David Hawker (Speaker) Share this | Link to this | Hansard source

I have received a letter from the honourable member for Melbourne proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The Government’s failure to ensure low interest rates and genuine housing affordability.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

Many years ago, when the Prime Minister was in his heyday as Leader of the Opposition, cartoonists were often happy to depict him as a little schoolboy, with the short pants held up high under his armpits, the funny old satchel, the weird glasses, the multicoloured pen in the pocket—all of those kinds of things. Gradually over the years he has grown in stature, he has shed the schoolboy image and he has become the man of steel, marching arm in arm with George Bush around the world sorting out the bad guys. It has been a truly astonishing transformation. But in recent times the wheel has turned, and gradually we are seeing the Prime Minister’s inner schoolboy re-emerge. He is now coming back to the petulant, pouting, recalcitrant schoolboy that was so damaging for the conservatives back in the 1980s. In doing that, he is peddling ever more creative versions of the old ‘dog ate my homework’ story—ever more creative stories that cast the blame on everybody other than him. The satchel, the multicoloured pen, the short pants up around his pectorals—all those kinds of things—are returning. It is all back. The statesman is gone and we now have the blame-game merchant—the Prime Minister who is never to blame, who is never responsible for anything bad and who takes all the credit, all the glory, when anything good happens and is always looking to shift the blame to someone else.

We have now had nine interest rate increases in a row—five since the election in 2004, when, we all recall, the Prime Minister asked the Australian people through the Liberal Party to trust him in order that he could keep interest rates at record lows. He now tries to wriggle out of that and suggest that none of that happened, that in fact his commitment was to have interest rates lower than any Labor government had. But today those words are still on the Liberal Party website: ‘keeping interest rates at record lows’. Over recent years, when interest rates have been rising, notwithstanding the government’s commitment to keep them at record lows, the narrative of excuses has been roughly as follows. First it was the drought. Then it was Cyclone Larry and bananas. Then it was petrol prices. More recently, in the last few days, it has been state governments

A couple of days ago it suddenly became the Liberal Party. The Liberal Party were irresponsible for putting up an advertisement during the election campaign saying the government was going to keep interest rates at record lows, and the Prime Minister was not told about it. It was nothing to do with him; he has no responsibility for Liberal Party advertising during a campaign. It was absolutely nothing to do with him whatsoever. Presumably, on that logic, the fact that this slogan is on the Liberal Party website even today is nothing to do with him either. Of course, the coda to this position is that if Labor were elected then the alleged reintroduction of centralised wage fixing would put up interest rates. So in other words there is a scapegoat, an excuse, wherever you look. It is an amazingly wide variety of versions of the old ‘dog ate my homework’ story.

The one thing that is central to this message is that it is never his fault. Every time that interest rates go up it is not his fault. There is a new excuse every time. When interest rates are low, all credit is due to the Prime Minister. Remember the slogan was ‘keeping interest rates at record lows’—not ‘helping to keep interest rates at record lows’, ‘chipping in to keep interest rates at record lows’, ‘influencing interest rates to stay at record lows’, ‘doing our bit to keep interest rates at record lows’ or even ‘enabling the Reserve Bank to keep interest rates at record lows’. No, the Howard government were going to do it all by themselves: ‘keeping interest rates at record lows’.

Isn’t it incredible that, when interest rates are low, it is all due to John Howard’s good work, it is all due to the Prime Minister’s good work, but when they go up, someone else is always to blame? Does anybody in the House remember the Prime Minister congratulating state governments in 2002 and 2003 for their good work in helping to keep interest rates down? I do not recall that. Yet apparently now, when interest rates are going up, it is their actions that are causing the problem. Back a few years ago when they were low, no, the states clearly had nothing to do with it. Two days ago it is suddenly the fault of all the states. They have record low debt and they all have AAA credit ratings. A couple of years ago the Prime Minister was attacking them for not investing in infrastructure. Now that they are investing in infrastructure they are accused of putting interest rates up. Of course, he is using misleading figures—he was at it again today.

And the Treasurer was at it again today, comparing net Commonwealth debt with gross state debt. Numerous leading economists have rubbished this suggestion. Both previous heads and the current head of the Reserve Bank have rubbished this suggestion and said that the states are not putting upward pressure on interest rates, and all the way he is busily marching in, talking over every last conceivable state responsibility at the same time. While he is blaming state governments and their activities for putting upward pressure on interest rates, the Prime Minister is busily grabbing every last piece of state responsibility, interfering in every last state role that he can manage. Yet somehow, magically, the states are the villains in this interest rates drama.

