CHECK AGAINST DELIVERY EMBARGOED UNTIL DELIVERY
SPEECH BY THE PRIME MINISTER
NATIONAL HOUSING CONFERENCE
CANBERRA 13 MARCH 1989
I want first of all to congratulate the organisers of this
conference. You have rightly recognised the importance of housing as an
issue important to the economy, and important to
Australian families and your meeting, very appropriately,
coincides with the recent upsurge in the community's concern
about the future of housing in Australia.
That community concern is rooted in a number of factors,
some of them seeming paradoxes.
In a year when the housing industry is working at virtually
its maximum capacity, many people, including young couples
starting out in life, are finding home ownership beyond
them. Booming house prices are creating two classes of
Australians: those who, in owning a home, are sitting
inside what in some cases is a spectacularly improving
asset; and those who don't own a home and who feel they are
missing out.
Some people are struggling, in a period of temporarily high
interest rates, to meet their home loan payments to the
banks and building societies. They despair that they are,
in an all-too-literal sense of the word, mortgaging their
futures.
But more disturbing still is the plight of those who aspire,
in vain, not to home ownership, but to the more basic
requirement of a roof over their heads.
At a time of record Government spending on public housing,
too many people even, tragically, including young
teenagers are sleeping in the streets.
So the questions being asked throughout the community about
the future of housing are important questions and I hope
that conferences such as this will be able to contribute to
the continuing process of developing answers to them.
For the Government's part, we saw, just over a week ago, the
convening of a special Premiers' Conference which focused
attention on the important issues surrounding the supply
side of the question.
Given the rough and tumble nature of politics the
constructive attitudes that the Premiers brought to this
meeting bode very well for the development of useful and
meaningful solutions on this supply side of the housing
equation. I want initially to outline to you my perspective on the
importance of the housing industry in Australia's growing
economy. Put simply, we can't look at any single feature of the
housing issue in isolation.
Housing is a very large sector of the national economy.
It makes a strong, and an increasingly strong, contribution
to gross domestic product.
And as an employer, the housing and construction industry
provides jobs and income security for more than half a
million Australians.
Investment in housing which includes new dwellings as well
as the burgeoning market in alterations and renovations
accounts for between 4 per cent and 4.5 per cent of total
GDP. Over the year to the 1988 September quarter, real housing
investment grew by an astonishing 25 per cent.
In that period, real GDP grew by 2.9 per cent. Just over
one-third of that total increase in GDP came from housing
investment. This considerable contribution of course reflects the strong
upturn in new dwelling starts that has occurred since the
beginning of 1987/ 88.
The Indicative Planning Council forecasts around 165,000
commencements in 1988-89 up by more than one-fifth on the
previous year.
This will bring the annual average number of new starts over
the years of my Government to around 140,000 compared with
around 129,500 a year in the Fraser years. On average
around 10,000 more new dwellings are being built every year
over the whole life of this Government than under the
previous Government.
Next year, according to the Indicative Planning Council, we
should see about 142,000 starts still above the 140,000
average achieved under my Government.
Ladies and gentlemen,
By a ny standards, the Housing industry is a giant of the
Australian economy.
I want today to outline some of the challenges that this
giant is going to have to face over the coming years not
to imply that the industry alone bears the responsibility
for the resolution of these challenges, but to urge you, and
the broader community, to recognise them and to begin
working together to meet them.
Some of these challenges are all-too-familiar. Some I think
have not yet received the attention they deserve, from
within the industry or within the broader community.
Let me begin by sketching in the background in particular,
the implications of the current boom in housing prices and
the related question of high interest rates.
A few years ago, before financial deregulation, controls on
mortgage interest rates meant that the supply of housing
finance was closely linked with Government monetary policy.
This meant there was a marked cycle to the availability of
home finance: when monetary policy was relaxed, finance was
plentiful; when it was tight, finance was scarce.
In those days, the key constraint on efficient activity in
the housing industry was not, as it is today, the supply of
resources, but the housing finance constraint, with this
cycle of plenty and scarcity.
The resultant inefficiencies were staggering. whenever the
industry had geared up for a peak in activity, there was a
collapse. Thousands of skilled workers lost their jobs and
left the industry. Thousands more had to be trained for the
next peak.
Financial deregulation has changed all of this, because
interest rates can now adjust to bring the supply and demand
for housing finance to equilibrium.
This has led to an unprecedented period of stability in the
flow of finance to the housing industry.
But it has also of course created the potential for people
to be squeezed by periods when interest rates are high.
That is what we are seeing at present, but it must be kept
in perspective.
Over the twelve months to January, median housing prices
increased Australia-wide by some 40 per cent, with increases
in Sydney and Perth of some 60 per cent.
over roughly the same period of time, interest rates have
increased from around 14 per cent to around 15 per cent an
increase of about 7 per cent.
