Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answers given by the Minister for Finance and Administration (Senator Minchin) and the Minister for Communications, Information Technology and the Arts (Senator Coonan) to questions without notice asked by Senator Sherry today relating to interest rates and to the property development company, Westpoint.

On the matter of interest rates, which a couple of my colleagues will be dealing with in greater detail, last week we had the second rise in interest rates since the re-election of the Howard government. These rises were despite the promise given by the Liberal government at the last election that interest rates would not go up.

Alan Ferguson (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Ferguson interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Senator Ferguson is interjecting very arrogantly. He remembers very well the promise the Liberal government gave at the last election that interest rates would not go up. What have we had? We have had two interest rate movements since the election. The average Australian family with an average mortgage of some $226,000 will be paying an extra $73 a month as a consequence of yet another broken promise by the Liberal government at the last election that interest rates would not go up. As I said, my colleagues will touch on some other aspects of this.

I want to come to the issue of the Westpoint financial scandal. I have asked in the Senate about other aspects of this matter. The scandal involves thousands of Australian retirees or people near retirement who have lost up to $400 million of their superannuation retirement savings in a financial scam known as Westpoint and its related entities—it was constructed of a number of what are called mezzanine property companies.

The issue I asked particularly about today relates to the revelations on the ABC Four Corners program last night. On that program—and congratulations to them for their investigative journalism—we learnt in much greater detail about two new aspects of what is one of the largest superannuation financial scandals this country has seen in the last 10 to 20 years, as far as I can recall. At the heart of this are the thousands of Australians who have struggled to save for their retirement through superannuation who have been blatantly defrauded by this Westpoint entity and the activities around it.

There are numerous aspects relating to the actions and activities of Westpoint that this government should give answers to, but I want to focus on the issue that was raised on Four Corners last night. One of the operators involved in this financial scam, Mr Richard Beck, earned some $9.2 million in commissions by enticing elderly Australians into the Westpoint investment entities. On top of that we further learned that the receiver of the Westpoint entities, Mr Mark Korda, has identified a number of financial planners, who were also involved in recommending the Westpoint entities for Australians’ superannuation retirement savings, who have collected more than $50 million in commissions from those investment vehicles.

This goes to the heart of one of the problems with at least some aspects of our superannuation industry in Australia, and that is the issue of commission based selling. We have heard evidence from Mr Lucy and ASIC—I have asked Mr Lucy and ASIC what was going on with respect to Westpoint at at least two previous hearings. What was going on was that commissions of up to 12 per cent of the moneys paid into the Westpoint entities were being charged by planners. There is an obvious conflict of interest when there are enormous commissions by any industry standard being received by the planners involved, in this case, Mr Beck. They are certainly the largest commissions— (Time expired)

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

Two issues have been raised by Senator Sherry this afternoon following on from question time. The first of those is mortgage interest rates. He began his remarks by completely misrepresenting the position of the government at the last election when he claimed that the government had said that interest rates would not rise under this government. That is absolutely false. What the government did claim—and claimed quite justifiably—was that interest rates would be higher under a Labor government than they would ever be under a Liberal-National Party government. That is evident from the history of interest rates in this country.

Under the last Labor government, we saw mortgage interest rates rise to 17 per cent and borrowings for business purposes at times at 24 per cent. During Labor’s entire 13 years in office, home loan interest rates averaged 12.75 per cent. When we came to power in 1996, they were still high at 10.5 per cent. In contrast, home loan interest rates today, even with the recent quarter per cent rise, are at 7.55 per cent—a dramatic and substantial improvement on that dreadful record of Labor’s economic management which led to those enormous interest rates that people experienced between 1984 and 1996.

In fact, if home loan interest rates were now at the average level that they were at under that Labor government, home owners with an average new home loan would be paying $215 a week more than they currently pay. One of the reasons interest rates were higher under Labor—apart from general economic mismanagement—was that they left the federal budget some $10 billion in deficit and they left an accumulated federal government debt of $96 billion. The government was in the market borrowing money to pay that $96 billion of accumulated debt. Of course, inevitably, that puts upward pressure on interest rates because they are in the market competing with home buyers and businesses that want to borrow money to sustain their activities as well. In that way, that puts a competitive upward pressure on interest rates.

