First Home Saver Accounts (Further Provisions) Amendment Bill 2008; First Home Saver Account Providers Supervisory Levy Imposition Bill 2008: Second Reading

Ten years ago, as we have heard in this debate, the price of the average house across Australia was about four times the average income. Today, as we stand here, the price of the average home is now about 7½ times the average Australian wage, and in some parts of Australia it is worse. In south-west Sydney, the area I represent, it is more than eight times the average income. This means that the typical homebuyer now spends about one-third of their income on housing costs. That is double what it was 10 years ago. When you spend a third of your income on housing costs, you are defined as someone in mortgage stress. Today, there are a million people across Australia who are suffering from mortgage stress. As a result, many people are unable to get a foot in the door; many people are unable to buy their first home and they are forced into the rental market. As a consequence, that pushes the cost of rents up. Rental vacancy rates across Australia are now below two per cent in most capital cities. In my electorate, the vacancy rate is even lower-it is about one per cent.

The consequence of all of these things is that more people are giving up on the great Australian dream-more people are deciding that buying a home is just too difficult. You see that in the figures for the proportion of first home buyers as a subset of all the purchasers of homes across Australia. You see that the proportion of first home buyers as a subset of that group is dropping. That is why I am glad to see these bills come before the House. These bills put the finishing touches to the First Home Saver Account scheme. They establish a levy to recover the cost of regulation of the scheme. Bodies like APRA, ASIC and the tax office will be able to recover the costs of their oversight through a levy model similar to the levy model for the retirement savings accounts scheme. This legislation establishes a mechanism for the processing of unclaimed moneys deposited in first home saver accounts and allows for the exchange of information between the tax office, ASIC and APRA and the states and territories. It also allows for the interaction between the operation of first home saver accounts and family law.

In introducing these bills, the Treasurer said:

First home saver accounts are the first of their kind in Australia and will provide a tax effective way for Australians to save for a first home to live in, through a combination of government contributions and low taxes.

These accounts will make it easier for young people in my electorate to save a deposit to buy their first home. They will enable people over the age of 18 who have not bought or built a home before the chance to save a bigger deposit. For every dollar up to $5,000 saved in one of these accounts every year, the government will put in another 17 per cent. This means that a young couple on an average income putting 10 per cent of their salary into one of these accounts will be able to save a deposit of about $88,000 in five years. That is $12,600 more than they would have in a standard bank account. Earnings on account balances are taxed at 15 per cent rather than at the account holder’s marginal tax rate-a significant tax concession for many people. The account will be available from banks, building societies, credit unions, public offer superannuation providers, life insurance companies and friendly societies from 1 October 2008. That is two weeks from tomorrow. So far I understand that 17 institutions have informed APRA of their intention to offer first home saver accounts, and I hope that these are the first of many more. I am pleased to see that the government has also eased the criteria by removing the $1,000 upfront contribution, allowing individuals to open an account without existing savings.

A recent survey by the Australian Housing and Urban Research Institute found that 23 per cent of first home buyers rely on family assistance to help buy their first home. So it makes sense that parents should also be able to contribute to their child’s first home saver account. Personal contributions can also be made by grandparents, which I think is a very good thing, with all the benefits flowing to their grandchildren. In the last few months I have heard a number of horror stories from local sheriffs forced to execute repossession orders in my electorate, particularly in the area of Bankstown. The sheriffs of Bankstown have told me stories of circumstances where they have had to repossess the homes of 70-year-old grandparents who had gone guarantor on their grandchild’s home. These are really sad cases where good intentions have led to great financial loss at the worst possible time in their lives, so this is another advantage that this legislation offers. Rather than having to go guarantor, grandparents can help their grandchildren in another way-they can give them a helping hand by making a contribution to that first home saver account and make a contribution to them saving a good deposit to get off to a good start in buying their first home.

The Treasurer and the Minister for Housing deserve congratulations for bringing this legislation before the parliament. It will encourage more young Australians to save a healthy deposit, and that is a good thing because having a good deposit behind you substantially reduces your risk of defaulting on your loan. But first home saver accounts on their own are not a solution. We need to work on the supply side as well. We cannot fix the housing affordability crisis without building more homes, so I am glad to hear that the Minister for Housing has been swamped with applications to build low-cost rental accommodation under the government’s National Rental Affordability Scheme. I understand the minister and her department are now assessing 244 proposals for new developments. This represents 12,770 potential dwellings. This year I understand that she will pick the best 3,500 dwellings to be built, next year it will be 7,500 and in two years after that the government will offer tax incentives for a further 25,000 dwellings to be built. That is good news for people on low incomes. It hopefully will be good news for people on low incomes in my electorate who are struggling to attain affordable housing. It is also another election commitment kept, and it is another example of the difference that a Labor government makes to people who are doing it really tough.

