Mr JOSEPH TRIPODI (Fairfield—Minister for Housing) [3.44 p.m.]: I move:
That this House:
(1) notes this morning's decision by the Reserve Bank of Australia to lift interest rates by a quarter of a percentage point to 5.5 per cent;
(2) expresses its concerns that New South Wales families with a $300,000 mortgage will now be forced to pay an extra $48 a month; and
(3) condemns the Prime Minister for his failure to honour his 2004 election promise on interest rates.
It is all covered on the front page of today's Sydney Morning Herald, which carries the headline, "Worst deficit in 50 years spells banana drama". The opening paragraph says it all:
The current account deficit has grown to more than 7 per cent of the economy for the first time in half a century, as the nation racks up foreign debt to pay for consumers' hunger for imports.
What this says is that the Federal Government has failed on economic policy. What it says is that the Federal Government has bludged for the past nine years, and as a consequence our current account deficit is going deeper and deeper into the red, our economy is contracting, and interest rates are increasing. On top of that, the Federal Government wants to rip into the wages of workers in this State. It is an absolute disgrace. We will have to pay more with less. With its industrial relations reforms coming down on the States, the Federal Government is asking people to pay more with less income. It is an absolute and utter disgrace, and that is why this matter must receive the attention of the House.
Today interest rates have risen by a quarter of a per cent. It may not seem like a huge jump, but for many people this increase will have a huge impact—the families that are struggling, young people who are starting out and trying to buy a first home, and ordinary Australians with higher personal debt levels than ever before. It is important to realise that a quarter of a per cent increase has a much bigger impact on repayments today than it would have had 10 years ago. It will take a bigger chunk of people's income to pay off what may appear to be a small increase. It is in fact a large increase.
In Sydney the scale of household debt has reached mammoth proportions. The most significant debt continues to be the mortgage on the family home. It is the families who are going to pay for the lies and deceit the Federal Coalition Government peddled last September and October. The hard work of the New South Wales Government in encouraging first home buyers into the market means that more than 32,000 first home buyers have been assisted in purchasing a home since April last year. They have been able to take that first and most important step towards being financially secure, assisted by the New South Wales Government but harmed by the Federal Government. We helped these people get into their first home but, as a consequence of the Federal Government's economic mismanagement, its high-taxing regime and, most importantly, its spending regime in which spending is out of control and wasted on regional rorts, the Reserve Bank has had to increase interest rates.
This interest rate increase will punish average families, who, in the lead-up to the last Federal election, were deceived by the Federal Government into supporting it. Federal Coalition members ran around with graphs and advertisements telling people, "This is how much more you will pay under a Labor government." The situation can now be reversed. Those advertisements can now be applied to the Federal Coalition Government. Those advertisements said that an extra $83 would be paid if interest rates go up by half a per cent. Interest rates will go up by half a per cent.
The Reserve Bank has no choice but to rein in the current account deficit. Why? It is because for nine years the Federal Government has run away from structural reform. For nine years it has failed to bite the bullet. The golden days of riding on the back of the Hawke and Keating governments, and all the tough reforms that we implemented back then, are over. As a consequence of the Federal Government's failure, and its bludging for nine years, we have hit bottom capacity. The opportunities are drying up and interest rates are going up.
In Fairfield, where I come from, the median house price is $392,000, and the opportunity for a young couple with an average income to buy a home has just been significantly reduced. The average household income in Fairfield is $750 per week. A family with this income would have been able to borrow $272,000 to buy their home. With a 10 per cent deposit, they were able to borrow $302,000, which was enough to buy a reasonable property in the area of their choice. But now the same family will only be able to borrow $265,000, and even with their initial 10 per cent deposit they will only be able to purchase a home worth $295,000. So the quality of housing for those families starts to deteriorate. It all comes home to roost: the lies that John Howard peddled in the last Federal election mean that families now have diminishing opportunities. That restricts the choices of first home buyers.