Over the last 10 years, as of April of this year, that $96 billion has been eliminated by the Howard government as a result of 10 years of hard work and effective financial management. The Reserve Bank said that the reasons for the decision to lift the official rate by a quarter of a per cent were primarily international factors relating to the outlook for growth internationally and were not domestic inflation, which is well under control and within their two to three per cent band. They also said that, with a surplus between a half and 1½ per cent of GDP, there is no upward pressure on interest rates flowing from the government’s fiscal settings. So, as I said, the rise in interest rates to the extent it has occurred is due to international factors. The present government’s position with regard to interest rates and their record with interest rates is far superior to that of the previous Labor government.

Let me turn now to the issue, which Senator Sherry also raised, of Westpoint and the disastrous situation there as far as investors are concerned. Senator Sherry has sought to use this to attack commission based selling of financial products. That is not the issue here at all. What is the issue, of course, is the ethics and honesty of the particular people involved with the Westpoint company and marketing their financial products.

We have legislation in place, which ASIC is applying, that will bring those people to book, but to use this particular issue to attack commission based selling when it is conducted by ethical and honest people is simply to use a particular case to further Labor hostility in general, and Senator Sherry’s hostility in particular, towards commission based selling, which is a legitimate activity when people do it on an ethical and honest basis.

In relation to Westpoint, as I said, ASIC has taken action against the perpetrators of the scheme which has cost people so much in lost investments. They are helping people to deal with Westpoint on a number of fronts and they are also working to bring charges against those who have been responsible for the financial losses suffered by investors. As long ago as 2003, ASIC started working in relation to this issue of Westpoint. (Time expired)

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I also seek to take note of the answer given by Senator Minchin on the issue of interest rates. Before dealing with some more general comments, I want to take a couple of moments to respond to something that Senator Chapman raised in his contribution and nail the lie once and for all that the interest rates on mortgages in this country were 10½ per cent when this government came to power. It is true that in 1996 the mortgage rates offered by the banks in this country were 10½ per cent, but Senator Chapman should know that in fact the banking sector mortgage rates had been deregulated under the Keating Labor government and that the mortgage rates from non-bank lenders were averaging around seven to 7½ per cent—and they have not moved much over the past 10 years. The deregulation of the mortgage sector, and in particular the opening up to non-bank lenders in the nineties, actually put pressure on the banks to reduce their interest rates to match what was available in the market. So let us nail the lie once and for all that somehow or other interest rates were 10½ per cent in 1996. That was certainly what the banks were charging, but that was not what was available in the rest of the marketplace.

I want to deal with the question of interest rates much more generally. I make the point to those listening that on 29 August 2004 the Prime Minister asked Australian families, ‘Who do you trust to keep interest rates low?’ The reality is that interest rates have just risen for the sixth time since 2001 under this government. So it is pretty clear that families should not trust this Prime Minister, because he has not been able to meet the commitment that he made in August 2004. It was during the last election campaign that the Liberal Party claimed that they would keep interest rates at record lows. In fact, interest rates have risen twice since that promise was made. They have risen twice since August 2004. The average cost of a mortgage for Australian home owners is something like $879 a year more than they were paying at that point in time. And I have to disagree with my colleague Senator Sherry, who says that it is $73 a month—it is a little bit more than that, because that works out to only $876 a year. There is a $3 difference. It is actually more than $73 a month.

Two weeks ago, the Treasurer was crowing that it was a debt-free day. However, what the Treasurer failed to mention when he was making that statement was that families in this country are more sensitive to interest rate rises than at any other time in our history. Families are more in debt than they have ever been. Ordinary household debt in this country has exploded under this government. People are borrowing to survive. They are not borrowing to buy assets, as is commonly argued by those on the other side, but borrowing to survive and living on their credit cards. That is what has happened to average families in this country and they are in more debt than they have ever been. And of course they are particularly sensitive to any interest rate rises under that set of circumstances, because they are spending more of their income to service the debt that they are accumulating day in and day out.

Let us also look at the question of the country. The country is in massive debt: $473 billion. We owe the rest of the world more than 50 per cent of our annual GDP. What did Prime Minister John Howard say in 1995 when he launched the Liberal debt truck? He said:

If it weren’t for the level of foreign debt, interest rates in this country would be much lower and every Australian today who owes money on his or her home is paying a higher interest rate than would otherwise be the case because of the size of our foreign debt.