Another supply-side measure is the Housing Affordability Fund, and the Prime Minister spoke at length about that in this place yesterday. This is a half-billion dollar fund that will cut the planning and infrastructure costs involved in the development of new housing. I am glad that these grants will be targeted to areas where there is high demand for new entry-level housing. I will certainly be looking at new developments in my electorate that might benefit from this, and I encourage those that are proposing those developments to apply for funding. One that immediately stands out in my mind is the Potts Hill redevelopment near Bankstown. That development will provide mixed housing for up to 12,000 new residents. In an electorate like Blaxland, the mortgage stress capital of Australia, where more people are struggling to keep up with the cost of paying their mortgage and where more people are having their homes repossessed than anywhere else in Australia, I can think of no better place to invest the money that will become available from the Housing Affordability Fund. I look forward to that with interest.

For anyone who has a mortgage, the thing that really counts is interest rates. The cut in interest rates two weeks ago was very welcome for the people of my electorate. It was very welcome because it will make life just a little bit easier for them. If you have a mortgage of about $300,000, that equates to a cut of about $50 a month in your repayments. That is an extra $50 in your wallet or purse and that goes some way to making things a little bit easier. That was the first rate cut in seven years and it was the first rate cut for 740,000 mortgage holders, many of whom are first home buyers. So the rate cut is a good thing. When rates are going the other way, when they are going up and up, they just put people under more and more pressure.

We talk a lot in this chamber about 10 interest rates rises in a row. In real terms, for someone on an average mortgage that equates to $400 less a month in their purse or their wallet. Imagine having $400 less a month. Imagine people on average incomes with an average mortgage with $400 less a month in their purse or their wallet and what it means for them. For many people it means that they have to give up the things they would like to do with their children, it means changing their lifestyles. For too many people it means losing all hope of the great Australian dream and it means having their home repossessed.

The fact that we have interest rates going down and not up is a good thing. When the Deputy Governor of the Reserve Bank appeared before the Senate Select Committee on Housing Affordability back in April this year, he estimated that there were about 15,000 families 90 days or more in arrears on their mortgage and another 30,000 more than 30 days in arrears on their mortgage. That is 45,000 families behind in their repayments-45,000 families sinking in debt, 45,000 families where the great Australian dream is rapidly becoming a bit of a nightmare.

Earlier this year the Sydney Morning Herald published a list of the top 10 suburbs in Australia where households were 30 days or more behind in their repayments. Nine of the suburbs were in New South Wales; four of them were in my electorate. I have said that my electorate is the mortgage stress capital of Australia and I have said that more people lose their homes in my electorate than anywhere else. In real terms what does this mean? It means that last year 300 families lost their home for good. Three hundred families had to hand the keys over to the sheriff-never to return. As we speak today, I know that the Bankstown sheriff’s office has had to repossess three more homes in Bankstown, and three more families tomorrow and the next day and the day after that will lose their homes.

It is not just Bankstown. At the other end of my electorate, in Fairfield, the eviction rates have doubled in the last few years, up from 113 in 2005 to 259 last year. This is the real cost of rising interest rates. It is not just a debate that we have in this chamber where we throw insults across the chamber at each other about who is the best economic manager. These are the real implications. I am not here casting blame; I am just saying what the real consequences are. The obligations are on us as legislators to do everything that we can to try and make life a little bit easier for people. The obligation is on us to act responsibly to try and create a situation where it is easier for people to live, easier to sustain the mortgages that they have and easier for people who want to get involved in the great Australian dream to get a foot in the door and get into the market in the first place. That is what this legislation does.

The 2006 census gives you a glimpse of why families in my electorate are doing it tougher than most. Median weekly family incomes in Blaxland are almost the lowest in Australia, and those families live in the most expensive city in the country. Median monthly mortgage repayments in Blaxland are in the top 40 of electorates in the country. That is why we are the mortgage stress capital of Australia. The residents in my electorate earn less but they pay more than the average Australian to keep a roof over their heads. The evidence from the Deputy Governor of the Reserve Bank to the Senate inquiry helps to fill out this picture. The surge in prices during the boom was comparatively higher in Western Sydney than the rest of Sydney. More households bought towards the peak of the market than anywhere else and incomes grew more slowly than in other parts of Sydney. It was ‘the perfect storm’. A disproportionately large share of loans were sourced also from non-deposit lenders and these loans are responsible for a disproportionate share of defaults. The arrears rate with non-deposit lenders in Western Sydney is three times the rate with the major banks. Many of these first home buyers were caught in the vortex of housing stress from the very start. Research from the Canberra university indicates more than 60 per cent of new home buyers are in mortgage stress-many of them signing up to low-doc or no-doc and low-deposit loans. That is why this First Home Saver Accounts legislation is important. It gives young Australians the chance to get off on the right foot with a deposit.

