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) to questions without notice asked today.

Over the last week, and before that of course, the Labor opposition has been focusing on the recent increase in interest rates. Last week we saw the fifth increase in interest rates since the last election. Today, yet again—although I was not here last week—I thought we saw from Senator Minchin, in the responses he gave, an example of how, after 11 years in government, this government and particularly the Prime Minister, Mr Howard, are so stale and out of touch with the Australian people. Frankly, ‘dribble’ would be the best description of the response coming from Senator Minchin’s lips in terms of argument to justify the five increases in interest rates that we have seen since the promise made by Senator Minchin and the Liberal government at the last election that they would keep interest rates at record lows. It is a quote from Liberal Party advertising at the last election that they would keep interest rates at ‘record lows’.

Senator Minchin made the amazing claim today that upward pressure on interest rates would occur as a result of Labor policy to abolish Work Choices. I would point out that since Work Choices was introduced there have been four increases in interest rates; four of the last five increases in interest rates have occurred since Work Choices was introduced. So if correlation were causation then it is Work Choices itself, the government’s very own legislative agenda and radical and unfair industrial relations changes, that have increased interest rates. We have seen four of those interest rate increases since Work Choices was introduced.

The question I pose today to Senator Minchin relates to this morning’s statement by the Reserve Bank. I think Australians cannot but be concerned about the observations made by the Reserve Bank, which expressed serious concern about inflation. It stated this morning that inflation appears likely to be somewhat higher than earlier expected. If inflation trends are going up—and they are—this very definitely places upward pressure on interest rates, despite the commitment by the Prime Minister, Mr Howard, at the last election, through the advertising that was conducted by the Liberal government, that it would keep interest rates at record lows. Of course we do not have interest rates at record lows any more. It is a matter of fact that interest rates are not at record lows. When we look at the cost of purchasing a house in dollar terms today we find that families need to earn seven times the average yearly wage to purchase a house. Ten years ago, or in 1996, it required four times the average yearly wage to purchase a house. Since the last election we have seen five interest rate increases, despite the commitment by the Prime Minister and the Liberal government that they would keep interest rates at record lows.

We had another interesting reference this morning by the Prime Minister to the Liberal Party advertising that it would keep interest rates at record lows. On the radio this morning Mr Howard finally admitted that Liberal Party advertising at the last election had included that commitment of keeping interest rates at record lows. Until now the Prime Minister has claimed that what he said was different from Liberal Party advertising. He has tried to make out that the Liberal Party advertising campaign at the last election—even though it said ‘keeping interest rates at record lows’—was not Mr Howard’s commitment and that somehow they were different. That is an absurd argument. He finally fessed up this morning when he acknowledged that the TV ad did make the promise that interest rates would be kept at record lows. Rather astoundingly he went on and said, ‘Look, that did appear in an ad, which I understand disappeared after the first week.’ I have got news for the Prime Minister: that ad is still on the Liberal Party website. (Time expired)

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

It seems that, as we get closer to this election, the sloganeering from those opposite becomes shriller and the arguments that they use become less and less connected with the facts. The fact is that Australian home ownership is still very much within the sights and capacity of Australian families. Despite the increase in the cost of housing, other things such as increased take-home pay and the increasingly effective social safety net have retained the capacity of Australians to afford home ownership.

We need to look beyond the sloganeering to see what is actually being done by the Labor Party to people’s confidence in their capacity to purchase their own home. Australians retain an interest in purchasing a home and they retain great confidence in their ability to do so. That is why Australians are prepared to put so much more of their household disposable income each month into their mortgage repayments. They have confidence in the economy of Australia to be able to sustain the jobs that they are in and the spending power that they have to go out there and purchase a home.