He also said:

I can promise you that we will follow policies which will, over a period of time, bring down the foreign debt.

That is another promise that was broken. Perhaps the promise that was made back in 1996 was a non-core promise, because we know that foreign debt has exploded since that point in time. (Time expired)

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

What we are witnessing today is a very brave Australian Labor Party—so brave that they are prepared to talk about interest rates 18 months out from an election. Did we hear the Australian Labor Party talking about interest rates during the last election campaign? No. The reason was that they know that the Australian public does not trust them with the economy. They know that the Australian public does not trust them with interest rates. They did not talk about interest rates in the teeth of a federal election because they knew that they would have been smashed at the polls. As it was, they were smashed at the polls even without talking about interest rates. We know that the Labor Party is gutless and scared about the subject of interest rates because Paul Keating told us that last night on the 7.30 Report. He said:

… why didn’t we take him on on interest rates?

He was referring to the Prime Minister. He continued:

Because we were too stupid. That’s why. Too gutless.

Kerry O’Brien asked:

Who was too stupid?

Keating said:

I think Latham should have taken him on …

Senators opposite might be gutless, but they are not completely crazy. They knew what talking about interest rates in an election campaign would have done: it would have driven their vote down even further. I was hoping that we would hear a bit about the orange-bellied parrot in taking note of answers today, but I think Paul Keating belled the cat by talking about the yellow bellies opposite when it comes to the economy.

When I think of Labor and the economy, the words of the Treasurer come to mind: ‘Hypocrisy, thy name is Labor.’ When Labor get on their feet and talk about the economy, it is always hypocrisy. Labor are in favour of bigger budget surpluses, lower tax, lower debt, higher surpluses, balanced budgets, more money for schools, more money for hospitals and lower interest rates. They are against every single measure that will create an environment in which those things can happen. We know that Labor in government left a budget deficit of $96 billion. Now, high budget deficits put pressure on interest rates. Labor say that they are in favour of lower interest rates, but they have opposed every single measure that this government introduced to reduce the deficit. They have opposed every single measure that this government introduced to pay down the debt.

Can Labor senators opposite name one single savings measure that they have supported in this parliament? I hear silence from the other side, because Labor opposed every single measure designed to bring this budget into balance, every single measure designed to pay down the debt. So when Labor talk about interest rates it is nothing short of hypocrisy. The home mortgage rate, as we know, is 7.55 per cent now. When we came to power, it was 10½ per cent.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It was not 10½ per cent!

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

The home loan interest rate, under Labor, averaged 12.75 per cent.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It was not 10½ per cent and you know it wasn’t.

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

Senator George Campbell!

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

If the average rate that applied under Labor had operated since we have been in government, for an average new home loan now the average Australian would pay $215 a week more than they currently pay.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Why don’t you come clean and admit it?

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

Senator George Campbell, you have had your go. Senator Fifield is entitled to be heard in silence.

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

In this debate, the Prime Minister and the government have been comprehensively misrepresented. This government never said during the election campaign that interest rates would not change under a coalition government. What the government said was that interest rates would be higher under a Labor government. Interest rates will always be higher under a Labor government than they will under a coalition government because senators opposite are not prepared to take the steps required to support an environment conducive to low interest rates.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

That is not true.

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

If they were, they would have supported savings measures in the budget.

George Campbell (NSW, Australian Labor Party) Share this | Link to this | Hansard source

That is not true.

Joe Ludwig (Queensland, Australian Labor Party, Manager of Opposition Business in the Senate) Share this | Link to this | Hansard source

You should read the RBA statement; that’s what you should do.

John Hogg (Queensland, Deputy-President) Share this | Link to this | Hansard source

Senator Ludwig and Senator Campbell!

Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

If they were, they would have supported the paying down of debt. I again give Labor senators opposite the chance to state which particular savings measures they have supported to bring the budget into balance. Silence again. I am not surprised. We have heard more cant and hypocrisy from the other side of this chamber in relation to the issue of Westpoint. This government cannot and will not ever state that a particular investment is one which is safe and secure. On this side of the chamber, we will never do what the Labor Party did in the case of the Pyramid Building Society— (Time expired)

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to take note of answers given by Senator Minchin to questions without notice today relating to interest rates. And weren’t those answers a stellar example of just how out of touch this government has become with ordinary Australians? Does Senator Minchin really think that his answers are going to make Australians who are facing an increase of up to $70 a month extra to pay off their mortgage—or those Australians who are going to have to pay $70 a month extra in rent because their landlord is going to pass on last week’s interest rate increase to them—feel better? That is the second interest rate increase since this government was re-elected in 2004 and, as Senator George Campbell pointed out, the sixth interest rate increase since 2001.