Back to the battlers from Fairfield! When added costs are taken into account, such as lenders' mortgage insurance, legal fees, and building and pest inspections, those families may well lose the opportunity to buy their dream homes. Mortgages represent the largest proportion of household debt for New South Wales with 850,000 families and individuals having a mortgage. All of them now have to pay more as a consequence of the Federal Government's failure to manage the economy. That is 850,000 families who will be bearing the brunt of this interest rate hike. As we all know, it is not only high-income earners who take out large mortgages; regular mums and dads take out mortgages for huge amounts in Sydney.
The reality is that Sydneysiders' huge mortgages are a necessary part of life and the failure of the Federal Government to manage the economy well has meant that those people will be severely affected as a consequence of the interest rate rise. The Prime Minister has no problem with telling the nation one thing and then doing another. As a consequence of those lies, the Federal Government won the last Federal election and as a consequence of those lies each family in this State will now be paying more. The Federal Government has just presided over the worst-ever quarterly current account deficit. That giant deficit is a statement about the inadequacy of the Federal Government's management of the economy. It is a disgrace. The economy is contracting, debt is rising, interest rates are rising and the current account deficit needs to be pulled back.
That is a poor showing from a government that ran a campaign on economic management and was re-elected through deceit. How can Peter Costello claim to have any economic credibility after misleading the public so outrageously? Today the Australian Financial Review reported that the rate rise could increase the cost of home mortgages. However, it has been noted by economists that the housing sector has, indeed, been slowing down on its own, and evidence from the industry supports that. The Real Estate Institute of Australia said today that the rate hike was "not good for home buyers", and "punished those who were trying to get ahead". The reality is that with falling property prices some people in Sydney will have negative equity in their homes and rising interest obligations. The Federal Government is stealing from home owners in this State. It is an absolute, utter disgrace and we expect a lot better from a government that claims to have economic credentials. [Time expired.]
Mr DONALD PAGE (Ballina—Deputy Leader of The Nationals) [3.54 p.m.]: What a shameful day it is when the Government uses its numbers in this place to vote down debate on a serious motion in relation to the most pressing issue in this State, namely, land tax, in favour of debating a matter that does not even come within the purview of this Parliament. Interest rates are a Federal issue and we debated the matter last week. I was prepared to give the Minister for Housing, a new Minister, the benefit of the doubt, but he has held the portfolio for two weeks and he has twice raised in the House the Federal matter of interest rates. At the same time, the Minister has myriad problems in his own portfolio—and I am happy to talk to him about them—to which he should give some priority and which this House should be debating. Not the least of those is land tax, but there is also a raft of other issues, including the Auditor-General's report on public housing that was tabled today. I will have more to say about that in a moment.
The Minister has many issues to deal with concerning New South Wales and yet he is wasting the time of this House talking about interest rates, which is a Federal issue. Let us dispose of the thrust of his argument at the outset. The Minister's argument essentially is that the Coalition Government has misled the people and that interest rates are creating a huge burden on housing affordability. First, the promise made by the Prime Minister was simply that interest rates would always be lower under a Coalition government than they would be under a Labor government. Frankly, that has been the case for at least the past 20 years.
In case Government members doubt me, let me remind the House of the figures from the Australian Bureau of Statistics. When interest rates under Federal Labor were at their peak, people with an average mortgage of $212,000 were paying $36,074 a year. That is when interest rates were 17 per cent. Now, under the Coalition Government, those people are paying 7.05 per cent and, as of today, another 0.25 per cent more. Nevertheless, under the old interest rate they paid $14,960 a year, a substantial reduction. When Labor was in power the interest rate average was 12.75 per cent and the person with an average mortgage paid $27,049 a year. Under the Coalition Government the average interest rate was 7.13 per cent and the person with an average mortgage paid $15,126 annually. That means that the person with an average mortgage paid $12,000 a year less—that is $1,000 a month—under a Coalition government than they paid under a Labor government.
Let us dispose of that ridiculous argument. Members on the other side of the House are so hypocritical it is unbelievable. They do not realise that one of the reasons the Howard Government was returned in such a big way was because of its economic credibility, something Labor does not have. Labor does not have economic credibility at a Federal or State level. The State Government has had record revenue from the property boom, and it has the Howard Government to thank for that. Because interest rates have been low there has been a strong housing market. What has the State Government done with the money? It has wasted it. It has not used the money intelligently by investing in infrastructure. We have a transport system that does not work, a health system that does not work and a lack of investment in infrastructure. Members on the other side of the House should be the last people to talk about economic management.