The Labor Party purports to be the great saviours of Australians when it comes to home ownership. They have picked up with their polling that people are concerned about the cost of housing and of other things and so they start to parrot the lines that there is some kind of problem and that somehow these things are slipping out of people’s reach. The question needs to be asked: what would the Australian Labor Party do to keep interest rates low? Let us put aside the evidence of what actually happened when Labor was last in office. We know what happened when they were in office. We know how hard it was for Australians to afford homes when interest rates hit 17 per cent. Let us assume that they have repented of that policy somehow—

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

That’s a tall order!

Gary Humphries (ACT, Liberal Party) Share this | Link to this | Hansard source

It is a tall order to believe that, Senator Parry notes, but let us assume that they have changed their policy. What do they believe today? We do not know much about what Labor believes when it comes to economic management or budgeting. We had the Leader of the Opposition and the shadow Treasurer telling us last week that there was not a sliver of sunlight between their budgeting policies and ours these days, that our policies are so close together, that they are complete fiscal conservatives and that you do not have to worry about any change of government as a result of that.

Again, let us put aside the evidence that, as we put in place all of the policies over the last 11 years to get to the stage where we have such a strong economy, such high employment and such low unemployment, and such relatively low interest rates, the Labor Party opposed all of those measures. They absolutely and utterly fought against every one of the measures we put in place to create the economic circumstances where Australians have confidence in their future. Let us put all of that aside and ask ourselves: what is it exactly that they would do?

We do not know what the Labor Party would do. We do not know what differences there would be in their policies. We do know that while this government has been pursuing these policies and lowering taxes at the same time state Labor governments have been doing something quite different. State Labor governments have been increasing taxes and charges on Australian families, increasing things like household rates and other pressures on Australian families. They have increased the cost of transport and they have increased all sorts of burdens that families have to meet. To a large extent it is true to say that, as the federal government has been taking that burden off Australian families with reduced taxation, state governments including local government have been putting that burden back on. So if there is pressure on Australian families we need to ask ourselves: where exactly is that coming from? I think we need to look very carefully at what contribution state governments have been making to the pressures on Australian families.

We know from evidence produced only in the last couple of days that Australians are not convinced that the Labor Party has the answers when it comes to interest rates. I note from the polling that was published only today that 31 per cent of Australians believe that there would be higher interest rates under a Labor government. I think that shows great perspicacity on their part to determine what kind of policy the Labor Party would produce. Even though they have not put any details of that policy on the table, why did Australians think that? The evidence is what Labor did only 11 short years ago. That is the indication of what would happen under Labor. That is why they cannot be believed on this question of producing lower interest rates. (Time expired)

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak to the motion to take note of answers to questions by Senator Minchin relating to housing affordability. At the outset I make the observation that falling housing affordability has become one of Australia’s most pressing economic and, in due course, social problems. For most of the last 40 years access to reasonably priced housing has been taken for granted. The demand and supply sides of the equation were often, and continued to be, in balance. Those who wanted homes could generally purchase them at the appropriate price within their particular wage bracket.

Of course there were always those for whom home ownership was going to be difficult. But for those renting and saving to buy a house the equation in the last few years has changed quite dramatically. As Labor’s summit revealed here in Canberra, the principal problem is failure on the supply side. There are simply not enough houses being built in the lower price range for first buyers or for rental supply. The question is what to do by way of public intervention.

The government’s attitude has been to reduce supply by cutting funding for public housing. They have cut billions of dollars of funding during their term of government over the last 11 or 12 years. Their alternative proposition is to support the demand side. They do that through rental assistance and other forms of low-level financial support, hoping that in time the market will respond. But, of course, as we know by the extent of the crisis right around Australia, the market has not done so as yet and does not yet give any indication that it will do so.

Consistent with this new blame game, apparently it is the fault of the states for not releasing enough land but, as we really know, it is much more than that. It is also about the cost of developing that land, fully serviced. More to the point, that developed land is paid for in full and not repaid through rates into the future. The downside of user pays can have long-term unfortunate consequences and they are now being visited upon us within this housing market debate.