His story with respect to the Labor alternative is equally ridiculous. Centralised wage fixing is going to be reintroduced, according to the Prime Minister. It would be funny if it were not so dishonest. It was a Labor government that dismantled the centralised wage fixing system in this country in 1993. I remember it well because I was a member of the Labor caucus at the time and there were vigorous debates about the detail of the industrial relations reforms that were introduced. Will we abolish enterprise bargaining? Of course not. Will we abolish non-union enterprise agreements? No, we will not. Will we restore the principle of comparative wage justice, which is effectively the mechanism, the transmission belt, through which increases in strong productive areas were transferred through to less economically strong areas in the past? No, we will not restore comparative wage justice. So the claim that the Labor Party is going to reintroduce centralised wage fixing is simply ludicrous.

In effect, the Prime Minister is saying that in order to keep downward pressure on interest rates you have to take penalty rates, overtime and all of the entitlements away from vulnerable workers—cleaners, servo attendants, security guards and shop assistants. That, effectively, is what he is saying—that any attempt to restore the basic rights at work of ordinary working people, particularly those who do not have much bargaining power, who are on low wages and who struggle to get by, is going to put upward pressure on interest rates. The implication of that is very clear. All you low-paid workers out there are going to have to sacrifice your penalty rates, entitlements and overtime in order to get lower interest rates. That is the Prime Minister’s real message.

The truth is that the Prime Minister is in complete denial. In March, as we all know, he famously told the Australian people and this parliament that working people in this country have never been better off. The Treasurer was at it too. A few weeks ago he said, ‘We have inflation right where we want it.’ What has happened subsequently suggests that he may now regret that statement because the cold reality is that a lot of people out there are hurting. A lot of Australians are struggling and will suffer as a result of these interest rates increases.

We have the second highest interest rates in the developed world. Interest repayments as a percentage of disposable income are at record levels. We have record levels of people under housing stress: large numbers of Australians are unable to enter the housing market and an increasingly large number of Australians are struggling to enter the rental market. There is no better indicator of a government that is tired, stale and out of touch and that has lost the capacity to govern in the interests of the nation than the statement that working people have never been better off.

This essentially is a government in cruise control. It is sitting back with its hands behind its head and it is steering with its knees. That is basically what the Howard government is doing. It is having a great time. It is relaxed and it really does not care.

It is traditional in the economic debate about the relationship between government spending and interest rates to focus on the quantity of government spending, the size of the surplus and the size of the deficit. That is vital; it is very important, but there is another dimension which is often overlooked—that is, the quality of government spending. What is that money being spent on? Quantity is obviously vital and the settings are vital but so too is the quality. It is quality where this government is most culpable. The debate continues among economists about whether or not the last budget put upward pressure on interest rates. The real culpability, the real failure, is the government’s refusal over a number of years to invest in the capacity that creates the ability for greater productivity growth, greater economic growth and general benefit to the wellbeing of the country. The failure to invest in productive capabilities such as infrastructure, education and skills, and broadband, is where the real culpability lies. That is precisely what Secretary to the Treasury, Ken Henry, was talking about in March in his famous speech in which he said ‘policy outcomes would have been far superior had our views been more influential’.

What were those views? They were that the government needed to focus more on investing in pushing out the speed limits to growth so that non-inflationary, non high interest rates growth could be better. Howard government decisions contributing to the latest interest rates increase were not taken last week, last month or, even to some extent, last year; they are decisions that have accumulated over three, five or even seven years—starving universities, starving TAFEs, not doing anything about broadband other than silly little mickey mouse handouts in National Party seats for political purposes and failing to tackle the infrastructure problem. All of this was in the context of an economy growing and public spending, government spending, growing even faster.

I will give you one concession, Mr Deputy Speaker. There is one really good thing the government have done in recent years on the macroeconomic front, and that is that they have increased immigration. They never talk about that. I wonder why. Why don’t we have the Treasurer and the Prime Minister here at question time talking about what a great contribution to the health of the Australian economy the increase in the immigration program is making? I wonder why we never hear anything about that. They should talk about it because they deserve genuine credit for that.

The government is drowning in revenue. Where has it all gone? Often it is hard to tell because the financial information we are now allowed to get is so curtailed. But here are a few examples. There is over $1 billion on promoting Work Choices. There is $350-odd million in the last financial year on government advertising alone. Labor’s highest spend was $85 million. There is $484 million on consultants in the previous financial year—we do not have the figures for the last one. That is 2½ times Labor’s higher spending. There is a 30 per cent increase in ministerial staff. There are nine ministerial staff for Senator Ron Boswell, who has no ministerial responsibilities—none. There are endless rorts to prop up sitting members—increasing the printing allowance and grants to National Party seats, and increasing the number of parliamentary liaison officers so that all their electorate staff can be off playing factional games in the New South Wales branch. The Special Executive Service level of the Public Service has increased by 44 per cent over the past seven years. And there is the crowning glory: the $350,000, signed off by cabinet no less, for a private gift to the Queen of a jewel-encrusted, gold, air-conditioned, horse-drawn carriage—the ultimate signature of the profligacy and stupidity of the Howard government.