That seven per cent increase is roughly in line with the
increase in average weekly earnings.
In other words, the massive lift in housing prices reflects
the simplest lesson of a supply and demand curve that even
with the massive output of the housing industry at present,
supply of housing has not kept pace with demand.
That is why, as I have said on a number of occasions, an
artificial reduction in housing interest rates, while it
might make it easier in the short run for people to pay
their mortgages, would not solve the overall imbalance in
supply and demand.
Indeed it would worsen the imbalance, putting further upward
pressure on house prices.
I make this point about interest rates, too.
It is wrong, both economically and socially, to make a
simple comparison between the current level of interest
rates in a deregulated environment and the alleged good old
days when there was a fixed ceiling on rates of
13.5 per cent.
We must remember that the 13.5 per cent housing loans rarely
cov-ered the full purchase price, and had to be topped up
with ' cocktail' loans that attracted interest rates much
higher than those that now generally prevail.
I don't seek to run away from the fact that housing interest
rates are causing distress out there in the community.
No Government wants interest rates a point higher than
absolutely necessary especially this Government, whose
highest priority has been, ultimately, the protection of the
living standards of ordinary Australians. Interest rates
will have to stay high to reduce spending on imports. But
as soon as it's economically responsible to reduce them, it
will be done.
The present degree of monetary policy tightness, coupled
with continuing tight fiscal policy and a responsible wages
policy, will be sufficient to restore the economy to a
sustainable level of demand growth that is, a level which
will permit good progress in reducing our current account
deficit relative to our GDP.
I have already mentioned that housing activity is forecast
to fall. overall, I am confident that demand pressures will
moderate over calendar 1989. That will create some scope
for moderation in interest rate pressures.
Ladies and gentlemen,
Demand for housing will remain strong for some time to come.
The Indicative Planning Council suggests there will be about
153,000 new starts a year for the next five years.
If action is not taken now to improve the supply of
resources to the industry, housing prices will continue to
increase and more people will find houses unaffordable.
None of us can accept that.
So we must tackle the longer-term supply questions.
The first challenge therefore that I wish to address today
concerns the supply of suitable housing land.
Australia is one of the most urbanised nations in the world.
Our capital cities have grown so much that land that was
once on the outskirts is now being advertised in the Real
Estate pages as inner city. Clearly, we need to reassess
the use we make of our scarce urban land.
In many senses this is a special challenge for Government
because rising land prices have already transformed most of
the private sector's land holdings from vacant lots into
shopping centres, factories and houses.
Governments, both Commonwealth and State, have been slower
to reassess the use of their sometimes extensive city land
holdings. The Commonwealth has now done this seriously. At the
Premiers' Conference, the Federal Government announced a
major program of land releases for housing development
around 27,000 blocks, the equivalent of 15 new suburbs, over
the next five years.
In the following five years, a further 31,000 blocks will be
released.
This is a significant step forward, and I pay tribute to the
Housing Industry Association for the role it played in
stimulating this issue and identifying some of these blocks.
I now urge other Governments in Australia to follow the
example set by the Commonwealth.
A second challenge relates to another supply issue the
supply of skilled labour through improved housing industry
training. I referred earlier to the effects of financial deregulation,
particularly on lessening substantially the boom and bust
cycle that previously used to plague the housing industry.
I hope in this new environment, now more conducive to long
run planning, that long term solutions to our training needs
will be found.
Recent sharp increases in subcontracting costs for some
trades show that skilled labour is now, as it has been, in
short supply.
In Sydney, rates for bricklayers increased by more than
per cent between 1987 and late 1988.
The Federal Government recently concluded arrangements with
the New South Wales division of the Housing Industry
Association which provided for the immigration of up to 225
building trades workers before mid-1990. This arrangement
involves an increased apprenticeship training commitment by
the industry.
In February we began consultation with industry groups, the
HIA, the ACTU and building unions with a view to developing
a national arrangement along similar lines.
But more needs to be done. The challenge must be taken up
by industry and unions.
A third challenge concerns the vexing question of developing
more innovative pattern to our housing development.
As our cities continue to sprawl, there is a lot of people
for whom the attainment of a house on a suburban block comes
not only at a high price in dollar terms but also at too
high a social price: isolation, distance from transport and
other amenities, length of commuter travel times.
Having acknowledged these problems, however, we must
remember that ours is a unique way of life.
Foreign visitors to Australia often comment with awe on the
quality of life generated by our deep-seated preference for
separate houses each occupying quarter-acre blocks in suburb
after green leafy suburb.
And it is true that Australian suburbs provide a quality of
life which is the envy of much of the world.
we should be jealous of our achievement. We do not want, in
Australia, to duplicate the failures of inner city Tokyo,
London or New York.
We need a uniquely Australian solution to these issues.
