Jason Clare (Blaxland, Australian Labor Party) Share this | Link to this | Hansard source

I move:

That the House:

(1)

notes:

(a)

the pain being felt by Australian families struggling to pay off mortgages due to rising interest rates;

(b)

the failure of the previous government to heed the warnings of the Reserve Bank; and

(c)

the need for low cost home ownership and reduced entry costs for home buyers as well as a range of rental options for moderate to low income households;

(2)

supports the Government’s commitment to tackling this problem by appointing a Minister for Housing and by making it a key priority for COAG in 2008; and

(3)

welcomes the Government’s plan to help first homebuyers break into the housing market with the first-home saver account scheme.

Housing affordability is the most important issue in Australia today. It is the human face of the inflation problem. Tonight, 1.1 million Australians are suffering from housing stress. Last year, 9,751 Australians lost their homes, and tomorrow three families in my electorate will be evicted from their homes. Homeownership, the great Australian dream, is slipping out of the reach of many Australians. This is what we inherited from the former government. This is what we inherited from the people who said Australians have never been better off. And this is what we inherited from the people who last week told us that the Howard government was the golden age of compassion. We inherited this, and we inherited the highest interest rates in 16 years, the second highest in the developed world. This is the unravelling legacy of the Howard government.

With every interest rate rise, more and more people are losing their homes. Nowhere is this a bigger problem than in my electorate of Blaxland in Western Sydney. Blaxland is the mortgage stress capital of Australia. One in two people with a mortgage in Blaxland are suffering from mortgage stress. More homes are repossessed in my electorate than anywhere else in the country. More than 300 homes were repossessed last year and the year before that—and I fear there is worse to come. Evictions have doubled in the last six months. The Bankstown Sheriff's Office is now evicting 15 families a week and, on top of this, house prices have plummeted. Housing prices have dropped by 16 per cent in the last three years. Some families now have negative equity in their homes. They owe the bank more than the house is worth.

In addition, as if we do not have enough problems, ‘sharks’ are circling in the neighbourhood, looking to make a profit out of others’ misery. Companies have sprung up recently offering to buy your home in less than 10 days for zero fees and with zero commissions, and their targets are the most vulnerable—people who are behind in their repayments and facing foreclosure, people with health problems, people who have lost their job, people who are about to get divorced. One company offers a finder’s fee of $1,000 if you can help them to buy a house. Desperate, vulnerable people are likely to make bad decisions, and I am concerned that some people are not getting a fair deal and are getting ripped off. That is why I have asked the Minister for Competition Policy and Consumer Affairs to get the ACCC to investigate these companies—to see what they are up to and whether there is a need for reform. We already know there are dodgy mortgage brokers out there that are ripping people off. Last Thursday, ASIC released a report that gave examples of people being charged up to $24,000 just to refinance their loan. They call it equity stripping; I call it a rip-off. I think it is an area that is screaming out for reform.

People who rent are not any better off. The rental market has been flooded by people who can no longer afford to buy and are pushing up demand and pushing up rents. Average rents have increased by 82 per cent in the last 12 years. In the last three years, rental vacancy rates have halved. In most capital cities, the vacancy rate is now at about two per cent. In Bankstown, in my electorate, it is now about one per cent. One local agent told me that he no longer advertises rental properties. Another agent has 70 people on his waiting list. I met a man at a men’s refuge I was visiting a couple of weeks ago; he was living in that refuge for a couple of weeks to give him enough time to save the money for a bond. This is what we have inherited.

Housing affordability has never been this bad. In the last 10 years, house prices have doubled. In 1996, the average home was four times the average wage; it is now seven times the average wage. We have never been in so much debt. In the last five years, the average mortgage has also doubled. That is why interest rates are so deadly. That is why more homes are being repossessed today than when interest rates were at 17 per cent. That is why the great Australian dream has become a nightmare for some and unimaginable for others.

This is why we need to act. It is going to take a lot of hard work, but I congratulate this government for getting started: for appointing the first housing minister in 12 years; for the First Home Saver Account scheme; for a $500 million Housing Affordability Fund to cut the cost of housing and spark construction activity; for the National Rental Affordability Scheme—for putting all of this on the COAG agenda—and, most importantly, for a plan to fight inflation.