The evidence before the Senate committee also points to the need for industry reform. I take this opportunity to pay tribute to the work of the House of Representatives Standing Committee on Economics last year, led by the former member for Cook, Bruce Baird, who conducted a report and made certain recommendations about reform to our financial system, financial services and credit. That, I am sure, will lead to good and positive legislation that will come before this parliament later this year. I am very hopeful that it will address the issue of mortgage brokers. Mortgage brokers are responsible for part of the pain that new home buyers are suffering, and they account now for something like 40 per cent of all mortgages that are now set up.

In 2003, a report from ASIC identified the increasing use of mortgage brokers and the associated problems that they have caused-poor advice, inadequate disclosure of fees and commissions, inconsistent documentation, uncertainty about the nature and price of the service, in a small number of cases fraudulent activity such as manipulating loan applications, and a need for clarity as to whether brokers were acting for consumers or lenders. Time does not permit me to go into this in any more detail tonight, but I will say more about mortgage brokers and the problems they have caused when the legislation comes before the House later this year. Suffice it to say that this is another area where we need to act.

We also need to make sure that banks and other lenders act in the interests of their customers, not against them. What I am talking about here is banks lending money responsibly. I hear a lot of stories from financial counsellors in my electorate of situations where people have multiple credit cards and debts that run into the tens of thousands of dollars. Many of them are pensioners and many are people who are unemployed. I do not think a banking system that is a responsible banking system should allow this to happen. I think it is important that we also look at what we can do in this area. Despite the growth in the problems of people repaying home loans, it is credit card debt that is responsible still today for the overwhelming majority of calls to consumer debt hotlines across the country.
I am also concerned about the recent behaviour of some banks pushing mortgages over the counter. A few months ago my local newspaper, the Fairfield Advance, did a special report on the growing practice of upselling home loans when customers visit their local bank for simple transactions. The report said:

A local bank teller who wanted to remain anonymous said they were not only encouraged to sell home loans but required to. The teller said she was required to sell 2 home loans a week.

This is not something that should be foreign to many people in this chamber. If you have been into a bank recently, you may well have spoken to a teller, exchanged your banking of the day across the counter and then found the teller offering you a mortgage. I have no problem with banks being able to promote their products, but the evidence suggests that they are giving some loans to people who are not able to make repayments.
If you want to buy a home, it is a lot safer to do it with a deposit and not get into one of these no-deposit or low-deposit home loan deals. This sentiment is shared by a reader of the Fairfield Advance and a resident in my local area, Rose Buontempo, who wrote:

People need to have a decent deposit saved and they need the knowledge to know how to save.

This is what this legislation helps to do. It allows first home buyers to save up for a deposit and get a firm footing to buy and then pay off their home.

There is something else that we can do as local members to help people that are being consumed by mortgage stress. Earlier this year I spent a lot of time talking to financial counsellors in my area to learn about the problems that people were confronting. I spoke to a gentleman called Tony Devlin, who runs financial counselling for the Salvation Army, to get a better understanding of the problem. He told me that they appreciated all the additional money they received in the budget for financial counselling but they were run off their feet. Ten years ago, 10 per cent of the people who walked through their door had mortgage problems. Now it is about 35 or 40 per cent. Tragically, many people leave it too late to get help. Usually, they come to the Salvation Army or the Smith Family when the bank is about to foreclose or the sheriff is at the door.

I have spoken in this chamber about the housing stress information night that I held in my electorate in July. I brought Paul Clitheroe along to see 250 local Bankstown residents, who filled up the Bankstown Town Hall on a cold winter’s night. We gave them some practical and free advice to help them keep their head above water. People like the Smith Family, Legal Aid, the Consumer Credit Legal Centre and the Banking Ombudsman all came along to help provide that advice. I think we did a good thing that evening. I think we helped to provide people with some practical advice that worked. One example is a woman called Sophia Helene. She came to the forum because she was just about to start as a real estate agent and was curious to find out about the issues that families in the area were facing. The more she listened to what people on the panel were saying that night, the more she realised that she was struggling with her own financial circumstances. She approached the Smith Family that evening and signed up for some free financial help and to get some more information about financial literacy. Sophia and her husband have been working with the Smith Family to improve their situation. I am glad she came along, but there is more work to do. That is why I will be holding another one of these forums in October at the other end of my electorate, in Cabramatta.

In the time I have left, I want to thank my staff for all the work that they did in putting together the event in Bankstown and the work that they are doing to do it again. This is the sort of thing that members of parliament should do. It helps people in a practical way. It is also the reason I have put together a debt relief information kit-to give people some practical advice.’

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