Tuesday, 7 November 2006
Questions without Notice
Economy: Household and Personal Debt
My question is directed to Senator Minchin, the Minister representing the Treasurer. Is the minister aware of the Prime Minister’s comments that the household savings ratio is a good indicator of ‘the money that people have got left over after they’ve put bread and food on the table’? Is the minister also aware that the household savings ratio deteriorated to negative 3.3 per cent in the June quarter? Doesn’t this mean that households have now been spending more than they earn for the last four years just to put food on the table? Given this unprecedented period of negative savings, how does the minister expect families to afford yet another increase in mortgage repayments—something that the Prime Minister has already given the green light to?
The senator raises the question of Australia’s household debt and the views of the Reserve Bank. I am happy to point out to the Senate that the Reserve Bank has recently noted:
... even though household debt has increased, the net financial position of households has improved noticeably ...
... households’ financial assets have increased by substantially more than their debt ...
Growth in household debt is not surprising when you have a strong economy. Interest rates are at relatively low levels and the unemployment rate is at a 30-year low. The fact is that household balance sheets—which is what you have to look at; it is all very well for the ALP to look at one side of the ledger in their narrow way, but you always have to look at both sides of the ledger—have benefited from very strong asset growth. For every dollar of debt, households have over $6 in total assets and almost $2 in financial assets. Under our government, the nominal net worth of households has increased by around 11 per cent a year, compared with growth of around seven per cent a year over the last seven years of the previous government. The latest ABS data indicate that household net nominal wealth is now $5,217 billion, which is almost three times the level of the $1,747 billion it was when the government first took office. Inevitably, the opposition, with its narrow focus and partisan attitude, will only ever focus on one side of the balance sheet. Any sensible debate on the state of Australian households must take account of household balance sheets. The Reserve Bank has made the position abundantly clear that household balance sheets are in extremely good shape.
Mr President, I ask a supplementary question. Doesn’t the fact that savings are now a negative 3.3 per cent mean that families are running down the savings that they do have or are using credit just to put food on the table? If families do not have any savings, how does the minister suggest they pay for their Christmas holidays? Won’t Christmas holidays be impossible for many families as they struggle under the weight of a $146 monthly increase in mortgage payments—and since their Prime Minister told them that interest rates would not go up under his government?