Danna Vale (Hughes, Liberal Party) Share this | Link to this | Hansard source

I call for a seconder for this motion. Is there a seconder?

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I second the motion and reserve my right to speak.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

I rise to join the government in noting that interest rates do hurt family budgets where they have home loans and, of course, benefit those many Australians with savings. It must be noted, however, that interest rates are set by the independent Reserve Bank, albeit as a blunt instrument of monetary policy. Interest rates in Australia came off a very low base, due to the outstanding economic management of the previous Treasurer, the member for Higgins. This low base was, in part, due to paying off Labor’s previous $96 billion debt and not having to pay the over $8 billion in interest payments that accorded due to that. This allowed the previous government to raise real wages in the last decade by over 21 per cent, whereas under the previous Labor government there was a decline in real wages of 1.8 per cent. Tax reform over the last decade returned more money to taxpayers and to companies. All of this allowed the Australian economy to become the envy and, indeed, the miracle of the world.

Remember that the Governor of the Reserve Bank in his June statement said that inflationary pressures were moderating and the Mid-Year Economic and Fiscal Outlook released in October forecast inflation at 2.75 per cent for this financial year and 2.5 per cent for the next financial year, noting also that the inflation rate over the previous 11 years was an average of 2.5 per cent. In other words, these are recently emerging but real inflationary pressures that we are experiencing, which is why the Reserve Bank is exercising monetary policy. Far from the Reserve Bank issuing these fanciful and farcical 20 warnings, the Reserve Bank simply said that inflationary pressures were moderating and the Mid-Year Economic and Fiscal Outlook forecast was 2.75 per cent for this financial year and 2.5 per cent for the next financial year.

What is concerning, though, is that this Treasurer has been talking up inflationary pressure with ill-timed and, dare I say, reckless comments such as ‘the inflation genie is out of the bottle’ one day before the Reserve Bank met to consider rates. Combine this with oil prices of over US$100 a barrel, food prices impacted by drought, a rapid increase in the cost of financial services driven by a fallout from the US subprime market collapse and the subsequent global credit squeeze, all of which have contributed to underlying inflation moving ahead of headline inflation.

During the election campaign, the people of Australia and the now government were warned that we were entering difficult economic times driven by international forces. Yet far be it from the Treasurer to act responsibly! In fact, he is acting more like a goose, with over 100 squawks about the previous government doing this or doing that, rather than facing these internationally-driven inflationary issues that have emerged. This is not the time for aimless squawking, Mr Treasurer, or for talking the economy down. It is a time for a flexible labour market. It is a time for retaining the strong $20 billion surplus this government was left. It is a time for implementing those coalition policies that Labor borrowed during the election.

I have a copy of these supposed 20 warnings from the Reserve Bank, which I read, looking for where it said that the economy was being mismanaged. I was looking for where it said ‘poor fiscal management by the coalition government’ and—you can imagine my surprise!—I could not find it. I was looking for where it said poor fiscal management by the coalition government was responsible for inflationary pressure and—believe it or not!—it was not there.

Let me read from 20 August 2007, which apparently is the 20th warning that this government put forward. All the Reserve Bank Governor said was:

“As far as I know, our liaison work still tells us that people find labour hard to get. As I said in my opening remarks, in some surveys it is the single most constraining factor ...

There was another apparent warning, from August 2006, that:

... clearly more has to be done to attract people into occupations.”

What a nonsense that 20 warnings were given—that is an absolute nonsense. The Labor opposition’s previous track record on economic management is an absolute farce. They were left an economy in top order. It is incumbent upon them to ensure that it stays that way.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the motion moved by the member for Blaxland. It just goes to show that, notwithstanding the election, those on the other side have not learnt the lessons that are there to be learnt from the election. Principally, one of the things the Australian people were telling the former government was that there was real pain in the community. That is what this motion is demonstrating—that there is considerable pain out there.