Just last week there was a coda to this list, and that is the Mersey hospital decision: a desperate grab for votes through a unilateral takeover of the hospital, overturning a carefully considered and developed hospital services rationalisation plan by the state government—the government that is actually in charge of hospitals. It is still without any details or any costings. Senator Minchin, the Minister for Finance and Administration, said on Sunday, ‘Obviously my department will be involved ultimately in the costing exercise.’ My apologies, but I thought the department of finance costed proposals before they were announced, not after. Clearly, there has been a change in practice.

What you have now is a government that is operating on the basis of: write the cheque first and then check the bank balance later. It is an extraordinary spectacle—you have the government wandering around Australia handing out money randomly to anybody who asks for it and, at the same time, saying that the No. 1 issue in the forthcoming federal election campaign is the economic and financial credibility of their opponents. They are the ones wandering around just handing out money like confetti, yet they are saying that our economic credibility is the issue. This election is about quality of government more than anything else, and the Australian people are entitled to expect more. We have a tired, stale, out of touch government trying to take credit when things are good and blaming everybody else when things go wrong. The Australian people deserve better. (Time expired)

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

I am pleased to be able to make a contribution to this important matter of public importance debate today. I just want to make one response to the previous speaker’s contribution, and that is to say that in the upcoming election I think one of the things that will backfire on Labor is their arrogance. Their arrogant belief that they have one foot inside the Lodge, one foot on this side of the parliament, was exemplified by that contribution today by the shadow minister for finance. To say that John Howard is old not because of his age but because of his ideas just showed how shallow and personal the member’s attack was on the Prime Minister. The member, in his argument, went directly to the age of the Prime Minister. That is something that Mr Swan and the Leader of the Opposition are saying they are not interested in doing, but the previous speaker today showed the true colour of the opposition and the nature of their personal attacks. Until today the attack has just been by way of briefing journalists and by snide little remarks on the side to public audiences. Today, the true colours of the opposition were shown in the spiteful attack on the Prime Minister and on the fact that he is now in his 60s.

The Prime Minister is incredibly energetic, not just in a physical sense but in a mental sense. He provides great stability to this government. He has done that over the last 11 years; he continues to do it today. My view is that he will continue to do it into the future. No personal attack by the members opposite will muddy the waters for the Australian people. Many Australians are in their 60s and I think they would look with disgust upon the argument put by the Labor Party today. Through these thinly veiled attacks the Labor Party is clearly saying to people in their 60s that they are past it. I say to mature-age Australians: do not look at some of the comments made by Mr Rudd or Mr Swan in trying to butter-up their lines to the media, look at the contribution by the shadow minister today to see the Labor Party’s true attack on the Prime Minister.

I am pleased to be a part of this debate today because I want to take the opportunity to speak directly to younger Australians. At 36 years of age, I am someone in this parliament who is relatively young and I understand some of the angst that is out there at the moment, not just among people in my own age cohort, at the older end of Gen X, as we are called—people in their early to mid-30s, people who have mortgages, who have children, who are faced with all of the demands of modern life. I have an understanding of the stress and pressure that they are going through. I also have an understanding of the stress and pressure that people younger than me are going through at the moment—people in their late teens and early 20s who might be saving for a house and paying high rents, saving towards buying a car, setting up a small business or whatever the case might be. There are huge demands in today’s society and huge expectations on younger people and, in particular, people with young families. There are huge expectations on my generation that we live in a house that is bigger than the one our parents owned. There are huge expectations on people in their mid to late teens, their 20s and 30s. The age group between 18 and 40 face expectations that they drive a new car, have the plasma screen TV and all the trappings that go with modern life, and that has brought with it pressure on households in this country. It is not just because people have proportionally higher mortgages than people had a generation ago but because with the mortgage repayments there are also now payments for credit cards, personal debt and motor vehicle debt, and all of that aggregates to put pressure on families in today’s society.

What I can say directly to people who are experiencing difficulties in meeting their mortgage repayments at the moment is that it is a very similar circumstance, but for different reasons, to the pressure that was held against people in their late teens and early 20s in the late eighties and early nineties. The pressure at that time, when I was in my late teens and early 20s, was directed at young people because interest rates were at 17 per cent. People in small business faced overdraft rates of 20 per cent. At that time, if you were a young tradie of 21 or 22 years of age who was trying to set up your own business, it was almost impossible. It was almost impossible because the climate set up by Labor when they were last in government meant that people were paying huge interest rates. They could not cope with the stress of interest rates under Labor.

I say to people today: have an historic understanding of where interest rates have been and where they would be in my view—and many economists in this country share the same view—if Labor were to be returned. Over the last 10 years this country has not had union domination in the workplace. We have not had the poor workplace practices that operated in the early eighties. I say to young people that our country today is a very different place to what it was then. If the Labor Party is returned after this election we will go back 10 or 20 years. We will go back to a situation, in my view and in the view of many economists, where unions are back in control, where strike rates will go up and where company profits will go down, which will mean people going back on to the unemployment queues. It will mean that the millions of Australians who own shares directly or indirectly by way of dividends will see reducing returns. That will send a very poor message for the future of this country and this economy.

