House debates Questions without Notice
Interest Rates
Kim Beazley Brand, Australian Labor Party, Leader of the Opposition
2:01 pm
My question is to the Prime Minister. I refer the Prime Minister to his assertion yesterday in question time that the record proportion of a household’s income consumed by interest payments is irrelevant because the value of their assets is greater. Can the Prime Minister explain how households can actually pay their monthly mortgage interest repayments using equity in their homes? Is the Prime Minister suggesting households could borrow even more just to pay their mortgage?
John Howard Bennelong, Liberal Party, Prime Minister
I am not suggesting that. What I am saying—and let me repeat it again—is that, because of the increase in the cost and value of housing, mortgages have risen very sharply in this country. For example, I am informed that the average mortgage in 1989 was $65,000. That figure is now $220,000 a year. I put it to the Leader of the Opposition that the relevant comparison that ought to be made for the purposes of today’s debate is to look at the interest payment today on the average loan and compare it with what it would have been if the interest rates of earlier years had obtained. The interest rate today on the average loan—
Simon Crean Hotham, Australian Labor Party, Shadow Minister for Regional Development
Mr Crean interjecting
Simon Crean Hotham, Australian Labor Party, Shadow Minister for Regional Development
Mr Crean interjecting
John Howard Bennelong, Liberal Party, Prime Minister
If you applied the average interest rate of the Labor years—that is, 12¾ per cent—it would be over $2,300 a month. That is being charitable, because it so happens that, in 1989, interest rates hit the notorious level of 17 per cent, and if you applied that to today’s loan it would be $3,100 a month. So it is now $1,430. Using the opposition’s logic, charitably speaking, if their average interest rate had obtained, it would be $2,300; but, if the interest rate of 1989 had obtained, it would in fact be $3,100 a month.