Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Housing and Urban Development) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Minister for Finance and Administration (Senator Minchin) to questions without notice asked by Senators Carr and Webber today relating to interest rates and first home owners.

Senator Minchin today was asked a series of questions relating to direct impacts on the wellbeing of hundreds of thousands of Australian families. These are people who are now most at risk of losing their homes because of interest rate rises. In fact there have been seven interest rate rises in a row, and three of these have occurred since John Howard promised to keep interest rates at record lows. Following the Prime Minister’s lead, today we saw Senator Minchin attempting to pass the buck on the issue—trying to blame everybody else but the government itself. Unfortunately for him, he is also on the record—and Senator Minchin is still with us here, perhaps he could advise us as to why this is the case—in February this year as saying that interest rates are the most important factor in relation to housing. Now, of course, we have a situation where the government is seeking to blame the states and blame anyone else for the increasing deterioration in housing affordability.

One minute we are told that interest rates are the most important factor and then when they go up, causing pain for many hundreds of thousands of hardworking families, suddenly someone else is held responsible. Senator Minchin’s somewhat condescending response has demonstrated that this government has simply run out of ideas when it comes to the question of housing repayments and meeting the cost of keeping a roof over your head. They simply do not care about the fate of hundreds of thousands of Australian families in the face of skyrocketing default rates. All they offer is condescending financial advice. Senator Minchin, in a somewhat desperate manner, resorted to arguing that the first home owners grant scheme was introduced to help first home owners into ownership. Of course this response directly conflicts with what Senator Minchin has said in the past. I have referred already to the fact that, back in February, he said that the first home owners grant was:

... introduced at the time of the new tax system’s introduction was very much and overtly in recognition of the consequences for home purchasers of the introduction of the goods and services tax.

We heard Senator Minchin go on to say that the grant:

... was and is a grant which acknowledges the one-off impact of the goods and services tax on the purchase of a home.

Then we were told that this was a grant to compensate for the GST; now we are told it is a device by which the government seeks to address the question of housing affordability.

We know that the pain being felt by Australian families is real and is not just a fantasy which the government seeks to dismiss in its rather cavalier manner. The Supreme Court of Victoria’s figures on mortgage repossessions show there has been a massive 58 per cent increase in the number of writs issued between 2004-05 and 2005-06. There was an increase in mortgage repossession writs from 1,948 to 3,084. In South Australia the Supreme Court figures indicate that the number of repossession summonses lodged increased by more than a third over the same period: from 371 to 476. In New South Wales, Supreme Court mortgage repossession statistics show an incredible 59 per cent increase in judgments between 2004-05, which is the fastest increase in 16 years—a jump from 3,061 in 2004 to 4,873 in 2005.

What we are seeing, of course, is the dark side of the housing boom—a boom described by the Prime Minister on 17 March 2004 as being ‘fantastic for the economy’. At that time, the Prime Minister and the Treasurer were happy to take the credit for higher house prices when they thought they were good news. Of course, now that we see clearly that the housing boom is far from being fantastic for the economy, the Prime Minister and the Treasurer have been trying to shift the blame for this pain to state governments.

In yesterday’s motion in the House of Representatives, they went one step further and tried to shift the blame to local governments. One minute they are shifting costs; the next moment they are shifting blame. It goes to show how hollow the resolution on local government that they passed just last week was. Labor does agree with Peter Costello on something; at least, we agree with something he said in 2003, where he— (Time expired)

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

I have never, ever accused Senator Carr of being ineloquent but today he has simply demonstrated the pervicacious nature of the Labor Party and their entire policy-free zone. He has demonstrated to me exactly why the Australian people have rejected the Australian Labor Party at four successive elections. We are talking about home ownership today, and specifically about affordability of home ownership and the burden upon regular Australian families. The dream of home ownership remains a uniquely Australian dream. It is a dream that, in this great country, allows all Australians the opportunity to own their own home. And it begins, let me tell you, with having a job.

