Yvette D'Ath (Petrie, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister outline some of the causes behind the cost of living pressures many Australian working families face at present and the government’s response?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

When we look at the challenges faced by working families right across the nation, these families are being impacted by developments in the global economy and in the national economy. Across the global economy, the rolling impact of the subprime crisis means that we have had an increase in the cost of credit arising from the increased cost of lending, particularly between financial institutions. The US Federal Reserve recently sought again to act on this matter in its decision the other night to reduce its rates by 75 basis points. The Fed having reduced its benchmark interest rate for the sixth time since August, rates have fallen from 5.25 per cent to 2.25 per cent in that time. This is of direct consequence to every family in the country. The sheer size of the American economy and the impact of American actions on global financial markets means that the wash-through effect in terms of the private credit markets and the cost of home mortgages is going to be felt across the world. That is why we have an active interest in this parliament—as has the government—in monitoring very closely all actions being taken by the United States regulatory authorities, their monetary authorities, in their response to the ongoing impact of the subprime crisis.

The inflation challenge that we face in this country compounds the difficulties which our own regulatory authorities face. For the benefit of the House, I repeat: when the government was elected, interest rates in this country were the second highest in the developed world, courtesy of the previous government; and, secondly, we had inflation running at a 16-year high. This compounds enormously the task of those charged with the responsibility of economic and public financial management in this country. High inflation complicates the task of economic policy, particularly at a time of global economic uncertainty. That is why it is important that we embark upon a responsible course of action to deal with these challenges, to ensure that we have a budget balance and a budget surplus—hence the target that we have announced—to ensure elsewhere on the demand side of the economy that we are boosting private savings and also to pick up the slack left by those who have preceded us by investing in the supply side of the economy when it comes to skills and infrastructure. Of course, where the rubber hits the road with these global economic developments and the uncertainty of global financial markets, as well as the domestic inflation challenge, we have this real problem on our hands—namely, housing affordability for working families. The Age newspaper today reveals that, for the first time since records began in the early 1980s, rental vacancy rates are at a new record low of 0.9 per cent in Melbourne.

Opposition Members:

Opposition members interjecting—

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I notice those opposite find this very amusing. Those around the country who are experiencing an enormous shortage of affordable rental accommodation at the moment are not finding it amusing at all. It is very tough out there. In our caucus room the other day we dealt with a frightening number of stories of many people participating in auctions to obtain access to rental premises. The impact on working families’ disposable income is huge. The most recent data, published in the Age today, adds to that.

As members, at least on this side of the House, are aware, this problem is not confined to Melbourne; it is right across the country. The Real Estate Institute of Australia reports that rental vacancy rates have now slipped below three per cent in every capital in the country. So it is no wonder that average rents for three-bedroom homes have risen by 82 per cent since 1996. Housing affordability, in all its categories, including rental accommodation, has fallen through the floor over the last decade.

If you look at the ratio between household income and the cost of purchasing a new home on the one hand, and the relationship between household income and the cost of rents on the other hand, you will understand why working families are under so much financial pressure. The Real Estate Institute of Victoria states what is required by way of action. I quote from the CEO of the REIV, Enzo Raimondo, who said about today’s alarming figures:

… it increases the urgency for governments to take action to increase public and private investment in rental stock.

That is precisely the course of action which this government has embarked upon. Rather than ignoring the housing problem, rather than not having a minister for housing, rather than not having a department of housing—which was the case on the part of those who preceded us—and rather than not having a housing policy at all, part of our $1.6 billion-plus programs on housing goes right to creating, over time, 100,000 affordable rental properties, charging, we hope, some 20 per cent below market rents by encouraging private sector investment in this field.

There is an acute shortage of affordable rental stock across the country. We have policy lined up to act in this area. Those opposite were inert on this issue. I say to those opposite: it is important that we see for the first time, as we break for the prebudget recess, one positive policy from the opposition on what to do with the housing affordability crisis which their inaction on inflation and interest rates has left for working Australian families.