Kim Beazley (Brand, Australian Labor Party, Leader of the Opposition) Share this | Link to this | Hansard source

I move

That this House:

(1)

notes that there have been three interest rate rises since the Prime Minister promised the Australian people in 2004 that, if re-elected, he would ‘keep interest rates at record lows’;

(2)

notes that there have been seven consecutive interest rate rises since 2002;

(3)

notes that the Howard Government has spent a billion dollars advertising itself, a billion dollars on the wrong war in Iraq, hundreds of millions of dollars on regional rorts and half a billion dollars on lawyers and consultants to implement its extreme industrial relations laws;

(4)

notes that, despite spending billions of dollars on itself, the Howard Government has failed to invest in the drivers of national productivity including skills, infrastructure and innovation; and

(5)

calls on the Prime Minister to immediately bring down a mini budget to redirect wasteful spending to invest in these productivity drivers necessary to build the economy’s productive capacity and put downward pressure on interest rates.

The government must immediately bring down a minibudget to invest in the essential drivers of productivity—skills, innovation and infrastructure. Middle Australia is hurting but this government is so out of touch that it does nothing—nothing for Australian families, nothing for their future, nothing to boost our national productivity to make Australia a smart nation standing on its own two feet and competitive in the global economy. Instead of nation building, Australian families have copped three consecutive interest rates rises since John Howard promised to keep rates at record lows. There have been seven consecutive rises since 2002. Just this morning, we find that average home loan repayments for a first home have exploded past the $2,000 a month mark for the very first time, rising from $1,941 to $2,078 in the June quarter. That does not include this month’s interest rate rise. It reflects only the May increase, plus the impact of increasing housing prices. First home buyers now entering the market will have to spend almost 28 per cent of their income on mortgage repayments—dangerously close to the Housing Industry Association’s no-go zone. We are sure to be catapulted smack bang into the no-go zone when the August rate rise is factored in, but today this out-of-touch Treasurer is wandering about trying to shift the blame. Blaming the states is much easier than taking it on the chin. It is much easier to blame someone else than it is to do something yourself.

This is a very different story from last week, when the Treasurer and the Prime Minister were arrogantly claiming all the credit for increased householder wealth. They cannot have it both ways. If they take the credit, they have to shoulder the blame for exploding mortgage repayments. Howard and Costello need to roll up their sleeves and start doing the hard work to put downward pressure on interest rates. Low inflation is the key to low interest rates.

Australia needs a mini-budget now. We cannot afford to wait to see whether inflationary pressures abate. The government has spent a billion dollars to advertise themselves, a billion dollars on the wrong war in Iraq, hundreds of millions of dollars on regional rorts and half a billion dollars on lawyers and consultants to create their extreme IR system. John Howard should cut this wasteful spending and invest it in Australia’s future. We should invest in the problems identified by the Reserve Bank—the critical skills shortage, our crumbling infrastructure and our flagging levels of workforce participation. We need urgent action on the supply side of our economy. The longer John Howard delays, the higher inflation and interest rates will go and the harder it will be on families. A decade of neglect cannot be fixed overnight. We have to start now. For the sake of Australia’s future, we cannot wait nine months until next year’s budget.

This morning, when I spoke at the Australian Industry Group conference, I was fascinated by the little system they have—their equivalent of ‘the worm’, of debate fame—in which everybody there has a hand-held object which, when you press various buttons, registers a vote on the screen. They waited until the end of my speech, and then they put up a list of about eight things. They asked: what should be the priorities of the federal opposition? They had interest rates on the list, from memory. They had industrial relations on it. They had skills on it; they had infrastructure—they had the whole lot. There was an interesting result. Only seven per cent suggested that the federal opposition should be worried about doing something with its policies on industrial relations; 26 per cent, about skills; and 29 per cent, about innovation.

These are business men and women who are investing in the future of this nation, and they know what the priorities should be. They know that in these crucial areas which are imposing such capacity constraints on the economy—according to the Governor of the Reserve Bank—there is a critical need now for some nation-building investment. The time is now for reprioritisation. The time is now for spending in this area and not in the government’s favourite areas. We will need a mini-budget to do that. (Time expired)

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

I second this motion. It calls on the Prime Minister to immediately bring down a mini-budget to redirect wasteful spending to invest in the productivity drivers in the economy necessary to build the economy’s productive capacity and put downward pressure on interest rates. Those opposite simply do not get the new interest rate equation. The fact is that the proportion of household income being consumed by mortgage interest payments is higher today than ever before. Data from the Reserve Bank shows that mortgage interest payments, as a share of household disposable income, are higher than ever before. At the last election, Mr Howard promised to keep interest rates—

Kim Wilkie (Swan, Australian Labor Party) Share this | Link to this | Hansard source

I call the member for Macquarie on a point of order.

Kerry Bartlett (Macquarie, Liberal Party) Share this | Link to this | Hansard source

It is not a point of order, Mr Deputy Speaker. Isn’t it appropriate that it be one speaker on each side on the motion, notwithstanding the fact that the member for—

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

It is protocol that a seconder can second a motion and speak to the motion immediately, as the member for Lilley has done. It is entirely appropriate.

Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

At the last election, the Howard government promised to keep interest rates at record lows. ‘Record lows’ was the commitment. Since that election, we have had three interest rate rises. These three interest rate increases have cost the average new mortgage holder $108 a month. The Prime Minister has presided over seven consecutive interest rate increases. These seven interest rate increases have cost the average new mortgage holder $250 a month. Of course, I know the member opposite thinks that we are being dramatic about this, but I can tell you that it does have a dramatic impact on the household budget.

Australians are now paying the highest interest rates of virtually any comparable country in the Western world. Last week Labor asked the government 10 times to explain their interest rate failures. First, Mr Beazley asked Mr Howard why he had broken the trust of the Australian people on interest rates. Of course, the Prime Minister denied that he had ever made any commitment, saying:

Well I don’t seek to give guarantees ...

Well, he did give a guarantee of keeping interest rates at record lows. Capital L, capital O and capital W was the commitment that was given by the Prime Minister.

Secondly, I asked Mr Howard to at least admit that we all know that the Reserve Bank’s measure of debt servicing shows that a bigger share of household income is being consumed by mortgage interest payments today than ever before. Mr Howard responded that loans are larger today because the value of homes is higher—a very bright man, to make that observation, but it was a slippery deception to cover up the fact that a greater proportion of interest repayments, as a proportion of household disposable income, is now being paid than in 1989, which seems to be the reference point of this government in this House. It is greater now than in 1989. Following on from that answer, the next day Mr Beazley asked ‘Honest John’:

Is the Prime Minister suggesting households could borrow even more just to pay their mortgage?

Of course, the Prime Minister suddenly understood that he had to be very careful in this terrain. Mr Beazley tried again, asking Mr Howard to tell the truth about interest rates and admit that, according to the Reserve Bank, a bigger share of household income is being consumed by mortgage interest payments on his watch than under Mr Keating’s. The fact is that not only is it a bigger proportion; debts are higher. Debts are certainly higher. The Prime Minister said, ‘Oh, well, assets are higher.’ He said, ‘People are comfortable; that’s why they’re borrowing more.’

We reminded Mr Howard the next day of this absolutely essential fact: household debt has consistently outpaced growth in housing assets, and the housing debt-to-asset ratio has increased from 10 per cent in 1989 to more than 25 per cent today. So, many people, far from being comfortable, far from being relaxed about this bigger proportion of payments, are actually being crushed by higher debt repayments and are under tremendous financial pressure. This is the equation that the government does not get: the fact that people are paying a higher proportion of their incomes than they were in 1989. What that really means is that there is no such thing as a small interest rate rise, because there is no such thing as a small mortgage. That is the difference. That is the new interest rate equation.

We then went on to ask the Treasurer to name any comparable country other than New Zealand that has mortgage interest rates that are higher than Australia’s. Of course, there is no such country. The next day I asked the Prime Minister why families in the US and the UK pay less mortgage interest than Australian families. Again, he was asked to admit that Australians are paying amongst the highest interest rates in the world. Mr Beazley asked the Prime Minister about Debbie Bridgman, who made the observation that she had actually gone out and borrowed more money as a result of the commitment that the Prime Minister made during the election campaign when he took personal responsibility for the level of interest rates in the Australian community. (Time expired)

Kerry Bartlett (Macquarie, Liberal Party) Share this | Link to this | Hansard source

This is a desperate attempt by the Labor Party to try to get traction on the economy to somehow convince people of Labor’s economic credentials, to somehow try to convince them that black is white and that Labor have something worth saying on the economy. It is interesting, judging by the small handful of people sitting there behind the Leader of the Opposition, how even the Labor Party themselves do not believe this. This attempt to cut through on the economy is failing because the Leader of the Opposition has form. It is failing because Labor’s miserable record speaks a lot louder than the Leader of the Opposition’s spin on this.

Let me come to the specifics on interest rates. Interest rates are still at historical lows. At 7.8 per cent, they are 4.95 per cent lower than the 12.75 per cent we had under Labor. During the 13 years of hard times under Labor, interest rates averaged 12¾ per cent. Let us put aside the massive 17 per cent there: right through the 13 years, they averaged 12.75 per cent. Now, they are 4.95 per cent lower than that. This means that someone with a mortgage of $200,000 would be paying $9,900 a year more, or $825 a month more, if we had Labor’s average rate of interest applying now. The fact is that people with mortgages are substantially better off now, because interest rates are at historical lows and they are still 4.95 per cent lower than the average that occurred during Labor’s years.

We are hearing this spin from the other side about bigger mortgages so they will hurt more. Yes, mortgages are bigger. But people’s houses are worth a lot more than they were before. Everyone knows that house prices rise almost inexorably over time because of the growing demand for houses and because of the limited land releases from the state government—and because, in the case of New South Wales, exorbitant taxes on land. Those land prices and those housing prices continue to rise generally, apart from some fluctuations, over time.