This government has lowered unemployment to such a level that every Australian in this country who wants a job can actually get a job. We can only contrast this with what happened under the Labor Party. In 1992 the unemployment rate across this nation was 10.9 per cent, and it in fact averaged 8.5 per cent under the Labor administration. How do you buy a home or afford to pay for a home when you do not have a job? The answer is: you cannot. How can you afford to buy a home, if you have a job, at 17 per cent interest rates? The answer is: most people cannot. You want to talk about home loan affordability and how many people defaulted on their payments; you need to go back to the high point in this country—the high point of defaults. In fact, it should not be the high point: it is actually the low point in economic mismanagement in this country, and it occurred under a Labor government.

We need to remind people that this government—and I remind Senator Carr—has reduced the tax burden on the regular taxpayer so that 80 per cent of the taxpaying public pay 30c or less in the dollar. This is a very important point because, under the Labor Party and under their administration, the top tax rate kicked in at around $50,000. Today it does not: today the average taxpayer pays around 30c in the dollar. This government has assisted first homebuyers by providing over 828,000 first homebuyer grants. This enabled a lot of people to put their foot on the housing market ladder—the ladder of opportunity—which, under this government, has every rung intact. It is not missing a few rungs along the way so it is only an opportunity for some, because it is an opportunity for every single person.

We have reformed taxation rates not only by reducing the marginal tax rates but by reforming our entire taxation system. By doing that, there were some agreements reached with the state governments that they had to fulfil in order to receive the rivers of gold in the GST. What has happened? We are talking about housing affordability. The estimated costs—the exact figure—escape me. I must be suffering from lethologica, I think, because the word was on the tip of my tongue. However, we have to decide here that the states have abrogated their responsibility. They have not cut stamp duty, which adds an unfair impost and an unfair burden to the new homebuyer. In fact, it adds to the cost of housing for any person upgrading, or even downgrading, their home ownership dream.

What else have the state Labor governments not done? Perhaps it is what they have done. They have fully loaded the costs of development of land onto private individuals and private developers. This is one of the tragedies that our developers are facing at the moment. Land banks are being released on an ever-diminishing basis by the state Labor governments. When they are released, the developers are expected to fully fund the infrastructure costs that go into them and pass those costs on to local homeowners and to new homebuyers. The cost of building a home has actually risen only marginally over the last 10 or 15 years in real terms—what we have are massive costs of land. This is the responsibility of the state Labor governments, I have to tell you, because the land is being released by them and they are failing in and abrogating their responsibility to support affordable home ownership for Australian people. Let us talk also about the level of investment, the level of asset growth and also the level of debt in the Australian nation. (Time expired)

Carol Brown (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to take note of the same answer. As reported in today’s Sydney Morning Herald, household debt has climbed to a record 171 per cent of household income, and regular financial obligations, such as mortgage repayments, are now soaking up more than one-fifth of all disposable income. In my home state, Tasmanians pay over 30 per cent of their income in servicing their mortgage. We have seen interest rates rise seven times since 8 May 2002, and many hardworking families right across Australia are feeling the impact as they deal with the pressures of financing a mortgage or their dream of buying their first home.

We are also seeing homeowners losing their homes at a record rate, forced out by massive mortgage payments, rising petrol prices and high personal debt. And, true to form, the Prime Minister has looked around to find someone to blame for this national crisis of housing affordability. This is what we have here: a national crisis in housing affordability. Unfortunately, Senator Bernardi seems to have fallen for the Prime Minister’s line. The Prime Minister has looked around to find someone in his blame game and he finds the states—‘I’ll blame the states for my neglect, I’ll blame the states for my lack of leadership and I’ll blame the states for my broken promise on interest rates.’ We have now seen three rises since that promise was made, taking the tally to seven in a row.

The Prime Minister blames the states for failing to release enough land for new constructions. But housing expert Alan Moran—the Prime Minister’s own expert—has confirmed that the PM’s only solution, massive land releases, would slash home values by $100,000. This would leave struggling families in financial crisis, owing more than their house is worth. We see figures confirming our worst fears: that the chance of young families owning a home—the great Australian dream—is diminishing; they are being locked out of homeownership.

According to figures, the proportion of first home buyers in the market has hit a 12-month low, with just 16.7 per cent of all loans being for first homes. Families are struggling with rising petrol prices, rising prices at the checkout, rising education and health costs. Families are simply unable to afford the loan repayments that are now required.