It is a difficult message to deliver, because people aged 18, 20, 25 or 35 do not have an historic understanding of where interest rates were in the eighties under Labor and where we have come to over the last 11 years. It is essential that we explain to people the difficulty that they would be exposed to if Labor were to be elected again. It is important to say to young people today that when Labor were last in government interest rates averaged 12¾ per cent. Under this government they have averaged around 7.24 per cent. The standard variable home loan rate has fallen from 10½ per cent in March 1996, when we were elected, to around 8.3 per cent today. I say to younger people, consider this statistic: with the interest rate reductions—from 10½ per cent, when Labor were last in government in 1996, to 8.3 per cent today—people are saving around $449 a month in interest charges on an interest only loan for an average mortgage of $245,000. Say interest rates under Labor only went to 12 per cent; say they do not peak at 17 per cent like they did when Labor was last in government: somebody on a $300,000 mortgage would need to find an extra $1,000 a month. I say to people in their 20s and 30s today—people of a similar age to me—who do have high mortgages, perhaps because as a generation we have a higher expectation than many of our parents, just consider the fact of where, if Labor got into power, you would find an extra $1,000 a month. I think a Labor government in this country would be a disaster for younger people—on many fronts, not just the economic front.

It is important as part of this debate that we talk not just about interest rates but about home loan affordability. When you look at some of the research that has been done—and I have taken an active interest in this issue over a number of months—you see that a number of factors have driven up housing prices. If you look specifically at some of the work that the independent institutes and property associations around the country have done, you see that there is a common theme to each of them: the prices that have been charged by local and state government authorities have increased quite dramatically. In some areas of the country, I am told that $150,000 of an average house price of $435,000 is made up of local and state government charges. Those figures are quite alarming. That is the most significant part of the house price increase and the reason we have difficulty with affordability in the current market.

We know that the expectation of people who are buying these houses has increased. In 1984 the average floor area of a newly constructed house was 162.2 square metres. In 2005 it was 247 square metres. That is an increase of 52½ per cent. The expectation of younger people of my generation has increased by that much over the last 20 years. It is something that we need to take into consideration. People who are borrowing money at the moment need to factor in that, if Labor were to be elected at the end of the year, they would need to be able to afford interest rate rises that would come under a Labor government. They have come before under Labor governments. If you look at the way in which Labor governments are managing the states and territories, you will see that the economic policies would be replicated at a federal level by federal Labor, and that would mark a stark increase in interest rates in this country. It is a sobering discussion, but it is one that has to be had. It is a message that we need to send clearly to younger Australians and in particular to younger Australian families.

The issue of home affordability in my own state of Queensland is particularly relevant, because councils in Queensland—indeed, right around the country—have been forced to pass on to consumers, to young families out there buying blocks of land, costs that have been passed on to them by state governments. The state government in Queensland, through their infrastructure planning act, have added tens of thousands of dollars to the price that consumers in Queensland are paying today for land.

When you talk to councils around the state, in many cases they are as frustrated as the federal government is at this development. What has happened is that there has been a shift in costs from the state governments to local government authorities for roads or upgrades of sewer systems. These costs would perhaps historically have been met by the state government but they are now being passed directly onto consumers by developers through the increased price of land. That is an alarming trend. On my assessment, it is not one that is likely to abate any time soon. That is of great concern to all Australians, because what it means is that Labor is locking younger people out of home loan affordability. Labor governments in every state and territory are contributing to the generation of Australians currently in the market being unable to afford a house. The great Australian dream should be preserved. We should protect it at every opportunity.

At the moment, there seems to be a renewed level of dictatorship in Queensland by Peter Beattie, who is showing himself as somebody who will not listen to the people of Queensland. Peter Beattie is behaving in a deplorable way, not just in relation to amalgamation but in relation to consultation with councils and others within the property industry who have some ideas and who are talking about ways in which they can make homes more affordable. Peter Beattie at the moment is showing arrogance by the way in which he is conducting his activities. That was highlighted by his comments yesterday, when he said that if he wanted he could be in power in Queensland for the next 100 years. That shows the arrogance of Labor at a state level and the underlying arrogance of this Labor opposition as well.