I do not know if the member for Brand is trying to say that he could do something about that. I do not know if the Leader of the Opposition is pretending that it would be good to get people’s asset prices down again. If we asked most people around this country if they would rather have a house worth $500,000 and be paying 7.8 per cent interest or go back to Labor’s time and have a house worth $300,000 and be paying 17 per cent interest, I know what most people would say. They would say, ‘We would rather have a more greatly valued asset and we would rather be paying only 7.8 per cent, not Labor’s 17 per cent on our home loan.’ The point is this: people with a mortgage are far better off now than they were under Labor. Their asset prices are higher and their interest rates are far lower, 4.95 per cent lower, than the average throughout Labor’s years.

Let me make two other points. One point is this: people now have a much better chance of servicing their mortgage because they have job security, because they have a job. We just saw last week record low unemployment of 4.8 per cent, the best for 30 years. Compare that with when Mr Beazley, the Leader of the Opposition, was minister for employment in December 1992, when we had unemployment of 10.9 per cent and when we had almost one million people out of work. How could people then afford to service their mortgage? The point is that people now have a much better chance of servicing their mortgage.

We have heard this nonsense from the other side about bringing down a mini-budget, that a mini-budget is somehow needed to try to address this situation. Let me remind the opposition that, if we had a mini-budget anything like the budgets that we had during Labor’s time, we would be in a worse mess. In their last five years, they had budget deficits totalling $68 billion, budget deficits putting upward pressure on interest rates.

Compare that with the record of this government: nine surpluses in a row, significant surpluses putting downward pressure on interest rates. The contrast could not be clearer. Labor’s deceitful fiscal policy, Labor’s incompetent fiscal policy, was a policy for upward pressure on interest rates. They could not contain their own spending. By contrast, this government’s fiscal approach has been to reduce the pressure on interest rates, and that is one of the reasons interest rates are so low compared with what they were.

On any indication, with lower interest rates, lower inflation, lower unemployment, no government debt and faster wage rises, people under this government are far better off than they were in those 13 years of hard times under Labor. This motion is nothing but humbug and hypocrisy from the Leader of the Opposition. (Time expired)

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

In some respects I feel for the Leader of the Opposition when he comes to putting this motion before the House. I feel for the Leader of the Opposition because he not only has to make this debate in direct contrast to 13 years of poor form when he was a member of Hawke and Keating governments but he also has to move this motion today in light of his stumbles on the weekend when the Leader of the Opposition did not even know who the Governor of the Reserve Bank was.

The fact is that the Leader of the Opposition comes in as the leader of the Australian Labor Party, a party that saddled this country with $96 billion of debt, a party that drove up interest rates to 17 per cent, a party that delivered a miserly 1.3 per cent increase in real wages over 13 years and a party that drove one million hardworking Australians onto the scrap heap of unemployment. It is those figures that hang around the neck of the Leader of the Opposition, and it is that track record that hangs around the neck of the Australian Labor Party.

Let us get back to basics: let us focus on the difference between the government’s performance and the opposition’s performance. When you look at those key indicators that I know the men and women of Australia on the street look at—unemployment, wages growth, the price of housing, their level of wealth, whether their children can get a job—people are better off under this government than they have ever been under the Australian Labor Party.

The Leader of the Opposition can come in here with all of his hot air, but it will not change the fact that he has a track record of failure that is only matched by the Labor Party’s track record of failure. If you want proof positive of the fact that the problem is bigger than the man—although that might sometimes seem hard to believe—look at what it is that is putting upward pressure on interest rates today. And do not take my word for it. I encourage you to look at the comments that the Governor of the Reserve Bank made. The Governor of the Reserve Bank has made it very clear that one of the principal drivers of upward pressure on interest rates today is the performance of the Australian Labor Party in every state and territory government, a performance that I would encourage the House to turn its mind to.

Collectively, the states are forecasting fiscal deficits of almost $5 billion in 2006-07 compared with a surplus position of $1.2 billion in 2005-06 and of $4 billion in 2004-05. We are moving from a position where state governments have a $4 billion surplus to the Labor Party running them all into the red to the tune of almost $5 billion. But it gets worse: the Australian Labor Party is doing an even worse job than what I am talking about. The forecast is that, from 2006-07 to 2008-09, state Labor governments will be budgeting for borrowings at around $43 billion. This is $43 billion of Australian Labor Party debt thanks to the state governments. All I can say is: thank goodness the Australian Labor Party does not control the federal financial benches. If the Australian Labor Party were here, instead of repaying $96 billion of government debt—which the coalition government has done, thanks to the Treasurer, Peter Costello, and the Prime Minister, John Howard—Kim Beazley and, before him, Mark Latham and, before him, Simon Crean would have driven the budget deficit of this country even higher than it is today.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Moncrieff will refer to members by their title or by their seat.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I will do so. I apologise, Mr Deputy Speaker. The fact is that the Labor Party has form. Under the Australian Labor Party, interest rates were at 17 per cent and the average interest rate was significantly higher than it is now. For 13 years, the average interest rate under Labor was 12¾ per cent versus an average interest rate under the coalition of 7.17 per cent, and today’s rate is 7.8 per cent. People are saving more money now than they would have under the Australian Labor Party.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.