Let us have a look at how the Minister for Housing might have spent his time in the House today talking about some of the matters that are relevant to the housing market. He could have allowed the debate on land tax. I have already mentioned what is happening with land tax. Thanks to the Government's abolition of the threshold 400,000 additional people out of a total of 510,000 are now paying land tax. That means that there is less incentive for people to become involved in the property market. Why would anyone become involved in investing or stay in the property market when these high land tax bills have to be paid? It is important for both public and private housing because we need those people in the marketplace with the confidence to invest, particularly in rental accommodation.
The taxes imposed by the Government have led to a crisis in the availability of affordable housing. Land tax and vendor duty in New South Wales are forcing up the price of property and driving investors to Queensland. I live on the border and I know that many people will not invest in New South Wales. They are investing in Queensland because land tax is lower and Queensland does not have vendor duty. It is as simple as that. I am staggered that Government members have not worked that out. The vendor tax was supposed to raise $690 million, but has raised only approximately $125 million. Driving property investment out of New South Wales will result in the State Government receiving less revenue from stamp duty in the foreseeable future. That will place further pressure on the Government's ability to provide appropriate health, infrastructure and other services. That is a no-brainer.
Mr ACTING-SPEAKER (Mr John Mills): Order! There is too much interjection. The honourable member for Ballina has the call. The Minister will have an opportunity to speak in reply.
Mr DONALD PAGE: I thought the Minister knew something about economics. Clearly he does not. If he did, he would take more seriously the impact of property taxes on the availability of housing and the attractiveness of housing as an investment in this State. Interest rates are the responsibility of the Federal Government, although they are the strong suit of the Coalition. We have a record of economic stability and economic prosperity under the Federal Coalition Government and for Labor to pretend otherwise is to avoid the truth. The Auditor-General's report on public housing was tabled in the House today. The report identified the fact that 65 per cent of public housing stock in New South Wales is not adequately maintained. That is something the Minister should concentrate on. In addition, 30 per cent of tenants in public housing are unhappy with the standard of accommodation and lack of maintenance. The Auditor-General's Report also identified the fact that the general upgrade program, which was set in place about seven years ago, is about four years behind schedule.
Mr Joseph Tripodi: Point of order: I know that the shadow Minister wants to draw to the attention of the House the excellent Auditor-General's report that was tabled today, which endorses the Government's initiatives. However, I ask him confine his remarks to interest rates, the subject of the motion.
Mr ACTING-SPEAKER (Mr John Mills): Order! I have the gist of the point of order. The honourable member for Ballina is experienced enough to know that he needs to stay within the leave of the motion.
Mr DONALD PAGE: Indeed. I am grateful for your guidance. The motion seeks the agreement of the House in the claim, in essence, that the increase in interest rates will adversely affect housing affordability. I seek to identify other issues in relation to housing affordability, accepting that interest rates will be one factor. There will always be minor variations in interest rates and 0.25 per cent is a relatively small movement compared with 17 per cent under the Keating Government. The Minister is an economist and should know that monetary policy works through the instrument of interest rates. He should also know that the trade deficit is a factor in money supply and has an impact on interest rates. In Australia our trade deficit is the result of exports dropping and imports increasing.
One reason for decreasing exports is that the State has provided neither the necessary infrastructure nor implemented port efficiencies. If the Government wants to have serious debate about economics and factors that impact on interest rates, I am happy to have that debate. However, New South Wales has so many problems with property tax, land tax, vendor duty and public housing that it is ridiculous for the Minister to waste the time of this Parliament debating a Federal matter on which the Government has no influence. It is a disgraceful waste of the time of this House. The Minister would do better to concentrate on matters within his portfolio.
Mr STEVE WHAN (Monaro) [4.04 p.m.]: I commend the Minister for Housing for moving this motion, which is important for rural as well as city residents. It is great to have a Labor Minister who understands that affordable housing means more than just the number of available public housing properties; it is about how people can enter the housing market. John Howard's broken promise is costing people in Monaro and the rest of rural New South Wales. Only a few days before the election, the Federal Liberal member for Eden-Monaro, Gary Nairn, stated:
All the election promises of the last five weeks mean nothing if the economy falters, and interest rates rise.