Families have seen the Prime Minister’s promise on interest rates go up in tatters, it having already, as I have said, gone up three times. They know they cannot trust the Prime Minister on interest rates. The government’s answer to those families paying off crippling mortgages, which are now taking up a massive proportion of the family household budget, is to blame the states and put forward a now discredited policy on land release—a policy encouraging a massive land release campaign that will erode property values. That is leadership! I support Senator Carr’s statement:

As a result of the Howard Government’s neglect of the housing affordability crisis, the proportion of first home buyers has been below the long-run average of 20.2% for over four years.

These figures show that higher interest rates are hurting everyone—those who have taken on a mortgage because they just couldn’t wait any longer, and those who want to buy their own home but can’t afford it.

The states and territories do have a responsibility and they have each taken action. By contrast, the Howard government has reduced funding for housing programs and abandoned Australian cities, including abolishing Labor’s Better Cities program, which had a return of four to one in terms of government dollars spent. States and territories have unanimously supported the development of the framework for National Action on Affordable Housing and are working together to implement it. The government had to be dragged to the table to sign up to the framework and it has not committed to taking any concrete action.

The Prime Minister needs to show leadership on this issue, an issue critical to all Australians, by taking responsibility for the crisis. Appoint a minister for housing and start working cooperatively with the states and territories to fix the problem, instead of playing the blame game for your failures and attempting to dump all the responsibility on the states. Australians will not be fooled. The government cannot take the credit for house prices increasing but dump homeowners now that housing affordability has reached a crisis.

Unfortunately, we have already seen evidence of homeowners unable to keep up repayments and being forced to sell their home for less than it is now worth. This leaves families with a large debt and no home. The Labor Party will have a minister for housing who can focus on the housing market and ensure that homeownership stays within the reach of hardworking families.

The Labor party knows that to address the problem of housing affordability we have to work together. These measures are vital if we are to address the growing problem of housing affordability and if we are to ensure that the dream of owning your own home is not simply a fairytale that is beyond the reach of everyday, hardworking Australians. (Time expired)

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I also rise on the matter that was raised in question time today and the answers given by Senator Minchin. Senator Carol Brown has highlighted the fact that Labor will introduce a minister for housing. I think before they do anything on that basis they should have a minister that will look after economic management, because that is how the housing situation in this country has become very strong. That is how our economy functions—we concentrate on economics, and that is the broad picture.

Turning to some of the minor detail, Senator Brown mentions interest rates. Interest rates fluctuate within bandwidths, and the interest rates under this government have fluctuated within an extremely low bandwidth. Under the Labor government, prior to this government taking office, interest rates fluctuated on a high bandwidth. I know because in 1990 I had a mortgage and mortgage rates went to just under 20 per cent. I still have a mortgage today, but mortgage rates are nowhere near that level. My mortgage rate is at a very affordable and manageable level. Also, from my family’s perspective, I have a son who recently married. They are saving for their first home. They have purchased a block of land. They have borrowed money to do so because interest rates are affordable to do that. That is a very important and significant factor: whilst interest rates move within bandwidths, they are relatively low. They have been a lot lower under this government than they have been in the past.

Senator Brown also blames the Prime Minister for blaming others. That is incorrect. The Prime Minister is not blaming the states; he is pointing out facts and stating the obvious. I quote the Reserve Bank Governor, who on 18 August this year said:

I think it is pretty apparent now that reluctance to release new land plus the new approach whereby the purchaser has to pay for all the services up front—the sewerage, the roads, the footpaths and all that sort of stuff—has enormously increased the price of the new, entry-level home. That is a supply-side issue, not a demand-side issue. I think there is a lot of evidence that, at the moment, those factors are becoming very important.

So it is not only the Prime Minister and this government but also people outside of this government who understand these issues who are saying that the state governments are a serious part of this issue. And the state governments are ensuring that housing affordability at the new entry level is too hard. It is just too difficult, because of those state costs.

That is not to mention stamp duty. We can look at stamp duty for forever and a day. State governments need to reduce stamp duty. If Labor were serious about low entry level into the housing market, the Labor Party would certainly be encouraging their counterparts at each state level to reduce and remove stamp duty. It is very important.

