perth and, to some degree, Darwin. The 12-month change in the Sydney property market, according to Australian Property Monitors, was a 0.5 per cent increase, in Melbourne a 3.1 per cent increase, in Hobart—which I know the member for Braddon would be interested in: southern Tasmania, not northern Tasmania—a 6.6 per cent increase, and overall in Australia quite a considerable slowdown in the growth we saw in the early part of the decade. The exception to that is Perth, which showed a 31 per cent increase in average prices over the 12 months, making Perth the second most expensive city in Australia.

In addition to the moderation in the property market we have also seen a moderation in credit markets, with housing credit increasing one per cent in December to be 14½ per cent over the year. Taken together with the adjustments as a result of fruit and petrol prices, we saw a lowering of the consumer price index in the December quarter, with the underlying measures around about 0.5 per cent for the quarter or two per cent for the year.

The good news is that the consumer price index seems to have ticked down a bit, and that is good news for stability in interest rates. Interest rates were left unchanged at yesterday’s Reserve Bank board meeting in recognition that moderation in the property market, in the credit market and in the consumer price index seems to have moderated to some degree the inflationary build-up that we saw in the latter part of last year.

If the Australian economy can continue to grow, with unemployment at a 30-year low of 4.6 per cent and inflation moderate, that will be a very good interest rate outlook for homebuyers and for business. To have a two to three per cent inflation rate in an economy where we have nearly full employment, at 4.6 per cent, is something that we probably would not have dreamed of 10, 20 or 25 years ago. Still, the task is to ensure that economic management is consistent with growing the economy, finding job opportunities for young Australians and keeping inflation low in a stable interest rate climate. That is what this government is committed to doing.