The Labor Party have had a lot to say about home affordability, but nothing of substance. This of course is a common theme that is running through the federal Labor Party at the moment. They have focus groups in which they shop these lines about home affordability, the economy or environmental matters—whatever it might be. Mr Rudd goes off with these focus groups and goes off talking to Hawker Britton, his specialists and his union boss advisers, about what it is that they should be saying in the media. Give Mr Rudd marks for his mastery of the media at the moment. He gets out there with these glib one-liners, says that he is going to fix it and then pulls back from the media without giving any policy detail or substance whatsoever for consideration or scrutiny. The Australian people are starting to see that the bloke who sits opposite and wants to be Prime Minister has no substance to him whatsoever. The reality is that that will come home to bite the Leader of the Opposition very quickly, because you cannot run around in this country putting up one-liners and saying that you have all the answers to all the problems and then, when you are asked for the policy detail, have nothing to show for it. Nothing better demonstrated this than when a 30-page document on the issue of home loan affordability was put out by the Leader of the Opposition that showed nothing of substance whatsoever. (Time expired)

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Human Services, Housing, Youth and Women) Share this | Link to this | Hansard source

I learnt something very interesting from the Minister for Revenue. I learnt that increased interest rates are not only not the fault of the federal government but the fault of all those ordinary families out there—the mums and dads—because they are so selfish that they want big houses, TVs and cars. Interest rates are nothing to do with anything that the federal government—

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order on relevance. That is a misleading statement and she should retract it.

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

There is no point of order.

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Human Services, Housing, Youth and Women) Share this | Link to this | Hansard source

He is very sensitive. He should not have said it if he did not mean it. It is very disappointing to hear the minister say that the reason families are struggling is because they want too much; because they want to put a roof over their heads; because they want to put a roof over their kids’ heads. Selfish parents—unbelievable. It is a lot like that Larson cartoon in which there is a dog owner talking to a dog. The line under the cartoon is, ‘What people say; what dogs hear.’ The person is saying: ‘Sit down! Bad dog! Stay there!’ What the dog hears is, ‘Woof! Woof! Woof! Woof! Woof! Woof!’ The minister and the government are just not listening. They are not hearing what people are saying when they say that they are having a tough time with interest rate increases. The minister was also not hearing when the shadow finance minister was talking about the government and its lack of ideas. What we say is that the government has lost touch, is running short on new ideas, is not tackling the pressures that are pushing interest rates up and is failing to invest in productivity. What the minister obviously hears is, ‘The Prime Minister is too old.’ I do not know what kind of Freudian thing he has got going on there. When the shadow finance minister says that there is a lack of ideas and investment, what the minister hears is, ‘The Prime Minister’s too old.’

Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

Did I say that?

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Human Services, Housing, Youth and Women) Share this | Link to this | Hansard source

You certainly did not say it, but that is what he heard. Over recent years, as interest rates have dropped, the government has been so very quick to take credit for it; you could not believe how quickly they took credit for interest rates dropping. It was all about the Prime Minister’s wonderful economic management; it was all about the Treasurer’s brilliance. Actually, it was not about the Treasurer’s brilliance, was it? It was always the Prime Minister taking responsibility for it. So it was not the Treasurer; it was the Prime Minister. The Prime Minister tells us that his leadership and his economic brilliance kept interest rates low. But as soon as they start going up again he says, ‘It’s not my fault; it’s nothing to do with me.’ Whose fault is it? It was the drought; it was the cyclone; it was this; it was that. He has run out of things to blame, so he turns to the states. Fascinating, isn’t it: although the states had nothing to do with interest rates falling, they are completely responsible for interest rates going up.

It is incredible, too, that when it comes to the issue of housing affordability it is nothing to do with the federal government—according to the federal government—but always the fault of local government and the states. And we heard from the minister today that it is actually the fault of those greedy parents wanting to put a roof over their kids’ heads. If you look at any analysis of the cause of housing unaffordability, there are things that local governments could do to improve it and there are things that state governments could do to improve it. But every single credible analysis says that high interest rates are affecting housing affordability. People have borrowed more than ever before, so even small increases in interest rates affect housing affordability. When houses cost four times the average annual wage 10 years ago and now cost seven times the average annual wage, you do not have to be a genius to work out that people are borrowing more. They have household debt three times the size that they had when interest rates were high under the last Labor government. As such, miniscule increases in interest rates make their housing unaffordable.

We now have a million people in this country who pay more than 30 per cent of their household income—not their personal income—on the rent or the mortgage. That is a historic high. Never before have we seen figures like that. Is the Treasurer worried? No, he is not worried, because on 27 February 2005 he said that any interest rate under 10 per cent is low. He said:

If you see a single digit in front of your interest rate, that’s low.

Well, it is not low for families who have borrowed hundreds of thousands of dollars to afford the average home.

We now have a situation where the average family cannot afford the average home. We know now what you have to be earning to service a mortgage on a median-priced home. In Australia’s capital cities you need a family income of $115,777 to service a mortgage on the median-priced home. That is not a mansion or a home in the eastern suburbs of Sydney or the eastern suburbs of Melbourne; on the median-priced home you have to be earning well over $100,000 to service a mortgage. That means that there are a lot of people locked out of the housing market.

There has been a lot of debate over the last couple of days about whether the Prime Minister said he would keep interest rates at record lows or keep interest rates lower than they would ever be under Labor—blah, blah, blah. What people heard during the last election was that the Prime Minister gave his words that interest rates would stay low under a Liberal government. That is what people heard. It is like the cartoon—what people say; what dogs hear. The message that people got, loud and clear, is that the Prime Minister would keep interest rates low. Perhaps it was a non-core promise!