Are Senator Minchin’s answers going to provide any succour to young people, who will see their dreams of buying a home disappear because of this latest interest rate increase on the government’s watch? Not only will those young people find it harder to save for a deposit for a house but they will be forced to compete for rental properties in a housing market that is already completely stretched. And, of course, when the rental market is stretched even further because of this latest interest rate increase, we know which Australians are going to be in the worst possible position: those on the lowest income, especially those single parents in receipt of benefits—the ones whose income and benefits will be reduced by up to $100 a week when the so-called Welfare to Work legislation introduced by this government takes effect shortly. They are the same low-income families who are already paying over 30 per cent of their income in rent.

Just how out of touch is this government? I think that was highlighted today by reports in the media of the Treasurer telling Australians that it would be good if they could save some of the money from the miserly and long-overdue tax cuts that he is apparently going to give them tonight. How patronising is that, telling people to save their money for a rainy day, as the Treasurer has done? With Australians signing up for credit cards in record numbers and average household debt per Australian family at $60,000, the Treasurer is telling Australians it is a good idea to try to save some money. With credit card debt increasing at the rate of nearly 21 per cent a year for the past five years, the Treasurer helpfully tells us to save some money! With Australian families currently spending 2.3 per cent more than is coming into the average household each week in income, the Treasurer tells those families it would be good if they tried to save some money. What piece of paternalism are we going to hear next from this government? Perhaps we will get the Treasurer’s recipes for using cheaper cuts of meat so that the family food budget is extended a bit further!

What advice are the government and the Treasurer going to give Australia’s young people who are hoping to buy a home to participate fully in society by becoming home owners but who are saddled with HECS debts when they leave university—HECS debts which are up to $8,000 a year per year of study? What advice is the Treasurer going to give to those 300,000 Australians who want to improve their opportunities for better paid jobs by gaining better skills and qualifications but have been turned away by our TAFE colleges? What is the Treasurer going to say to those people?

Isn’t it about time that the government stopped giving out this paternalistic advice about how people should manage their finances and instead started doing something to give Australians real opportunities to earn a higher level of income and started doing something about improving the ability of people to skill up and to train so that they can take on better jobs and so we do not have to import skilled labour from overseas to do those jobs of Australians?

Not only have we seen this government preside over two interest rate increases since 2004 under the very watchful eye, apparently, of Senator Minchin, the Prime Minister and the Treasurer, we have also seen petrol prices go through the roof. Today at a petrol station in Coober Pedy in regional South Australia, unleaded petrol is 143.5c per litre and diesel petrol is 152c per litre. With the government intending to increase the cost of fuel for regional Australians by another three cents per litre after June, the pain for Australian families in regional areas is just going to get worse. And of course, as we know, this government has absolutely no plan for dealing with how we are going to provide affordable energy for this country into the future.

How out of touch is this government? I do not know. I do not know who Senator Minchin talks to when he frames his answers. Maybe he talks to those people who are going to share a table at dinner tonight with the Deputy Prime Minister at a cost of, I think, $1,400 per head. I do not think ordinary Australians have that kind of money. Maybe that has escaped the government’s attention—or maybe they just do not care.

During the last election campaign, the government banged on endlessly about what great economic managers they were, but let us remember that, since the government have been in office—10 long years—average mortgage repayments for Australian families have gone from $700 a month to $1,100 a month and petrol prices have gone from 70c a litre to double that. Petrol prices are now 19 per cent higher than they were at this time last year. In just the last two years of this government, according to ABS statistics, the cost of petrol has risen 31 per cent, the cost of child care has risen 25.4 per cent, the cost of hospital and medical services has risen 11.4 per cent and the cost of pharmaceuticals has risen 8.2 per cent. It might have escaped me, but I have not seen wages and welfare benefits increase that much. (Time expired)

Question agreed to.