If interest rates rise just 2 or 3 per cent, the benefits of tax cuts or Government spending will be totally lost. Tens of thousands of Eden-Monaro residents and small businesses will face hundreds of dollars a month extra in paying off a mortgage.
John Howard's promise of low interest rates has been broken and residents in Monaro will now pay more. Housing affordability has declined because people are further in debt. The policies of the Howard Government have resulted in burgeoning personal debt and burgeoning national debt. In 1996 the average first home buyer in New South Wales borrowed a little over $94,000, but that figure rose in 2003 to $203,000. It is now even higher. Many people around my age with young families have borrowed much more than that to buy their first home. The owners of a house in Dilwynia Crescent, Jerrabombera, paid $465,000 and will pay an extra $64 a month because of today's Reserve Bank interest rate rise. A four-bedroom house in North Terrace is now valued at $425,000 while a home in She Oak Place, Jerrabombera, is valued at $599,000. Those owners will pay at least $64 more a month because of today's interest rate rise.
Those same people attended the Jerrabombera polling booth on election day, only to be confronted with a large poster which warned of interest rate rises. Those people were conned. I handed out how-to-vote cards at that polling booth and saw young mums concerned about high mortgage payments. Their fear is now a reality. People buying their first homes will now pay more on their mortgage. The Liberals, Federal and State, will say anything to get elected. The honourable member for Ballina referred to stamp duty. New home buyers have benefited from the Government's policies for affordable first homes, such as the stamp duty exemption for first home buyers. As a result, 42 first home buyers in Jerrabombera have received, on average, stamp duty concessions of $11,180. The Government is helping young people to buy their own homes.
We know the tactic of the Federal Government: it is about squeezing the States so it can claim good economic management. The Federal Government has built surpluses by squeezing the States and providing insufficient funding for service delivery or the building of new infrastructure. The Federal Government's economic management is a farce. Indeed, there has been no economic reform since the Keating Government. The Coalition's economic reform consists of slugging Australians with higher taxes. This year the Federal Government will collect $250 billion in taxes from the Australian people; it is the highest-taxing Government ever. Before he was elected John Howard said:
I can promise you that we will follow policies which will, over a period of time, bring down the foreign debt.
What has happened to that policy? When the Coalition came to office the foreign debt was $194 billion; it is now $421 billion.
Mr Donald Page: Rubbish!
Mr STEVE WHAN: It is not rubbish. It is in the figures provided by the Australian Bureau of Statistics. John Howard said that his first economic priority in government would be to tackle the current account deficit. Today it is at a record high level; it is the worst deficit in 50 years. That is the stuff of banana republics. Do members opposite care? The Howard Government and the State Opposition do not care. Coalition members are only interested in saying whatever it takes to get elected. We know it will be no better from members opposite. All they have in their policies is a $9 billion black hole, which they will inevitably make up in the same way as the Howard Government—with more taxes.
Mr ADRIAN PICCOLI (Murrumbidgee) [4.09 p.m.]: No-one likes to pay interest, and no-one likes it when interest rates go up. It is hypocritical for the State Labor Party to accuse John Howard and the Federal Coalition of making false promises and then crying crocodile tears that Coalition members made a false promise before the last Federal election.
Mr Milton Orkopoulos: So you admit they were false promises!
Mr ADRIAN PICCOLI: I think John Howard said, "Interest rates will always be lower under the Coalition." I do not know whether he ever promised that interest rates would not increase. History will show under which government in the past 20 years interest rates were significantly lower. I was only young at the time but I remember many farmers being sold out by their banks because of the 20 per cent plus interest rates foisted on them by the Federal Labor Government. We lost many of our best farmers because of the mismanagement of the Australian economy by the Hawke and Keating governments. If we are talking about pre-election promises we need only go back to 1995. What did the Premier say in 1995? He said that he would halve waiting lists or resign. It is written in blood. Clearly, his blood is not worth much because the waiting lists doubled.