Labor’s position is that, given the failure of the market, it is clear the government must intervene. Labor, if elected, will add to its earlier offer to local government in encouraging cheaper land provision. Labor will also provide support to investors and superannuation funds to encourage them to invest in low-cost housing. Investments, of course—and sensibly so—are governed only by guaranteed rates of return. So the assistance provided by a future Labor government is intended to offset the lower rate of rent charged to the renter. We believe that will need to be discounted by some 20 per cent, and we say at the outset that this is quite a radical and innovative model. It recognises that low-cost housing rental to lower income people is not naturally an attractive investment. It provides an incentive for the leverage of private sector funding that can provide far greater relief than the historic public housing model. It is estimated that this initiative will provide an extra 20,000 houses per year. When made available to those most in need, it will make a serious contribution to housing need and to housing affordability. We look forward to the government’s response in due course.

This problem, though, is just another symptom of the Howard government being asleep at the wheel. It is another sign of failure to invest in infrastructure, and there is none as important as housing for thousands and thousands of Australian parents and families who, because of current government policy, are currently unable to get into the home purchase market. In that sense, there is nothing more important than housing for the long-term welfare of Australian families and nothing more important for the long-term social cohesion of this country than proper access to adequate finance for housing for Australian families. (Time expired)

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

When I was growing up, most of my school years were spent during the life of the Hawke and Keating governments,  when we had ‘the recession we had to have’, when my fellow students at Gawler High School and young people like me everywhere wondered whether they would get a job because unemployment was so high, and we wondered whether we would be able to afford a house one day, because interest rates were so high. I am pleased to stand here today to say that, after 11 years of good economic management by the Howard government, people such as me, who went through the school system during the Hawke-Keating years, have now seen that sound economic management means that you can get a job and you can buy a house. There is, of course, one key important factor in home ownership—the most important factor—and that is having the income stream with which to buy a house. That is, having a job is the most critical factor when it comes to home ownership.

Last week we saw the release of new employment statistics saying that some 10,483,700 Australians have a job. That is more than at any time in Australia’s history, I am pleased to say. Of those jobs, 2.1 million have been created since 1996, with 1.2 million of them being full time. Indeed, more than 387,000 of those jobs have been created since the workplace relations reforms were introduced in 2005. So the first critical factor for young Australians—for any Australian—to be able to buy a house is a job, and the Howard government has provided jobs in spades. It is unquestionably our greatest single economic achievement. We have not only provided those jobs but we have done so with rising real wages. There are more people in more jobs with more money with which to buy their homes, a key and critical factor.

There is a second factor, though, which plays into this, and that is the question of availability. People can have the jobs and have the income but they need to find a place to buy. Unfortunately, this is where our state and territory counterparts have grossly mismanaged the housing market. They have failed to release appropriate land stocks, they have failed to ensure that the homes are being built in areas where people can afford to buy them and they have failed to provide adequate transport and ensure low-cost transport into new areas of development. They have failed to provide the supply side that is required to make sure that housing remains as affordable as it should be. So with the first factor we have a story where critically on the jobs front the Howard Liberal government has delivered over the past 11 years. With the second factor we have a sad and sorry tale of state and territory Labor governments failing to deliver for Australians.

There is a third factor, though, and that is financing. Alongside with having a job, there must be affordable financing. I am very pleased to say that the financing of home ownership is far more accessible again today than it was when people of my age, people who are today buying their homes for the first time, were considering doing so way back in their schooling years. Financing is far more available and far more affordable, standard variable home loan rates having fallen from 10.5 per cent when the Howard government was elected in 1996 to an average of 8.3 per cent today. Would we like them to be lower? Do we wish recent rises had not occurred? Absolutely. But are we proud of the fact that they are lower today than they were when we were elected? You bet. Are we proud of the fact that they are lower today than at any time when the Labor Party was last in government? We are very proud of that, because along with record jobs, that is the factor that is allowing Australians to borrow and get into homeownership.

