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 Sherry, Sterle and O’Brien today relating to inflation and interest rates.

I first draw the attention of the Senate to the fact that we have now had four interest rate rises since this Prime Minister said that the government would keep interest rates at record lows. What we have seen in recent times is that this rate of increase in the cost of maintaining a roof over your head has had very serious consequences for many hundreds of thousands of Australians.

We have already seen over the last two years an increase of some 60 per cent in the rate of defaults in New South Wales, Victoria and the Australian Capital Territory. We have seen the rates of default increase by a third in South Australia. We have seen increasing numbers of Australians put in the clutches of the loan sharks, as a result of the failure of this government to regulate mortgage brokers.

We have seen hundreds of thousands of Australians forced into acute financial stress as a result of the policies of this government. And this has occurred in a context where this government went to the last election claiming that they would keep interest rates at record lows. Four rises later, we can now clearly see that that was a proposition predicated upon a lie—a fundamental lie.

We have a situation in this country where home buyers are rightly losing confidence in the record of this government. We have a situation now where, for the first time, we are seeing that the number of people actually buying a house has fallen—the percentage of people buying a house has fallen. If the proportion of families owning their homes in Australia had been maintained at 1996 levels, we would see 70,000 more Australians actually owning their homes.

For the first time, we are seeing first home buyers with mortgage rates much higher and less affordable than they were when interest rates were at 17 per cent. The percentage of income that is required to maintain your interest payments to keep a roof over your head now is much greater—in fact, 50 per cent greater—than it was when interest rates were at 17 per cent. And that is a simple mathematical equation that is predicated on the assumption that people are now required to borrow much more because the price of housing has skyrocketed.

We have a situation where, as a result of the rise yesterday, there has been a $50 increase in the monthly repayments on a $300,000 loan—that is an extra $195 a month since John Howard took personal responsibility for interest rates, as he did in the last election. That is an extra $380 a month since interest rates started to rise in May 2002.

We now have a situation where, as a result of this government’s actions, there are more and more Australians who are being forced into the hands of the loan sharks and are now losing their homes because they cannot meet the increased costs of debt; they cannot meet the increased costs of financing their mortgages. We have a situation where there are increasing numbers of Australians who are forced into the deregulated section of the market—the completely unregulated section of the market—where people are lent money on 100 per cent of the total value of a property.

In the west of Sydney we see declining rates in sales of property, where people now have negative equity in their properties. With interest rates increasing, people who cannot meet those payments are forced to sell their house and end up with less money than they started with. The four increases in interest rates are placing increasing burdens upon the families of this country, and since this government is responsible it should be held accountable. (Time expired)

Alan Ferguson (SA, Liberal Party) Share this | Link to this | Hansard source

The words that come out of Senator Carr’s mouth never cease to amaze me. It must be Melbourne Cup week, because the Labor Party want to have a couple of bob each way. One minute they are complaining because the price of houses is too high and then, in the same breath, Senator Carr is saying the cost of houses is coming down, so people are losing their equity. You had better make up your mind. It is about time you started backing some of these horses on the nose, Senator Carr, because you cannot have two bob each way on interest rates. Either you are unhappy because the cost of houses is rising or you are unhappy because the cost of houses is falling. You cannot be unhappy about both; you must decide which one.

Senator Carr goes on about the four rises in interest rates since the last election. The Labor Party did not worry too much about a 0.25 per cent rise when they were in power—0.25 was not even considered. They went straightaway to a 0.75 per cent increase and then, only a few months later, another 0.75 per cent increase. So you were not talking about the smallest incremental rise possible, which this government has been faced with—0.25 per cent each time. The Labor Party—the party that Senator Carr belongs to—preferred to put it up by 0.75 per cent and then another 0.75 per cent until we reached the stage where people were paying 17½ per cent. That is only on a house loan. As I have said to the Senate before, I distinctly remember paying 24 per cent under Labor.