It is interesting that we have seen an enormous move since the note that was leaked from Shane Stone, saying that the government was mean and tricky. We have really revolutionised things! Textor says that the government is arrogant and out of touch, not mean and tricky. Things have really changed in the last few years!

I guess we should not be surprised by the broken promise on interest rates, because Janette Howard—someone who knows the Prime Minister pretty well!—said to the authors of a book about Mr Howard:

You talk about a whole lot of things when you’re trying to convince people to do things—

like vote for you in a federal election—

but you don’t go back and honour every single one of those unless you have made a firm commitment about it and John wasn’t into making firm commitments.

That was about the leadership but it really applies here, doesn’t it? Obviously, in the Prime Minister’s mind when he said he would keep interest rates low—when the Liberal Party advertising said that they would keep interest rates low and when the website, just today or yesterday, was still saying they would keep interest rates low—it was not a firm commitment, because the Prime Minister is not into firm commitments.

I do not know how the Prime Minister expects the Australian people to believe a single word he says in the next election campaign. People are always going to be looking for what the catch is here. If he says he is going to keep interest rates at historic lows, what does he really mean by that? Does he mean we are going to see five back-to-back interest rate rises after the election? Is that what he means by keeping interest rates at historic lows? Who knows? Why would the Liberal Party spend a single dollar on advertising when it means nothing? Why have a website if you cannot trust a single word that is on the website?

The Prime Minister has wonderfully selective amnesia! I have to take my hat off to him. He is so brazen in talking about 17 per cent interest rates under the last Labor government when he, as Treasurer, presided over 22 per cent interest rates. How can he possibly think that nobody is going to call him on that inconsistency?

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

The Treasurer did.

Tanya Plibersek (Sydney, Australian Labor Party, Shadow Minister for Human Services, Housing, Youth and Women) Share this | Link to this | Hansard source

Indeed, fortunately the Treasurer does not have selective amnesia. The trouble with the Treasurer is that he spilled his guts in one book. We would like to hear a bit more of it now. We would like to see him have the courage of his convictions in the chamber sometimes.

The reality is that people are paying more of their household income on interest repayments than they ever did under Labor. They are paying 9½ per cent of gross household income on their mortgage interest repayments. The highest level it ever reached under the Keating government was 6.1 per cent. Household debt has doubled as a share of income in the last 10 years; it has tripled since 1989, when interest rates hit 17 per cent. We are the only party which has been talking about housing affordability and solutions to it. (Time expired)

Andrew Southcott (Boothby, Liberal Party) Share this | Link to this | Hansard source

As usual from the Labor Party, we have only heard half the story. I suspect that the Labor Party is very much a glass-half-empty type of party, because there was another figure that came out from the Australian Bureau of Statistics today, and that was the unemployment rate for the last month. The unemployment rate for the last month was 4.3 per cent—the lowest unemployment rate, again, since November 1974. When we look at the last 35 years we see that it has taken us until now to get back to where we were before the excesses of the Whitlam Labor government. If anyone had suggested in the 1970s or the 1980s that you could have an unemployment rate of 4.3 per cent and an inflation rate of 2.1 per cent—if anyone had suggested you could have an economy running like that—they would have been laughed out of the place.

One of the features of the Australian economy in recent years has been the extraordinary flexibility that we now see. This has not been due to chance. It has not been, as some suggest, just due to a resources boom. It has not been, as Paul Keating suggested, all due to the changes he made in 1983 and 1984. It has come from a very disciplined approach to economic management. It has come from having budgets in surplus. It has come from taking steps to reform the financial system. It has come from taking a very tough decision to reform our tax system when we made the decision to go to a broad-based consumption tax and have lower income tax at the same time. It has come from having an independent Reserve Bank and giving it the target of keeping inflation between two and three per cent. All of these things together mean that the Australian economy now has a degree of flexibility that it did not have in the seventies and eighties. As members we should look at the Australian economy in toto. What you see today is an unemployment rate of 4.3 per cent and annual inflation of 2.1 per cent, at the lower end of the band, and we have a standard variable rate for mortgages of 8.3 per cent.

The Labor Party have delighted in talking about the overdraft interest rate for 1982. They neglect to say that that was not the housing rate then. The housing rate was capped—and Labor Party members should know that—until 1986. The record rate paid for mortgages is 17 per cent and that was under the Labor Party. When the Labor Party were last in government the Reserve Bank did not raise rates by a quarter of one per cent at a time; they raised them by one per cent on more than one occasion.

