Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

We are determined to ensure that under us interest rates are lower than they would ever be under a Labor government. The Labor Party pretend to have exactly the same approach to monetary and fiscal policies as us, but there is one big difference: they would take us back to the pre-Keating era in industrial relations—the most extraordinarily backward step in the economic reform of this country we have ever seen, which every economist worth their salt has said will significantly increase inflation in this country and therefore increase interest rates. That is what will damage the people to whom the senator refers.

It is the ordinary working families of this country who will be damaged by the Labor Party’s approach to industrial relations because that will have a direct impact on inflation and therefore interest rates. Of course the government has sympathy for those Australians on low incomes who are having difficulty servicing their mortgages. Of course those Australian families do not like to see interest rates go up. But those Australian families have much worse to fear from a breakout of inflation—as has occurred under previous Labor governments and as is threatened by the debt binge that the state Labor governments are now embarking on.

And, while expressing that concern, we should keep this whole issue of housing debt in perspective. It is a fact that the Reserve Bank’s Financial Stability Review, conducted recently, does illustrate a few things about housing debt and housing finance that should be remembered. Household debt, according to the RBA, is concentrated among higher income households. Those in the top 30 per cent of the income distribution hold no less than 60 per cent of the debt. Those in the bottom 40 per cent of income distribution hold just 10 per cent of the household debt. In fact, the median debt-servicing ratio for low-income households fell between 2002 and 2005.

It is also a fact, according to the Reserve Bank, that many households are ahead on their mortgage repayments. Just over 50 per cent of indebted households are ahead in their mortgage repayments. It is also a fact, according to the Reserve Bank, that property gearing ratios have fallen. The ratio of household debt to housing assets fell between 2002 and 2005. It is also a fact, according to the Reserve Bank, that the increase in overall household debt over the past decade is attributable to an increase in the number of people with an owner-occupier mortgage. That is particularly noticeable in the number of people with an owner-occupier mortgage in the 55 to 64 age group. Of course, they are the people who are making a deliberate choice to dip into the asset base they have in their home to take out loans.

I would also draw your attention to the issue of household arrears, which the Labor Party likes to talk about. In March this year, the Reserve Bank noted:

The various measures of loan arrears also suggest that the household sector is coping reasonably well with the higher levels of debt and interest servicing.

The ratio of non-performing to total housing loans with Australian banks is 0.38 per cent. The RBA notes that this remains lower than at any time in the 1990s and low by international standards.

Do not let it be said that the government does not have sympathy for those on low incomes struggling with mortgages. We do have sympathy for those people. Our concern is to ensure that we maximise their job opportunities. Today we saw unemployment staying at a record low of 4.3 per cent; thousands of new jobs have been created. That is our response. We will go on with the task of creating jobs, keeping inflation low and keeping this economy strong.