Hearing the member for Fadden reminds me of the former Prime Minister’s comment that working Australians, working families, had never been better off. He forgot to mention that we currently have the second highest level of interest rates in the developed world and the highest inflation in 16 years. This is the legacy that we have been left by the former government. But compounding these national figures is the impact that these figures are having on the ground, the impact that they are having in terms of mortgage stress in my electorate of Lindsay. These are the 2006 ABS figures, so this is not a recent phenomenon. It is not about international pressures that have all of a sudden come on the scene since the last election, as the member for Fadden would have you believe. Mortgage stress figures from 2006 indicate that 33.5 per cent of households in the Lindsay electorate are suffering from mortgage stress. That is up from 19.5 per cent in 2001.

Equally, the problem of rental affordability is a challenge that many people in my local community are facing. As I was handing out leaflets in my local community at the train stations a couple of weeks ago, a number of people came up to me and told me that they were facing massive increases in rents. And I saw recently in the Penrith Press, one of the local papers in my area, a local real estate agent, Mr Sandy Almazan, the director of Ray White Glenmore Park, stating:

Two years ago we’d be lucky to receive three or four applications for every property—

those being rental properties. But now, he says:

... we get at least 20 applications for every house and have had up to 80 names of people interested in a particular property.

This is a crisis. I know that the former Treasurer, the member for Higgins, said that it was not a crisis. As recently as July last year he refused to admit that there was an affordability crisis for housing in this country. We, on the other hand, have recognised that and we put forward to the people at the last election a range of policies, a package of policies, that will address, in part, some of the challenges that we face on the housing affordability front.

First and foremost we have created the position of Minister for Housing. The former government saw it as such an important priority that they did not even have someone sitting within the ministry who had housing as their area of responsibility! On top of that we have a plan that includes our First Home Saver Account scheme, which will allow young people in particular but first home buyers more generally to save the funds that they need in order to get a deposit with which to then crack the housing market—which is very difficult, particularly in areas such as the area that I represent and the area that the member for Blaxland represents in Western Sydney. We have also proposed a National Rental Affordability Scheme, where 100,000 new rental homes will be built and delivered at rental prices 20 per cent below the market value. Our Housing Affordability Fund will be a key element of our fight against the housing affordability crisis.

From time to time those on the other side will simply say that the housing affordability crisis is the result of the entry taxes that exist on properties, whether they be local government or developer charges or state government taxes. There is no question that these factors are a consideration, and that is why we need to be working with the states to address that situation. But, unlike those on the other side, we have a plan to address that. One of the key elements of our plan is to ensure that money is available to fund the essential infrastructure that is needed, to take the burden off those developer charges, to ensure that the cost of buying a property will be reduced—and our plan will reduce the cost of individual blocks of land by up to $20,000 as a result of our National Housing Affordability Fund.

On top of that, Labor have a clear plan for not only identifying surplus Commonwealth land but also actually getting on with the job of releasing it. There is one property in my particular area, the North Penrith Army Land, a site that has been ready for development for many years but which has not been developed because the former Commonwealth government were dragging their feet. These obstacles will not get in the way of a federal Labor government, and that is why we intend to implement the plan that we put to the Australian people and to deliver greater housing affordability to people throughout this country.

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

Mortgages are a key issue for my constituents in the electorate of Cook. There are 15,361 dwellings being purchased, which represents about a third of all the dwellings in my electorate, and more than 50 per cent of constituents—based on the last census—had a mortgage payment greater than $2,000 per month. The electors of Cook have steadfastly supported the Liberal Party because of our economic management credentials. It has been the Liberal Party to whom they have entrusted the economic management of this country. The last time that the electorate of Cook elected a Labor member was at the time of the Whitlam government. He was dispensed with, along with that government, for many reasons but principally, I would say, because of that government’s economic record.