As for the MPI that we are debating today—the government’s failure to ensure low interest rates—let us look at what a government can do in this area. Firstly, we have an independent Reserve Bank. No-one is suggesting that the Reserve Bank should be directed on interest rates. Clearly, the Reserve Bank is independent and it has the goal of keeping inflation between two and three per cent. I do not need to remind people of the dangers of letting inflation get out of control. We saw it happen a couple of times in 1974 and 1981 with wage breakouts that led to enormous rises in inflation that, as a consequence, absolutely wrecked the Australian economy. As I said earlier, it has taken us over 30 years to repair the damage that was caused to the Australian economy in the Whitlam years.

There are a lot of problems with Labor’s approach to economic management, but I would like to highlight two of them, and these are the reasons why interest rates will always be higher under a Labor government. The first of these is the impact of labour market flexibility on monetary policy. A number of Reserve Bank governors have given testimony to the effect of having flexibility in the labour market. It makes the decision for monetary policy much easier. We had an inflexible labour market in 1981—and I think of 1981 particularly—and the enormous rises in wages that occurred that year did lead to a recession in the early 1980s. It is very clear that having more rigidity in the labour market has consequences for interest rates.

One of the things that we need to acknowledge is the elephant in the room. The elephant is the union movement and the union movement’s say in the Labor Party. This is why the Labor Party were never able to go as far down the track of introducing flexibility in the labour market as the economy needed. I acknowledge that when Labor were last in government they took a whole lot of decisions that helped the Australian economy—having a flexible exchange rate and allowing competition in the banking market, for example. But because the Labor Party is a wholly-owned subsidiary of the union movement, they are unable to introduce the reforms that the Australian economy requires.

The government has done that. As a consequence we have seen real wage rises of 20.8 per cent for workers since the Howard government was elected. Importantly, because the labour market is flexible, businesses have had the capacity to pay so we have not seen damage to the economy that we saw in the past.

To examine the second reason why interest rates will always be higher under Labor, we can look at the example of the state governments. How would Labor operate in government? At the federal level we have increased services in health and we have increased spending on education and child care. But we have done these things within our own resources. We do not run deficit budgets. In four of the jurisdictions around Australia we see Labor state governments increasing debt. It will be $70 billion over the next five years. Ian Macfarlane, the former Reserve Bank governor—and I know the former Leader of the Opposition got confused about which Ian Macfarlane it was—in the Weekend Australian of 12 August 2006 said:

I have been lucky—for most of my time, fiscal policy has consisted of small surpluses.

So the movement in the government account has not been big enough to be important in the consideration of monetary policy.

It might become an issue because the states are now part of the equation.

These are two of the principal reasons that Labor cannot handle money. This is not something new. Anyone who has followed Australian politics, and older voters, understand that the Labor Party cannot handle money. It is quite possible that there may be a change of government this year. Labor may win government. We now see that the Australian economy is running with an unemployment rate of 4.3 per cent, with inflation at 2.1 per cent and with a mortgage rate of 8.3 per cent, which is higher than it has been in recent years but is still lower than it was for any month of Labor’s 13 years in power. (Time expired)

Julie Owens (Parramatta, Australian Labor Party) Share this | Link to this | Hansard source

I know that, when I go back to my electorate tonight, I am going to start meeting people who are struggling with the ninth back-to-back interest rate rise—and the fifth since John Howard promised the people of my electorate to keep interest rates at record lows. The people in Kings Langley, Winston Hill and Toongabbie are right to feel betrayed, because households, families and individuals out there are hurting. In my electorate of Parramatta, the number of households paying more than one-third of their income in mortgage payments in 2001 was 2,214. Five years later, in 2006, it was four times higher, at 9,020 households. Over a third of households that rent are suffering rental stress. Of the detached houses sold in my region in 2006, only four per cent were judged affordable—down from 28 per cent just five years ago. And the situation is likely to have deteriorated further than that, as the figures that I am relying on were produced after the first six back-to-back interest rate rises and there have now been three more since then.

So what do we get from the government in response to all this? We do not see the work of government. We do not see them knuckling down to keep downward pressure on inflation. We do not see them investing in infrastructure or working to improve the skills crisis—both issues that impact on inflation and that have grown into massive problems through 11 years of neglect by this government. No, we do not see that. What we do see is them looking for a way to spin and spend their way out of electoral trouble, even though the Reserve Bank and reputable economists make it clear that spending like a drunken sailor, like we saw John Howard do in the 2004 election campaign—and he has already started again in the marginal seats around Australia—will put upward pressure on interest rates. But we know that it is not upward pressure on interest rates that interests the Prime Minister; it is upward pressure on his votes in marginal seats. We know this is true, not just because it is obvious from the patterns but also because the Treasurer told us in interviews given for the Prime Minister’s biography.

