Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition (Social and Community Affairs)) Share this | Link to this | Hansard source

My question without notice is to Senator Minchin, Minister representing the Prime Minister. Is the minister aware of reports that, because the government broke its election promise to keep interest rates at record lows, many working families will be forced to sell their homes? Does the minister have any advice for families reported in today’s press who are now having to give up things like a family pub dinner, brand name nappies for their children, a glass of wine after work or even driving to the shops? Is the government concerned that people like single mum Joanne Pagano from Sydney are considering giving up their family’s private health insurance because of increases to their already huge mortgage payments? Hasn’t life for many working families just got a lot tougher because of the government’s failure to honour its promise to keep interest rates at record lows?

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

We are determined to ensure that under us interest rates are lower than they would ever be under a Labor government. The Labor Party pretend to have exactly the same approach to monetary and fiscal policies as us, but there is one big difference: they would take us back to the pre-Keating era in industrial relations—the most extraordinarily backward step in the economic reform of this country we have ever seen, which every economist worth their salt has said will significantly increase inflation in this country and therefore increase interest rates. That is what will damage the people to whom the senator refers.

It is the ordinary working families of this country who will be damaged by the Labor Party’s approach to industrial relations because that will have a direct impact on inflation and therefore interest rates. Of course the government has sympathy for those Australians on low incomes who are having difficulty servicing their mortgages. Of course those Australian families do not like to see interest rates go up. But those Australian families have much worse to fear from a breakout of inflation—as has occurred under previous Labor governments and as is threatened by the debt binge that the state Labor governments are now embarking on.

And, while expressing that concern, we should keep this whole issue of housing debt in perspective. It is a fact that the Reserve Bank’s Financial Stability Review, conducted recently, does illustrate a few things about housing debt and housing finance that should be remembered. Household debt, according to the RBA, is concentrated among higher income households. Those in the top 30 per cent of the income distribution hold no less than 60 per cent of the debt. Those in the bottom 40 per cent of income distribution hold just 10 per cent of the household debt. In fact, the median debt-servicing ratio for low-income households fell between 2002 and 2005.

It is also a fact, according to the Reserve Bank, that many households are ahead on their mortgage repayments. Just over 50 per cent of indebted households are ahead in their mortgage repayments. It is also a fact, according to the Reserve Bank, that property gearing ratios have fallen. The ratio of household debt to housing assets fell between 2002 and 2005. It is also a fact, according to the Reserve Bank, that the increase in overall household debt over the past decade is attributable to an increase in the number of people with an owner-occupier mortgage. That is particularly noticeable in the number of people with an owner-occupier mortgage in the 55 to 64 age group. Of course, they are the people who are making a deliberate choice to dip into the asset base they have in their home to take out loans.

I would also draw your attention to the issue of household arrears, which the Labor Party likes to talk about. In March this year, the Reserve Bank noted:

The various measures of loan arrears also suggest that the household sector is coping reasonably well with the higher levels of debt and interest servicing.

The ratio of non-performing to total housing loans with Australian banks is 0.38 per cent. The RBA notes that this remains lower than at any time in the 1990s and low by international standards.

Do not let it be said that the government does not have sympathy for those on low incomes struggling with mortgages. We do have sympathy for those people. Our concern is to ensure that we maximise their job opportunities. Today we saw unemployment staying at a record low of 4.3 per cent; thousands of new jobs have been created. That is our response. We will go on with the task of creating jobs, keeping inflation low and keeping this economy strong.

Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition (Social and Community Affairs)) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. I thank the minister for his response and note that he did not, for one minute, mention the growing number of distressed families having to deal with the mortgagee in possession sales of their homes. I ask: does the minister still claim, as the Prime Minister does, that working families have never been better off?

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

Australian families working or otherwise have benefited enormously from the extraordinary economic performance of this country under the Howard-Costello management of our economy. It is remarkable that after 16 years of continuous growth, 11½ years of those under us, we have the strongest economy that this country has ever seen.

We have unemployment at the record low of 4.3 per cent, a number that the Labor Party could only dream about. The party that professes to represent the workers put millions of people out of work and had one of the worst recessions this country has ever seen. The Australian people are benefiting from us keeping inflation low at 2½ per cent on average with real wages rising throughout our period in government. It is extraordinary that under your government, through you, Mr President, real wages effectively never rose in 13 years. You should be ashamed of your record in office.