We need to ensure that we are not creating a millstone
around our necks by requiring, as many local zoning and
other regulations virtually do, that no housing pattern
other than the quarter-acre block is allowed to exist in our
cities. It is this kind of thinking which lies behind the Green
Street Project or, to give it its formal title, the Joint
Venture for More Affordable Housing. This is a co-operative
program, run by industry and the Federal, State and Local
Governments, which has been particularly effective at
demonstrating that a wider range of housing choices exists,
and that more innovative building and land development
techniques can usefully be employed.
Its success is measured by the savings of up to 24 per cent
which have been achieved on house and land development.
But, again, more needs to be done.
At the recent Special Premiers' Conference, the Commonwealth
announced a package of five measures costing an estimated
$ 8.8 million over the next three years.
These measures are:
first, a three year program to redress inadequacies in
the availability of data on land supply and the
composition of demand;
second, a joint program under which financial and
technical assistance will be provided over the next
three years to Local Government for a review of
technical residential land development regulations;
third, a program to promote improvement in the
administrative aspects of approval processes at local
government level, which will include demonstration
studies, research and information dissemination;
fourth, the setting up of an expert task force to
examine the scope for significant reforms of technical
regulation of building codes and standards, which will
draw on the Commonwealth, State and Local Government,
the design professions and the building industry; and
finally, the promotion of analysis and policy
development in relation to housing supply within the
Department of Industry, Technology and Commerce.
These measures will, I hope, provide a necessary framework
within which innovative design can flourish. It is then up
to you, the people involved in all aspects of the industry,
to provide the practical ground-level solutions.
At the same time, as we begin to formulate answers to this
third challenge, we must recognise a fourth: that new
patterns of life are being created by technological growth
and the changing nature of Australian society and industry.
High technology may have a profound impact on the kinds of
housing people might choose in two decades time.
New developments in transport, such as the proposed very
Fast Train, may make it possible for people to commute to
city centres more rapidly from much further away.
Computers and new communications equipment may actually
reduce the need for people to travel to city centres at all;
they are certainly making it possible for major corporate
offices to operate in a small town or provincial centre
instead of in the middle of a capital city.
At the same time, let us recognise early that an
increasingly prosperous Australia, and an Australia that is
attracting increasing numbers of tourists from overseas, is
going to have to provide recreational accommodation in
unprecedented numbers.
Let us make sure that this is provided in a way that our
coastlines, our mountains, our deserts are not vandalised by
insensitive development that allows a well-off minority to
despoil the natural beauty which is the heritage of us all.
Finally, my fifth challenge is that we must ensure that
decent, affordable housing is within the means of all
Australians. This is a challenge to us all.
And at each level of the community's housing needs, the
Federal Government is proud of its record of assistance and
leadership.
We have offered an additional $ 40m over 3 years to the
States under the Supported Accommodation Assistance program
to provide additional and improved services for the
homeless.
-To assist the large number of Australians whose incomes are
below the level necessary to achieve home ownership in the
-private market place, we have doubled funding for public
housing in real terms in the five years to 1987-88 compared
to the previous five years to 1982-83.
And for young home buyers, the First Home Owners Scheme is
widely regarded as the most successful home ownership
assistance scheme ever introduced. From October 1983 to
February 1989, FHOS assisted over 320,000 households into
home ownership at a cost of $ 1.4 billion.
And FHOS continues to help people achieve home ownership.
Around 42,000 applications will be approved this year down
somewhat on the 54,000 applications approved last year but
about the same number as was approved in 1986-87.
I have mentioned the Indicative Planning Council's measure
of underlying demand for housing starts at 153,000 per year.
At the current approval rates, FHOS accounts for over a
quarter of this group a wide coverage by any standard.
Another important recent initiative was the establishment of
the National Review of Housing Policy in June 1988. This
review, being conducted by my colleague Peter Staples, the
Minister for Housing and Aged Care, will assess the
performance of housing assistance programs and develop
strategies for improving these programs.
Ladies and gentlemen,
The Australian dream of a home of one's own is still a
desirable one, and it is still an attainable one.
It is still part of the promise of life in this great
country of ours.
We must not let the peak of the house price cycle convince
us otherwise.
But as Australia develops, so must our strategies for
realising the dream.
My Government's commitment to housing is deep and long
standing, we have a proud record in housing because we
have kept our sights on finding the proper longterm
solutions, not the wrong, short-term, knee-jerk reactions.
Through financial deregulation, we have taken the most
important step possible towards ending the boom-bust nature
of housing. Effective housing planning can now take place.
We have dramatically improved access to affordable housing
for all Australians.
And those efforts have now been supplemented by supply side
measures. I have tried to indicate today the range of challenges
facing us in the future.
But if we are to be successful in meeting any of those
challenges we will need co-operation and commitment from all
of us: the Commonwealth, States and Local Government,
industry, unions, planners, architects and others.
In declaring this Conference open I can do no better than to
wish you success in finding common ground and building that
co-operation.