There was also that famous pledge to get rid of the tolls on the M4, the M5 and other highways. Last time I drove on the M4 and the M5 I had to pay a toll. The Labor Government has not abolished the tolls. Indeed, the amount of the tolls has increased. That was a great promise to the true believers in the western suburbs. And we know what the Premier did to the true believers in the western suburbs! Members opposite should not complain about a pre-election promise that has been broken. The Minister for Housing told us that he has an economics degree. Therefore, he would understand that the Reserve Bank operates its monetary policy independently, with no influence from the Government—and rightly so!
The Coalition and John Anderson are sensitive to the impact of higher interest rates on farmers. At times politicians may be tempted to interfere in interest rate rises. That is why the Reserve Bank has been separated from politics. If the Australian economy is to be managed properly, at times interest rates must rise. Let us hope that they rise only a little, and that the rise has the intended impact, which is to reduce the current account deficit. Why is the current account deficit so high? It is because the economy is strong and the unemployment rate is at a record low. We have a high current account deficit because we are importing much more than we are exporting. Under the Federal Labor Government, the unemployment rate was 10 per cent. We now have an unemployment rate of 5 per cent.
People in Western Sydney and Newcastle, people in Labor electorates and the battlers have never seen such prosperity. They can afford to buy new cars from Japan. A few Labor members have bought new cars, such as a BMW or a Mercedes-Benz, from Germany. They like their German cars. That all adds to the current account deficit. If people can afford to buy nice things, that is great. Members opposite should thank the Federal Government for the prosperity we are now seeing in Australia. The Minister for Housing, who has an economics degree—admittedly it is from the University of Sydney; it is not as good as an economics degree from the Australian National University—would know that at times the monetary policy levers must be pulled to ensure that the economy remains strong for a longer period. We do not want a big spike this year or next year, and then have to go through 10 years of recession. That is what these interest rate rises are all about. We do not like them but they are good for the economy.
Mrs BARBARA PERRY (Auburn) [4.14 p.m.]: Today's interest rate rise will increase the burden on families in my electorate of Auburn and make it increasingly difficult for young people to buy a first home in the area. I commend the Minister for bringing this matter before the House today in light of the interest rate rise, because it gives me an opportunity to talk about the impact in my local area. We all know that Sydney has the highest house prices in the country, and even in traditionally affordable areas such as Auburn young people are finding it hard to secure financing to purchase a first home. The New South Wales Government has achieved a great deal in helping first home buyers into the market. However, today's interest rate rises will significantly reduce the benefits that these first home buyers have been able to achieve under our policies.
To date, more than 32,000 first home buyers have been assisted into the housing market through the State Government's stamp duty exemption scheme. In the Auburn local government area it is important to note that to date 530 first home buyers have benefited from the Government's first home buyer scheme. These local people have saved a total of $5.9 million in stamp duty concessions since April 2004. That is 530 local people who are taking that all-important step for their families of buying a home. They have been helped by the State Government to purchase a home in the local area, where prices have become very high recently.
In this area, getting together a 5 per cent or 10 per cent deposit is becoming difficult as prices increase. That is why the Government's stamp duty concessions play such an important role. Without this program, the costs associated with buying a first home are simply too high. My electorate also covers parts of the Bankstown local government area. Although I do not have specific statistics for those parts, I can say that the story is similar in the Bankstown area. Some 1,365 first home buyers have taken advantage of the Government's generous concessions. All up, that is a total saving of more than $16.7 million in stamp duty for the area.
No doubt first home buyers know who they can trust when it comes to buying that first home. From the New South Wales Government they get real assistance and a real commitment to helping them achieve their goals. Unfortunately, what we have seen today from the Federal Government is a broken promise—call it what you like. The honourable member for Ballina spoke at length about the fact that the Federal Government, in its election campaign, said that interest rates would always be lower under the Coalition. Let us look at that in detail. That is incorrect. Interest rates in this country are not lower under the Coalition. Compared to other countries, Australia's interest rates are already higher than those in other OECD countries, where the real rate is 3 per cent.
Mr Donald Page: They are lower under the Coalition.