This motion deals with interest rates, so let us consider some facts on interest rates. Under the coalition, the average interest rate was 7.25 per cent; under Labor, it was 12.75 per cent. The government likes to talk about 12 straight interest rate rises. Let us look at the quantum of those increases and the period of time. Looking at the standard variable rate under the coalition, from April 2002 interest rates were 6.05 per cent; at November 2007 they had risen to 8.55 per cent. That is a 2½ percentage increase over five years and seven months—67 months. Labor could do a lot better than that, I can assure you! In March 1985 interest rates were 11.5 per cent under Labor, and in just 13 months they went to 15.5 per cent—that is a four percentage point increase. In June 1988 they were at 13.5 per cent, and in just 12 months they rose 3.5 points to 17 per cent. In August 1994 they were at 8.75 per cent, and by December 1994—just four months later—they had gone up 1.2 percentage points. When Labor put down the pedal on interest rates, they went up on average 0.3 per cent per month. Under the coalition, they went up by 0.04 per cent per month. So under Labor we had an interest rate accelerator, when they put the pedal down, that was 7½ times higher than under the coalition. And not once, I should note, did the starting point under Labor ever get lower than the finishing point under the coalition. So it is just bizarre to have those opposite come into this place and deliver lectures on interest rates when Labor have written the book on how to increase interest rates in this country and have presided over an interest rate accelerator that exceeds all others.

Inflation at this same time under the coalition averaged just 2½ per cent. If you look at the headline rate for inflation, you see that as of December 2007 it was at three per cent, which was in the band set by the former Treasurer. Under Labor, the average was 5.2 per cent. A lot is also said about what is driving inflation. The shadow Treasurer made a very good point today where he showed that the Reserve Bank governor has given the government two out of five for their five-point inflation plan. Only two issues that are referred to by the government were covered by the Reserve Bank governor. The Reserve Bank governor also made a very good point back in January when he said that inflation expectations up until that point were under control. What has happened since then? The first figure to come out on inflation expectations, from the Melbourne Institute, shows that inflation expectations have risen from 3.8 per cent to 4.3 per cent. That is what happens when you talk about ‘genies’ and ‘bottles’: you drive inflation expectations. It is very concerning to those who have mortgages—and around 15,000 in my electorate do—to see a reckless Treasurer bounding about our financial markets, talking about genies and bottles and driving up inflation expectations.

The Reserve Bank governor talks about many things when he talks about inflation. He talks about fuel prices, which the government said they would keep under control. That is what the people of Australia are now looking to the government for; the government have made the promise and they will need to be held to account for it. They are the ones who are going to have to deal with $80 billion worth of state government debt on their watch; they will have to address that also. The previous government has left an excellent record on interest rates. (Time expired).

Jennie George (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

I want to begin by commending the member for Blaxland for bringing this important issue to the attention of the House. The contribution he and the member for Lindsay have made will give their constituents great hope for effective representation in this chamber from these two new members of parliament. Regrettably, I cannot say the same for the member for Cook, because I think he completely missed the point of the issue that is here before us. His speech was a great exposition on issues to do with inflation and interest rates—which I am not saying are not part of the problem—but he really does not understand that out there in the community there is growing desperation about the issue of housing and rental affordability. It is true to say that his government really fell asleep at the watch on these important issues and that Labor in government have made these issues very much part of our agenda for the future.

I am not surprised that recent research data from NATSEM, a very authoritative body based here in Canberra, shows that more than a million of our fellow Australians are spending more than 30 per cent of their income on rent or a mortgage and that, arising from this, housing affordability in our country has fallen to record lows. The average home cost four times the average wage back in 1996. In 2007 that factor had risen to seven times the average annual wage. It is no wonder that, for many young people and for many families, the idea of ever owning their own home is no longer part of the Australian dream—a dream that we in earlier generations grew up with, believing that it was within the means of all to aspire to home ownership. I say that because, when you look at the average first home mortgage of about $300,000, the interest rate legacy left by the former government has now made repayments on that amount in the order of $2,700 per month. That is a huge impost on many of the people that I represent.

It is not just mortgage stress that is an issue. When you look at the rental market in Sydney, in the year ending September last year the increases were in the order of 14 per cent on an annual basis, and in places like Perth they were up around 23 per cent. Rental vacancy rates have halved since 2004. Like the electorates of the members for Blaxland and Lindsay, the issue of housing and rental affordability is also a major one in my electorate of Throsby and in the Illawarra region generally. When I looked at the most recent 2006 census data across the Illawarra, I found that nearly 11,000 households were suffering mortgage stress. That data is a bit out of date now, with the consecutive interest rate rises that came after that data was collected. But, in the five-year period from the 2001 census, there has been a 100 per cent increase in the number of households suffering mortgage stress. Over 40 per cent of households in private rental arrangements in my electorate of Throsby are in rental stress, paying more than 30 per cent of their income on rents, and the queues for public housing keep getting longer and longer—no surprise, because of the impact of the huge cuts of around $3 billion in real terms from social housing under the Howard government.