I will recap. Economic management: we have that, and the Labor Party need to pick up on economic management. Interest rates: we have low interest rates; within a bandwidth that fluctuates, they are still very low compared with the high, fluctuating bandwidths that the Labor Party had. It is not federal government issues that control the state government issues—and even, to a degree, local council issues—that affect the price of entry into new housing. These factors are all very important. I think the public of Australia understand that what we do, as good economic managers, is to ensure that housing affordability stays at the best possible price.

Then we come to first home buyers grants and subsidies. This government has been extremely proactive in introducing and maintaining these schemes. They enable people to have some offset when they first take up a mortgage. That is very important.

Housing affordability is a very important thing in this country. This government has a very serious approach to housing affordability. We can only ask that the state Labor governments follow the lead of the national government and reduce their charges to make it easier for those first-time entrants when they wish to move into their first home or, indeed, buy a block of land.

So I refute the allegations, made by Senator Carol Brown in the chamber a short while ago, that our interest rates are high; they are relatively low. And it is not only this government indicating that we have state governments to blame; outside experts are indicating the same. And I think we could find a long list of people who would also support that. (Time expired)

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

What Senator Parry might also find is that this government has ignored five years’ worth of warnings from esteemed organisations like the Reserve Bank about housing affordability and the need to invest in skills and infrastructure to put downward pressure on inflation and interest rates. That is just a fact of life.

We can play the blame game as much as we want but, when there is a fundamental problem, we need some national leadership and a national government that will take action. If the government’s economic management was so rosy and if housing affordability was such a simple issue, why is it that, in 1996, when this government first came to power, people were spending on average 28.7 per cent of their incomes on mortgage loan repayments and yet, in early August this year, only a month ago, average repayments were consuming 32.3 per cent of people’s incomes? It is not only that a greater percentage of household income is being absorbed by the cost of housing. When you also bear in mind that people are actually earning more money these days, on the whole, then that says there is a serious affordability crisis in our community.

It seems we are going to play the game of blaming the states. As I say, that seems to be this government’s only solution or option in discussing this. Whenever we define a problem it is always someone else’s fault. There is never any national leadership to fix this problem for all Australians; instead we are going to blame the states.

In my home state of Western Australia, when the Labor government came to power—and they took over from the Liberal Party, when last I looked—there were only 7½ thousand blocks of land per year released for new homes. Some five years later, there will be over 16½ thousand new blocks of land released for homes, just in the Perth metropolitan area. If that is not the sign of a state government accepting its responsibilities and trying to do its bit to address the need for housing affordability, I do not know what is. Where is the action from the federal government to assist in that, in what is a booming economy? Nowhere. All they can do is just keep blaming others. That is hundreds of percentage points of increase: in five years it has gone up from 7,500 blocks of land released to over 16,500, with the aim to have released 20,000 blocks of land in this financial year. That is a significant contribution to easing the supply of housing. And those opposite then carry on about state government fees and charges.

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Yes!

Jeannie Ferris (SA, Liberal Party) Share this | Link to this | Hansard source

And stamp duty.

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

I wonder how much those opposite know about how much of the fees captured by state governments actually pay for providing the infrastructure and the planning required to actually release those blocks of land. In my home state, the fees collected—including stamp duty—only make up 39 per cent of the cost of releasing that land. So 61 per cent of the cost of releasing that average block of suburban land is borne by the state taxpayers. It is not actually recovered in fees; the fees are not the significant issue.

When we look at housing affordability, we are not saying it is just the cost of land; it is also the cost of housing. I do not know anyone who says, ‘It is only the cost of land that is the issue.’ It is actually a house and land package that is the issue. And this government is doing nothing about it.

You cannot get away from the figures. We have looked at the percentage of average weekly incomes that are now spent paying off household mortgages. The latest figures that we have from the HIA-Commonwealth Bank quarterly review of housing affordability from June 2006, show—and there is no escaping this for the federal government—that first home buyers entering the market would have to commit at least 27.9 per cent of their incomes towards mortgage repayments. That is first homebuyers. That is a significant amount of their income that they would have to commit to just attempting to live the great Australian dream of owning their own home. (Time expired)

Question agreed to.