Mrs BARBARA PERRY: Let us be honest about it. With the current global economy and Australian economy, which members opposite say is booming, why are interest rates in Australia higher than those in other OECD countries? One must ask that question, and the Federal Government must answer it. Another issue is that at election time there was a perception in the communities in Federal electorates that interest rates would not increase. It is clever how the Federal Government, at the time it was standing for re-election, played on the politics of perception and the community's perception. That was a sad state of affairs. People were influenced by the clever Coalition advertising during the campaign. I find it very sad for people in Western Sydney, in particular, who voted for the Coalition thinking that interest rates would not increase.
Ms Virginia Judge: They were hoodwinked.
Mrs BARBARA PERRY: That is true. Today, many people in Western Sydney and the Auburn area will not be able to afford these rises. In the last census, Auburn had the lowest use of home computers. We are talking about people who cannot afford to buy computers for their children. We are not talking about affluent areas. [Time expired.]
Mr JOSEPH TRIPODI (Fairfield—Minister for Housing) [4.19 p.m.], in reply: I am not surprised at the disappointing response we have received from members of the Opposition. They do not care about people suffering with higher mortgage rates. They do not care that this will cut into their incomes and reduce the quality of life they are currently experiencing. The Sydney Morning Herald stated:
Yesterday's figures also showed that foreign debt grew by $83.4 billion to $691 billion, or more than 2½ times the level at March 1996.
Honourable members may remember the debt truck. Now it is a semitrailer or, more probably, a train. It is choking all those home owners because the Federal Government has failed to implement the economic reforms necessary to keep the economy going. The Federal Treasurer admitted that. He said:
But I don't underestimate the significance of these figures—we need to lift exports.
At last he has come to terms with the fact that he has not addressed the supply side. He has not implemented any of the structural reforms necessary to get out of the capacity constraints. What he has done, as the honourable member for Monaro pointed out, is to starve the States. Why do capacity constraints exist? Because the Federal Treasurer has done nothing other than starve the States. We have had to balance the books in those circumstances. In the last Commonwealth-State Housing Agreement, the Federal Government cut $210 million in social housing from this State—out of the pockets of the neediest people in the State. It was a disgraceful economic decision, a decision that hits the absolute poorest and indicates what kind of people are in power in the Federal Government. They do not care about home ownership or what the burden is on the pockets of these people.
The Federal Government spends like a drunken sailor. It says and does anything to get itself elected but is not willing to take the consequences. The Federal Government promises one thing and delivers the opposite. They are do-nothing conservatives in Canberra and that is why we are paying the price today. The Federal Government promised families low interest rates but went ahead with a spending program that has left the economy vulnerable to adjustments like this one. The Treasurer promised home owners that if his Government was elected they would not have to worry about an increasing burden on their mortgages. They got exactly the opposite. He told the Australian people that only his party would keep interest rates down and the lies have come home to roost. By giving our economy the worst ever current account deficit in the first six months of this term of government he has betrayed the Australian people.
What shocked me the most was the Treasurer's recent statement that anything less than a 10 per cent interest rate is acceptable. He is saying he could double the interest rate and that is acceptable. That is the kind of arrogant, out-of-touch Government that is in Canberra. That is an absolute disgrace, and makes a complete mockery of this ad, which says that plus 5.7 per cent is an extra $950 for the average person. That is what the ad says and the Government is living up to it. The Federal Coalition said Labor was going to do that, but it is doing it. Today the Treasurer said an extra 5 per cent interest-rate is acceptable. That is an absolute disgrace. It shows a Government that lacks sympathy and is grossly out of touch.
The Treasurer said today that interest rates are still low by international standards. It should tell that to the families who will now be paying more than $100 per month extra on their mortgages each month. He should tell that to the first home buyers who will be told by the banks that they can no longer afford to buy the dream homes that they were looking at, that they will have to come up with bigger deposits if they wish to go ahead with their plans. Since yesterday thousands of people have had to review their plans about the dream homes they wanted to buy. I would like to demonstrate to the Federal Treasurer that these home buyers are suffering. I hope he is listening and getting the message from the Government of New South Wales. [Time expired.]
Question—That the motion be agreed to—put.
The House divided.
Mr J. H. Turner
Mr R. W. Turner
Question resolved in the affirmative.
Motion agreed to.
|Ms Gadiel||Mr Hazzard|
|Mr Gibson||Mr Merton|