While there are no silver bullets to cure the affordability issues that I touched on tonight, the Rudd Labor government is committed to a comprehensive, affordable housing agenda. For the first time, the Minister for Housing has been proactive in raising a number of innovative suggestions to try and deal with this legacy from an uncaring government for whom the issue of affordability of housing and rents did not even register.

Could I just say that in terms of those policies, I am very pleased about the fleshing out of the details of the first homebuyers saving scheme. I think that will be a great incentive for young people to save in a tax-effective account for a deposit for their first home. I am very keen about the provision of funding for infrastructure so that we can hopefully reduce state and local government development charges. The investment scheme for rental properties at 20 per cent below market rates I think will help relieve some of the obvious pressure that exists. (Time expired)

Peter Slipper (Fisher, Liberal Party) Share this | Link to this | Hansard source

Firstly, may I congratulate you, Madam Deputy Speaker Vale, on the new position you currently hold. It is clear that rising interest rates under the Labor government is a matter which is of great concern to most homeowners and homebuyers right throughout the country. The former government reduced interest rates very substantially. One thing you can always be certain about is that when Liberal and National parties are in government interest rates will be much lower than they would be under a Labor government. We have a transparent system where the Reserve Bank sets interest rates, but over many years when we were in government we had the situation where interest rates were much lower than they would have been under Labor. In recent times, interest rates have gone up a little but, having said that, interest rates are still much lower than they were historically under previous Labor governments. As a government, we were able to bring about a situation where more and more Australians have been able to achieve the Australian dream of homeownership.

It is somewhat concerning to me that our economic record is being demonised by those opposite. There is the suggestion that, despite the fact that we provided 11 years of sound economic management, we were not cognisant of the dangers of inflation. There seems to be a suggestion that the previous government, as it was prior to 24 November last year, was spending irresponsibly and not taking into account the future needs of the Australian people. Let us face it, when we came to government we inherited a government debt of $90 billion. Over 11 years, we repaid all of that debt and got to a situation where the government and therefore the nation was debt free. That meant that we were able to spend money on desirable social outcomes. Of course, the very best way of achieving desirable social outcomes is by having sound economic growth and a well-run economy. We were only able to do that by making difficult decisions, by dotting i’s and crossing t’s. The funding announcements that we were able to make prior to the election were, in effect, the dividends from the sound economic management over the last 11 years.

The new government has inherited a budget surplus of anywhere up to $30 billion. That hardly indicates that the former government followed the mistakes made by the Keating, Hawke and Whitlam governments. Those governments spent in order to create an artificial sense of prosperity and, in doing so, mortgaged the future of our children and grandchildren in the pursuit of this artificial prosperity. I am very proud to have been part of a party that supported the previous government over the last 11 years. The previous government has a sound economic record, and we created a proud nation. Right around the world, we are regarded as a nation which is greatly respected, a nation which has been a good international citizen and a nation which has been prepared to stand up and be counted and make some difficult decisions, particularly in the international interest. In this regard, I particularly refer to the Asian currency crisis, where we took a lead role and quarantined the economies in Asia from the worst aspects of that crisis. In doing so, we helped them to rebuild and also to, shall we say, reinforce the fact that we are a good international citizen and that we want to play our part in this part of the world.

Having said that, there is no doubt that many homeowners and homebuyers are feeling the pinch because every time the interest rates go up there is a drain on the pocket and another strain on the household income. But I do not think it is right to say that the former government was responsible for the interest rate rises which have occurred. One has a situation where interest rates go up and come down, but through sound economic management we were able to see very much lower interest rates than before, whereas the new government stands condemned—

Danna Vale (Hughes, Liberal Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.