Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Housing and Urban Development) Share this | Link to this | Hansard source

My question without notice is to Senator Minchin, the Minister representing the Prime Minister. I again refer the minister to the growing community concern that young Australian families now find it harder than ever to buy their first home. Is the minister aware that yet another report was released yesterday highlighting the difficulties faced by young Australians trying to buy a house? Doesn’t that ABS Housing finance report show that the proportion of first home buyers in the market fell to a mere 16.1 per cent in August, the lowest level in 18 months and a full four percentage points below the long-run average? Haven’t the commentators from the ANZ, the Housing Industry Association and the Macquarie Bank been unanimous in blaming this on interest rate hikes in May and August? What is the minister’s explanation for why so many young couples and families are unable to buy their own homes under the Howard government?

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

We are getting rather bored with this line of questioning from Senator Carr. He keeps trying but is really making no impact whatsoever because the Australian people have a lot of common sense—and a long memory. They remember what interest rates were like under the Labor Party, the party that Senator Carr represents. The interest rates under Labor were horrendous. Young Australian families suffered immeasurably under the former Labor government.

One of the great things we have done in government is to bring inflation under control. The new Governor of the Reserve Bank made the point that in the 10 years we have been in office inflation has averaged between two and three per cent—unlike our predecessors, who completely lost control of the economy: inflation went through the roof, interest rates went through the roof, and people lost their homes, their businesses and their livelihoods. It is one of the great achievements of this government to have worked to give the Reserve Bank the independence that it must have in order to ensure that the great scourge of any economy—that is, inflation—is kept under control.

The way it keeps inflation under control is by having independent responsibility for setting interest rates. Interest rates, of course, are much lower under our government than they ever were under our predecessors, the Labor government. The reason mortgage payments may be higher is that Australians, in a situation where we have unprecedented prosperity—as we have seen, 4.8 per cent unemployment, high participation rates, the lowest unemployment for 30 years—have enormous confidence in the prosperity of this economy and their own financial positions. They are borrowing more because they have more confidence in their capacity to service those loans. They are buying bigger houses and they are taking out bigger loans. Interest rates are lower than they were under our predecessors and they have confidence about their jobs, so they are able to take on bigger mortgages. That means, by definition, their payments are higher than they otherwise would be but off the base of a much lower interest rate than was the case under our predecessors.

Of course many commentators have made the point that one of the big issues with house prices is land affordability. It so happens that it is state Labor governments that are responsible for land release policies in this country, so it is Labor governments in this country that are responsible for land release problems. The Urban Development Institute of Australia has noted that there has been a failure throughout Australian capital cities to adequately match land supply and demand and that a subsequent affordability crisis has prevailed. If Senator Carr cares about young Australian families wanting to buy a home, he should talk to the state Labor premiers and get them to do something about land affordability to enable young Australian families to have a chance to have a home.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Housing and Urban Development) Share this | Link to this | Hansard source

I ask a supplementary question, Mr President. Is the minister aware that, if the proportion of families who own their home was the same as it was in 1996, there would be another 70,000 young Australian families who would actually have their own home? Is he aware of the Reserve Bank governor’s comments yesterday which contained a strong suggestion that there would be another interest rate rise before the end of the end the year? What impact would this have on the capacity of young families and couples to become first homeowners?

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

What I am aware of is that mortgage interest rates at the moment are around 2.7 percentage points lower than when we came to office and inherited the train wreck that the Labor Party created with this economy. Those lower mortgage interest rates are saving households around $495 a month in interest payments. It was this government that introduced the First Home Owners Scheme in 2000 to assist first home buyers. Over 830,000 first home buyers have now taken part in the scheme. What Australians know is that, whatever the level of interest rates, they will always be lower under our government than they ever would be under Labor.