In fact they are some four per cent lower today than they were on average under Labor’s reign. We have a very good story to tell, and yet we have the hypocrisy from the other side who are advancing policies in workplace relations reforms, whose history on government debt would only drive interest rates higher. Econtech have found that interest rates would be some 1.4 per cent higher under a Labor government, because their unrestrained workplace relations policies would allow union bosses into any workplace, driving up wages free of any consideration of productivity, costing the average Australian some $273 more per month. (Time expired)

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I do not intend to rewrite history or tell just part of the story of interest rates in this country or what John Howard did when he was Treasurer, but I am going to talk about the serious issue of housing affordability. Labor believes that all Australians have the right to secure affordable and appropriate housing. Housing affordability is now at critical levels for homeowners with mortgages and families who rent. Obviously, this is hurting working families and stretching their budgets to the limit.

Housing affordability has never been worse. Many Australians have given up on the dream of home ownership. The average Australian first home buyer now pays $2,300 per month to service a typical first home mortgage. They need a six-figure income just to meet their mortgage repayments. Rents are also increasing in many parts of Australia, making it harder to make ends meet and almost impossible to save a deposit for a home.

Dealing with the housing affordability crisis is a core challenge facing governments today. Labor believes that the federal government can take a more active role. The housing crisis needs national leadership—we need to end the blame game. Labor is committed to policies which make housing affordable by implementing economic policies designed to maintain low interest rates and a competitive housing finance sector; and secondly, policies which ensure that those on low and middle incomes can meet the cost of home ownership or rental or public housing arrangements.

A report by the Urban Development Institute of Australia released on Monday last week showed that only 39 per cent of average households can now afford to buy a house in their local area. Compare this to 96 per cent of households in 2001. This report is the most recent in a series issued by the housing industry, which is profoundly frustrated by the lack of interest and leadership by the Howard government on housing affordability. This is despite the fact that it is one of Australia’s biggest social problems.

The Commonwealth Bank-Housing Industry Association housing affordability index is at a record low, having fallen 40 per cent on Peter Costello’s watch. Households now need an income of $115,000 to keep up with mortgage repayments on the average loan for a median-priced home across our capital cities, up from $47,000 when Mr Costello became Treasurer. The average home now costs seven times the average annual wage, up from four times the annual average wage in 1996.

Data from the 2006 census paints an alarming picture of the number of households losing over 30 per cent of their income in rent payments. In my home state of Tasmania this equates to more than 11,000 households—or 38.2 per cent. Some of the Tasmanian electorates with the highest proportion of renters losing over 30 per cent of their income to rent payments include Bass, with 40 per cent of households that rent; Franklin, with 38.7 per cent; and Denison, with 38.6 per cent.

This is why I am so amazed that John Howard still believes that Australians have never been better off. Let me tell you this: the working families I have talked to in my home state disagree 100 per cent. They are hurting. If anything, this data shows just how out of touch the coalition is, especially with working families who are struggling with rising grocery prices, child care, petrol prices and, of course, interest rates.

In countless commercials in the last election, Mr Howard told you, the Australian people, that he could be trusted to keep interest rates at record lows. It was an irresponsible, undeliverable promise. In a press statement on the 16 July this year, Peter Costello claimed:

In order to keep housing affordable to young Australians we need to ... keep interest rates low.

What a joke! The fact of the matter is that there have now been nine rate rises on his watch, five of which have occurred since John Howard’s election promise in 2004 to keep rates at record lows. ‘Who do you trust?’ Remember that? Kevin Rudd’s plan for Australia is for the next 10 years, not for the next 10 weeks. Labor is committed to keeping the economy strong, but also to making sure our economy delivers for Australia’s working families. As I said at the outset, I am not rewriting history, but it is important that the community remember the 22 per cent interest rates that Australian families faced under John Howard when he was Treasurer. I remind people that this is the fifth interest rate rise since the 2004 election. This is hurting Australian families. There is also the uncertainty over industrial relations, the increased cost of child care, and the price of petrol and groceries continuing to escalate. (Time expired)

Question agreed to.