And, if you want to talk about people going to loan sharks and people borrowing money offshore, I can say that it was because of the pressure of 24 per cent interest rates that two of my neighbouring farms were lost. Because of the 24 per cent interest rates, they went overseas to borrow money at a cheaper rate and then, with the changing rate of the Australian dollar, they lost their properties—thanks to the Labor Party.

Can I also say to those people who are borrowing money for houses that one of my children bought a house six months ago—the first house they have ever owned. The first thing they did was ask, ‘How much can I afford in repayments?’ They worked it out and then locked the interest rate in so that if interest rates went up or down they would know exactly how much interest they would have to pay on the loan, because it was locked in for three years. Senator Carr makes no mention of the many people who chose to fix their interest rates. They are not affected by the interest rate rises. The only ones you are talking about are those—

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

Senator Sterle interjecting—

Alan Ferguson (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Sterle, you have not been in this place long, but I am sure that you remember plenty of people in the trucking businesses that you were involved in who were also paying 24 per cent interest rates and for longer. They paid 24 per cent under a Labor Party—the very Labor Party that you belong to—and they lost their trucks. I did not hear you speaking too loudly back in those days about the Labor Party, with its high interest rate policy of up to 24 per cent.

The Labor Party ought not come in here and talk about loan sharks. The very people they did not protect when they were in government suffered the indignity of losing their businesses because of 24 per cent interest rates. So, Senator Carr, you can come in here and talk about those people who have lost faith in the government. Let me tell you this: the last time the Australian public were tested at the ballot box, they rejected the Labor Party in a way not seen for a long time. And you, Senator Carr, were one of Mr Latham’s great supporters and you supported his policies. You supported all of those things which drove the Labor Party to the worst defeat it has had for some time. If you try to tell us that the Australian population have lost faith in the Howard government, you have a very short memory, because the last time they were tested they rejected outright the Labor Party for the sorts of policies they were proposing, both economically and in a lot of other fields, such as bringing home troops immediately. When you come in here and start raising the issue of interest rates, remember your history—and the people of Australia will never forget your record—in relation to interest rates. (Time expired)

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

In rising to take note of answers, I note what an oxymoron ‘answers’ is. I think I have just misled the Senate and I apologise, but I will move on. I would like to quote a few paragraphs from one of the articles in the Australian today by Mr Steve Lewis entitled ‘Rates hike puts election tax cut off the agenda’. It clearly states:

With mortgage payments at a 10-year high, there is likely to be further pain for families, with the central bank signalling it may tighten monetary policy further.

It also goes on to quote Mr Simon Tennent, Executive Director of the Housing Industry Association. Mr Tennent alludes to the fact that ‘housing affordability had been pushed to its lowest level ever’—not in the last 10 years but ever. The article reads:

For the first time, home buyers are now required to spend 30 per cent of household income—the level at which borrowers are officially said to be in housing stress—to make the minimum repayments on the national average home loan.

“Based on what’s happened with house prices in the September quarter and this latest interest rate increase, the proportion of income will hit 30 per cent for the first time ever ...

That says a lot, doesn’t it? The Prime Minister can say, ‘Who do you trust?’ I look forward to seeing the ads popping up on the TV with the Pinocchio proboscis sticking out every time he opens his mouth on interest rates. Do not worry, he will not be the only one. He is followed by a gaggle of government senators who will be just as guilty.

While I am at it, I would like to refer to Senator Minchin, who told us yesterday:

While I acknowledge that those families with mortgages will pay more as a result of this rate rise, they will have the comfort of knowing that mortgage rates, even at 8.05 per cent, are considerably lower than they were when we came into office, when they were at 10.5 per cent.

Senator Minchin also said:

On the average mortgage, people are paying much less than they would be paying if mortgage rates had stayed at 10.5 per cent.

What an absolutely condescending statement. I do not think I have ever heard anything like it. How dare Senator Minchin treat the people of Australia with such contempt as to think that they are far better off now, with interest rate rises, housing affordability and what they are paying out of their pockets, than they were years ago under the Labor government!