This is a government that is well and truly in denial, in a way that working families around the country cannot be. We have already seen that family pressure denial from the Prime Minister, with his statement, ‘Working families have never been better off,’ and we have already had, ‘It’s all the states’ fault.’ That has been recognised as drivel by economist after economist. And from the Treasurer, when talking about skills shortages and upward pressure on interest rates as a result, we heard: ‘It’s a good problem to have.’ Nothing that puts upward pressure on interest rates is a good problem to have. But the skills shortage is a good problem to solve. This government has had 11 years to solve it, and what do we get? We get: ‘It’s a good problem to have.’ I am looking forward to telling that to the people in my electorate tomorrow when I go doorknocking.

And what did we get today? We got: ‘Families are under incredible financial pressure because of our prosperity. It’s the price of our prosperity. We’re too prosperous,’ says the Prime Minister. I have been doorknocking in my electorate for three years now, and I am looking forward to explaining to people who are suffering incredible financial pressure, particularly those in Northmead—which has one of the highest insolvency rates in the country and the highest number of repossessions—that the problem is that they are too prosperous. This goes to show just how much John Howard has lost touch with ordinary Australians. I meet people in my electorate—and I met another one on Sunday—who have started to reach the conclusion that their children will not be better off than they are. After 15 years of unprecedented levels of growth, people are saying to me that they now believe that their children will not be better off than they are. That is how profound the concern out there is about the cost of living, the cost of education, the effect of Work Choices—which rips away any semblance of security—housing affordability and these latest increases in interest rates.

Today John Howard tried to get a little bit back in touch. I notice that he has been trying for a few days. Today he qualified his statements by saying that he knows that some families are not sharing in the prosperity. He needs to get a bit further in touch, because there are some suburbs in my electorate where the opposite is absolutely true. There are some families who are sharing in the prosperity, but the vast majority are not. There is no excuse for this government or any government—not even one that has so lost touch—to not notice the pain of families. This government is so filled with hubris and self-congratulation that it does not even notice the pain of families. We on the Labor side believe that every Australian deserves secure, affordable housing. We will work hard, if the Australian people give us the opportunity, to help Australians achieve their housing aspirations.

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

I often like to start speeches like this by quoting famous thinkers, and today I would like to quote one in particular. I would like to quote one of the leading lights of the Australian Labor Party, one of the intellectuals of the Australian Labor Party, one of the giants of the Australian Labor Party. They would gather around his feet and listen to his pearls of wisdom. But I see a couple of puzzled looks coming from the opposition as they frantically start to think, ‘Who could that possibly be?’ I talk of course about the former member for Werriwa, Mark Latham, who said, ‘Politics is show business for ugly people.’ I have to say that I think we are witnessing that here. Some might unkindly remark that about me—and I will cop that—but if there is an Oscar going for acting, it has to go to the Australian Labor Party in this debate this afternoon.

Members of the Australian Labor Party have, one after another, stood up with their most sombre faces on, decried the lot of Australians and said how, if they were in power, they would improve the lot of ordinary Australians and how outraged the Labor Party are that, under the Howard government, interest rates have increased. If you were to take them at their word, Mr Deputy Speaker, you might actually think that the Australian Labor Party genuinely believed that. If you were to take them at their word, you might actually believe that the Australian Labor Party are powerless to not have an impact on interest rates or housing affordability. But the very opposite is true. The Australian Labor Party are more able than the coalition government to rein in interest rates and to bring down housing costs so that they are more affordable. The question is: how could that possibly be done? How could the Labor Party do that? The answer is very straightforward, and members opposite do not need to take my word for it. I will quote two third parties. The first is the Residential Development Council, which have made it perfectly clear that the single biggest problem with housing affordability is state Labor governments and the outrageous taxes and fees that state Labor governments levy on first home buyers and home buyers across the board. That is the single largest problem, and if the Labor Party were genuine, if the Labor Party were serious, if the Leader of the Opposition Kevin Rudd really cared about housing affordability, the Leader of the Opposition would pick up the phone, call his state Labor mates and tell them to scrap or cut stamp duty and make more land available, because these are the absolute triggers that are causing the housing affordability crisis in this country. There is no blame game involved in this. They are the facts. They are not the facts because I as the member for Moncrieff say they are. The Residential Development Council says they are the facts.

I say to the Australian Labor Party: do not just stand up here and be hypocrites; do something about it. You have the power. Ring your state Labor mates and get them to fix this problem. At the moment the Howard government provides a $7,000 first home owner’s grant to first home buyers. It is not a lot of money, but it makes a big difference to the lives of ordinary Australians. What does the Australian Labor Party do? The Howard government provides a $7,000 grant to first home buyers to help get them into their first home and the Labor Party takes it straight off them as stamp duty. That is the Australian Labor Party. Look through the crocodile tears. It says, ‘Thank you very much, Prime Minister Howard; we will take that as tax at a state government level.’ Do something about it. The Australian Labor Party should get serious and cut stamp duty rates so that it is not ripping that $7,000 out of the hands of Australia’s first home buyers. The second issue is state Labor debt. The Australian Labor Party is borrowing $70 billion. We have paid off $96 billion. (Time expired)

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

Order! The time allotted for this discussion has concluded.