Kelvin Thomson (Wills, Australian Labor Party, Deputy Manager of Opposition Business in the House) Share this | Hansard source

Indeed, and that is exactly what I am referring to. The increase in mortgage repossessions reflects the fact that many households are under more financial pressure than at the peak of high interest rates in 1990. The data from the Supreme Court of New South Wales shows a rapid and, from my point of view, concerning acceleration of mortgage repossessions in New South Wales since 2002. The figures from the Supreme Court of New South Wales show that the number of repossession actions increased from 2,189 in 2002 to 5,368 last year. I am concerned about the impact of that on the individuals concerned. I am concerned about the fact that a Macquarie Bank survey shows that almost two-thirds of mortgage referrers expect to see an increase in the incidence of mortgage distress and defaulting over the next year and that that is almost twice the level reported in last year’s survey.

We now have a situation where the OECD Economic Outlook No. 80, released just before Christmas, found that Australia’s household debt, as a proportion of household income, experienced the second fastest growth in the OECD over the last decade. Clearly, if you have that situation going on and you have Australians seeking to repay a mortgage at much greater levels of payment than is occurring in other countries around the world and you have increasing mortgage repossessions as a result, then we ought to be concerned about the impact on housing affordability, bankruptcies and insolvencies of the now eight interest rate rises since 2002. The figures that have been released for administrations under the Bankruptcy Act show that bankruptcies increased from 20,051 in 2005-06 to 22,300 in 2004-05. That was an increase of well over eight per cent. Debt agreements also increased, from 4,738 in 2004-05 to 4,866 in 2005-06.

These things are a direct consequence of increased household debt, an increased proportion of income going into repayments and people being unable to pay. We see this happening in the area of mortgages and we see it happening in the area of credit cards. Debt accrued on credit cards reached $39 billion at the end of last year, 14 per cent higher than a year earlier, which has prompted concerns about household debt levels. Reserve Bank of Australia figures show that total household debt in Australia was $962 billion as at 31 December. Reserve Bank figures on credit card debt are also matched by comments made by key people in our largest banks talking about the perils of credit card debt. For example, the Commonwealth Bank of Australia chief executive, Ralph Norris, said that he was ‘worried about predatory pricing in the credit card business’, saying that smaller lenders had taken on risks that the CBA had rejected.

Household debt is very important to the health of the economy and also to the individuals concerned—those people who end up on the sharp end of this and who are unable to repay their debts. The main source is mortgages, as I mentioned, but credit card debt is also skyrocketing. According to the chief economist at AMP Capital Investors, the ratio of household debt to annual income is about 160 per cent, and that ratio was 102 per cent five years ago and 69 per cent 10 years ago.

After a series of interest rate rises, we have had an increase in calls from Australians in financial distress. It has apparently risen by 35 per cent from last year. We have also had an increase in bankruptcies—6,016 in the December quarter, which was 20 per cent more than in the same period in 2005. The Wesley Mission, Debt Helpline and the like, who have surveyed these things and measured these things, say that households are finding it increasingly difficult to make ends meet. There are more Australians in financial distress than there used to be. The managing director of Debt Helpline said:

These days, there is no discretionary spending in the suburbs. After accommodation, food, education and fuel, there is nothing left over.

When you put these things together, there is a disturbing picture of rising household debt and problems with housing affordability in this country which the government has failed to understand. When we have tackled the Prime Minister with questions about interest rate rises and so on, he says: ‘It is fine. Asset prices are going up, house prices are going up, and this is a fine thing.’ But the sharp end of this is mortgage repossessions going up, people finding it impossible to get into the housing market and, in some cases, finding it impossible to stay there once they have entered and arrived. I hope the government will be less smug and less complacent about these issues and turn its attention to them so that we do not get the insolvencies, the debt agreements and the things of this character that we are presently being required to deal with.

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