Another interesting article comes from the West Australian newspaper, from my fine home state of Western Australia. It was written by Mr Shane Wright, and there is a wonderful table in it. One could never, ever accuse the West Australian newspaper of being a left-wing publication, I can assure you of that, but it has very good reporters. They have brought to the attention of all Western Australians and anyone else who—I was going to say ‘has been fortunate enough’, but there is nothing fortunate in this damn article—has seen the article that, back in 1996 when the Howard government came into power, the average mortgage of a home in WA was $233,000 and the official rate was 5.25 per cent. They have also listed what has happened every year since. When they get down to 2006 under the Howard government—and this is the interesting part—the average mortgage in Western Australia is now $314,000, the fixed rate is 6.25 per cent and the variable rate is eight per cent.

And we hear this condescending statement from the minister yesterday about how lucky Australians are and we should be thankful that interest rates are so much lower than what they were under Labor! The average mortgage in Western Australia alone is up by $90,000. I do not know what the rest of Australia would be thinking when they hear that, Senator Minchin, but I tell you what: I was absolutely disgusted. I am sure that intelligent people listening to your speech would have felt your statements were disgraceful.

I would like to also talk about the people in Western Australia. I will just choose a federal electorate—Hasluck, for example. The people of Hasluck have copped a double whammy: not only has Mr Howard broken his promise to them to keep interest rates at record lows but his government has ignored their pleas not to build a brickworks in their backyard—a brickworks that not only will pollute the environment that they and their children live in but, unfortunately, will likely decrease the value of their family homes. Once again, the Howard government is— (Time expired)

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

There are a few things I would like to talk about but, when I hear the Labor government talk about their economic credentials, that really is a trip into fantasyland.

Glenn Sterle (WA, Australian Labor Party) Share this | Link to this | Hansard source

‘Labor government!’

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

You’re 12 months early!

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

If there is one thing I will back this government to the hilt on, it is its economic credentials—because you have absolutely none. I just want to run something past you. I think it is fair to say, ‘Interest rates were trending down and interest rates were trending up,’ but what you have to take into account, good gentlemen and ladies on the other side, is the differential of where Australia was with the US under this government and where Australia was with the US under your government, because that is what it is really all about: trends.

In 1990, the interest rate in Australia was 17 per cent, which basically meant that every five years you had to be able to get a return almost equivalent to the value of your business. As an accountant, I can tell you that is virtually impossible. It sends people broke. The US interest rate was 8.25 per cent. There is the differential: more than twice the US interest rate. In 2006, the interest rate in Australia is six per cent and the interest rate in the US is 5.25 per cent. That is a clear indication of a government that has its hands on the reins, as opposed to one that is full of opprobrium, probably half tanked and completely off the rails. It might not be unique: maybe there was just a glitch in the system and, at a certain point in time, the Labor Party had no idea!

I thought back on the history of it, on my early recollection—I was quite young at the time—of someone called Khemlani. I remember that form of Labor Party management, when they would actually go out to get loan sharks. You had the best one of the lot. You had one from Pakistan who was going to refinance Australia! That is the best form of loan shark in the world. You were going to hock the whole of Australia, but you managed to hock the whole of Australia later on when you built up $96 billion on our nation’s credit card—which, of course, this government had to repay.

The Labor Party were the brilliant triple bottom liners: high inflation, high unemployment and high interest rates. You could do the lot. You are incredible. And the wealth of experience! The Mark Latham statements—his economic credentials and where he was leading the nation—in the Latham Diaries have to be read to be believed. There was the black hole that Paul Keating left behind and the ‘recession we had to have’. Do you know how much angst that cost when people started going broke, and how the Labor Party were absolutely despised because people were going out of business? They were going broke. They were having to sell up. Their contracts were falling over. They could not meet their payments at the bank. That created misery in families throughout this nation. There was that fateful moment when the Prime Minister of this nation stood up and said: ‘This is the recession we had to have. This is what the Labor government has delivered to you.’ Whether you go back to Whitlam, whether you look at Keating, whether you look at Hawke or whether you look at Latham, your form is incredible. Your form is absolutely without merit.

