Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

Today I want to put on the record my thoughts about the current debate surrounding housing affordability and interest rates. As I travel around the country with the Labor Party’s Family Watch Task Force, I find that one of the key issues uppermost in people’s minds is housing affordability. This of course relates to the financial pressures they are under because of rising interest rates and also, for young people, trying to get into the housing market and set up a family home for the first time.

As I have talked to local families around the electorate of Oxley and all around the country on the Family Watch Task Force, it has become glaringly clear to me that families face a new interest rate reality. The latest rise in interest rates is hurting families because mortgages are so much larger than they used to be. It is also clear that interest rate rises for many families in Oxley and around the country are now about more than just the repayments; they are having an impact on the whole household budget.

For a lot of different reasons many households in my electorate have taken on a lot more debt in recent years. This is a trend that has been repeated across the country. People may not be surprised that this trend may be in part due to this government’s exuberant promotion of rising values in equity in homes and people borrowing perhaps a bit too much on the back of their new-found wealth.

The average new mortgage in Australia is $222,000, and it is much higher in major capital cities. Since the election, repayments on an average new mortgage have increased by some $108 a month. Australian households are now paying out a bigger share of their income on interest payments than at any other time in Australian history. Australian homebuyers are now paying amongst the highest interest rates in the whole world. This is not a good record for this government. This is not something this government ought to be proud of.

Household debt has doubled in the last 10 years under the Howard government. The Reserve Bank of Australia recently found that the ratio of household debt to income is at a record 153 per cent. This is more than twice the level of 10 years ago. The increased cost of houses, rising petrol prices and the ever-growing cost of school fees are just some of the reasons why debt levels are climbing fast for so many households, to the point where some households are using debt to finance grocery bills. This rising level of debt also means that many households are much more sensitive to interest rate rises than they ever were in the past. Interest rates of six per cent, which is a low number, represent the highest figure that Australian families can possibly bear.

This is the heart of the new interest rate reality under the Howard government. In Oxley there is no longer such a thing as a small interest rate rise, because for families in Oxley there is no such a thing as a small mortgage, nor is there such a thing as a cheap home. Young people who used to come to my electorate trying to buy their first home because it was one of the few places where they could afford it and get into the market at the bottom, at the cheap end, find this no longer possible. They have lost their dream of owning a home. This explosion in the level of household debt means that households are now spending a higher percentage of their income on interest repayments than ever before in Australian history.

There have been three interest rate increases since the last election, when the Prime Minister, John Howard, pledged to keep interest rates at record lows, and seven interest rate increases in a row. This is not a good record and not something this government should be proud of.

More and more young families today are being forced out of homeownership, possibly for the rest of their lives. Figures out recently confirm bleak prospects for young families locked out of homeownership. The proportion of first home buyers in the market has hit a 12-month low, with just 16.7 per cent of all loans being for first homes. Hardworking families are simply unable to afford loan repayments, as interest rates continue to rise. As we heard from the chief of the Reserve Bank, interest rates are likely to increase again this year. Rates have gone up three times since the Howard government promised voters that it would keep them at record lows, and they are now probably the most expensive rates in the world.

As a result of the Howard government’s neglect of the housing affordability crisis, the proportion of first home buyers has been below the long-running average of 20.2 per cent over the past four years. These figures show that high interest rates are hurting everybody, from those who have taken on a mortgage because they just could not wait any longer to those who want to buy their own home but now cannot afford it. As you would expect, the Prime Minister has been trying to divert attention from this government’s ongoing failure to address the housing affordability crisis. Its only response is to blame the states.

The Prime Minister has finally realised this is a critical issue for young Australian families, because he has been doing research and polling on this, but he is not prepared to make a commitment to them. But now the Prime Minister’s own expert, Dr Alan Moran, has confirmed that the only solution the Prime Minister has put forward, which is massive land releases, would slash $100,000 from current home values. This will leave a struggling family in financial crisis and owing more than their house is worth.

Under this Prime Minister, the proportion of homeowners in Australia has fallen. Under this government, the potential now is that, for those people who have bought and have borrowed heavily, the proportionate value of their home will be less than what they owe the bank. It is time the Prime Minister took responsibility for this crisis, appointed a minister for housing and started working cooperatively with the states and territories to deal with this problem. It is no good just blaming everybody else.

The government’s self-serving campaign to dodge responsibility for the nation’s housing affordability crisis cranked up a notch further today. A government motion in the House is yet another disgraceful blame-shifting attempt by the Howard government to dump all the responsibility on the states. The truth is that the Howard government first abandoned first home buyers when it crowed about house prices going up and kept driving the prices up with its policies and encouraging people, through its actions and policies, to borrow on their new-found wealth and equity. Now that affordability has reached crisis point, this government is deserting homeowners and encouraging massive land releases that will erode property values.

This government has always been about grabbing the glory in the good economic times and then blaming everybody else when things go bad. The Howard government was happy to bask in the economic sunshine of past Labor economic reforms but, as prices now rise beyond the reach of ordinary people and we see gloomier economic times in the future, the government cannot run away fast enough and is just blaming anybody it can find. Already we have seen evidence of homeowners who are unable to keep up repayments being forced to sell their homes for less than they are worth and, even more frighteningly, less than what they actually paid for them. This is leaving families with large debts and no home. This is debt that will be passed down to the next generation.

The Prime Minister is simply trying to distract attention from the pressure families already face from rising interest rates and petrol prices, but he is providing and putting forward no solutions. He is trying to draw attention away from the major threat to families—the Howard government’s plan to reduce overtime payments and job security through its extreme industrial relations laws. The Howard government ignored five years worth of warnings from the Reserve Bank about housing affordability and about the need to invest in skills and infrastructure to put downward pressure on inflation and downward pressure on interest rates.

In the House during question time today, we saw the Prime Minister furiously trying to back away from his massive land release campaign, as the implications for property values become clearer to ordinary families that have staked their whole futures on buying very expensive properties, particularly in the Sydney market. The Howard government is desperately out of touch on housing affordability issues and has completely ignored this for a decade. In contrast, Labor will invest in future productivity to put downward pressure on interest rates. Labor will have a minister for housing who can focus on the housing market and ensure that homeownership stays within reach for hard-working families.

Finally, if those two pressures were not enough, it gets worse. Consider this fact: Australian families are being slugged with a record Commonwealth government tax take and record high mortgage repayments. The Treasurer does not want to face up to this double punch on family budgets. The Australian Bureau of Statistics and budget papers confirm that the Howard government is the highest taxing government in Australian history. In 2005-06, the Commonwealth government’s taxation revenues were equal to 25.3 per cent of GDP. The second, third and fourth biggest annual tax takes as a percentage of GDP were also under the Howard government. Reserve Bank data also confirms this and that households are now spending record high proportions of their income to pay interest on their mortgage. Australian households under the Prime Minister and the Treasurer are now spending 8.7 per cent of their disposable income to pay off their mortgages—more pressure than they have ever felt before. (Time expired)