You were talking about prices—the repayment prices for home loans. That is because the price of real estate in this nation has gone through the roof, based on the value of land. People have confidence in the economy. The fact is that people are wealthier now. They have greater wealth than they have ever had before. The value of their assets is far in excess of what they have ever had before. That is why they keep re-electing the coalition government—because they have become wealthier.

Interest rates are going up. I have to inform you that quite a few Australians have been prudent enough to lock in their interest rates. They have been locking in their interest rates at some of the lowest rates in the history of this nation. The reason they can do that is that the hands of the coalition government on the reins are steady. They know what they are up to. The first thing they did, like any astute housewife, was to pay off the unnecessary debt—to pay off the $96 billion that a wayward, out of control government had racked up on the nation’s credit card. They are major reasons why this government— (Time expired)

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

One really would have to be forgiven when listening to the government speakers in this debate for thinking that the Labor Party were actually the government of this country, because their only contribution to the debate about interest rates that we have heard so far has been harking back to what happened in very different economic circumstances, very different global circumstances, in previous governments. I will talk a bit about that in a moment.

Senator Joyce actually went back to the Labor government before that; he talked about the Whitlam government—as if what happened some 30 years ago has any relevance in today’s global economy, with the very complicated and complex global environment in which we live. It is no excuse for this government to talk about interest rates as if you can automatically compare what happens today to what happened in very different economic circumstances some time ago. I think it is an absolute cop-out for them.

What the government really need to do if we are going to get serious about having this debate in this country is face up to the fact that they are in government. I think the government actually like Senator Joyce to talk about them having their hand on the tiller or having their hand on the levers of the economy. He has now given us a new phrase about having their hands on the reins. If they have their hands on the reins of this economy, you would want to have a good look at that horse and maybe take it to the vet, because we are starting to see a very serious problem with eight successive interest rate increases, four since the last election. This government wants to continue to remain in denial about the impact that these changes to the economy are actually having and why they are actually taking place.

Senator Minchin, to his credit, actually tries to answer questions fulsomely. The trouble is that he is now being hung by his own words from previous occasions. The standards that he wanted to apply in different economic circumstances and the quotes and statements about the measures of the economy that he used once now seem to have gone out the window. He seems to be able to use the government’s spin—and I can understand that that is politics—about interest rates and how low they are without actually acknowledging where they are going to go and how they affect people. Again it is a feature of this government that in nearly every instance when things are going well they are totally responsible and take complete credit for everything that goes well, but as soon as things are not going particularly well then of course it is everyone else’s fault—it is either the states’ fault, the global economy’s fault or the previous Labor government’s fault. It is the fault of the Labor governments of 10 or in some cases 30 years ago that there are problems with the economy today! It is quite a bizarre approach. What did Senator Minchin tell us? He said that the reason for the interest rate rise now is the world economy. He talked about global demand.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

That’s what the Reserve Bank said. You’re quoting the Reserve Bank.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

You certainly were not disputing that view, Senator Minchin. You say it is due to the world economy. You agree with the fact that that is what the Reserve Bank says. You talked about global demand and then you went on, and I will quote you. You said, ‘We had to put a light touch on the brakes.’ I think that is a little bit in conflict with the line the government would have us believe—that they do not have any control over this and that this is something that the Reserve Bank does in complete isolation from the government. I think Senator Minchin has indicated that the government did give the Reserve Bank the green light for this increase. His words were, ‘We had to put a light touch on the brakes.’

It is fine for Senator Minchin to finally admit that, but the ‘light touch on the brakes’ does not just go to this economy; it goes to every household in this country. The eighth successive ‘light touch on the brakes’ of this economy has now led to $260 per month in extra mortgage payments on the average mortgage for Australians. That is $260 a month being taken out of the household budget, out of the household grocery bill. At the same time we see housing affordability crashing in this country. Senator Minchin also told us that—

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Wait for it!

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

It will be profound.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

It is coming; yes, it will be profound. If only I had a few more minutes, I would probably be able to find it in my notes. Something tells me I will have to wait till the next time I am speaking in a take note of answers debate to continue on that issue.

Question agreed to.