Joint Bank/Treasury Paper on Housing — Reserve Bank of Australia, March/April 1978
Summary
This Reserve Bank of Australia Research Department file holds the Joint Bank/Treasury Paper on Housing of March/April 1978. It includes a note from the Office of the Prime Minister dated 6 April 1978 saying Prime Minister Malcolm Fraser wants a report from the Treasurer on the housing industry by the end of the week, a Treasury minute of 7 April 1978 from First Assistant Secretary C.R. Rye, and a draft reply for Treasurer John Howard enclosing the joint paper. The paper reports that private dwelling activity expanded strongly over 1976 but eased in the first half of 1977 because of a surplus of unsold new dwellings, and that the value of housing loan approvals reached an all-time high in the September quarter of 1977 even as commencements fell in each quarter of that year.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- Source documents
- Document type
- During Past Disasters That Exacerbated Housing Issues The Treasury Department Distributed
- Case
- During Past Disasters That Exacerbated Housing Issues The Treasury Department Distributed Funds Differently
Cite this document
“Joint Bank/Treasury Paper on Housing — Reserve Bank of Australia, March/April 1978.”
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R-71-2209-12
.1.21Y1Iy_.§fstion
ADM.973
972
JOINT BANK/TREASURY PAPER
ON HOUSING
March/April 1978
Records
Control
-22(5)1-12.
Period
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R-71-2209-12
• R-71-2209-12
Accession Number
PER1VIANENT
Records Control Period
PERMANENT ARCHIVES
Record
Group Research Department.
Activity Section
Title Joint Bank / Treasury Paper on Housing
March / April 1978
DO NOT ADD TO THIS FILE
CLOSED FILE
RETUIZN TO ARCHIVES REI?OSITORY
For Subsequent Material About This Subject See
ERA 3-3
Legacy Hardcopy Records Folder R-71-2209-12 06/19669
Reserve Bank of Australia
ii
Research Department - Management Section - Joint Bank / Treasury Paper on
Housing
R-71-2209-12
With Compliments
Y oiftbd
f.A 1 A4
iloftiaw 4.4;estv.-41.—
4
THE TREASURY
CANBERRA, A.C.T
R-71-2209-12
• CONFIDENTIAL •
The Trea6uver
Ne received yesterday through your office notification
the Prime Minister has asked for a report from you on
housing by the end of this weeK kcopy attached). We
understand through Departmental channels that he has
a similar request of Mr Croom.
Attached for your consideration is nn updated and slightly
amended version of the paper which had been prepared earlior
as a Treasury/RDA document for the MPO, but which you decided
not to circulate. We fool that that paper, under cover
of a letter to the Prime Minister, draft attached, would be
a suitable responso.
Subwittod for consideral,ion.
C.R. Rye
First Assistant Secretary
7 April 1078
R-71-2209-12
1 ..
• RF.S13
CONFIDENTIAL
The It Non. Malcolm Fraser, M.P.
Primo Minister
Parliament ;:ouse
CANBERRA ACT 2600
Y.y. dear Prime Mini5tor
In response to your request for a report on housing,
enclose a paper preparod jointly by the ]nerve Bank
and Treasury.
Yours sincerely
(John Howard)
R-71-2209-12
OFFICE OF THE PRIME MINISTER
CANBERRA
r
R raT TIM r
-6 APR 1978
SENIOR PRIVATE SECRETARY
TO THE TREASURER
As discussed, he Prime Minister has asked if he
could have a report from the Treasurer of the situation in
the housing industry. The Prime Minister would like to have
this report by the end of this week, please.
,)
(Peter Hand)
Private Secretary
6 April 1978
R-71-2209-12
•
•
0
HOUSING FINANCE AND ACTIVITY - INvORMATION PAPER
RECENT TRENDS
Private dwelling activity expanded strongly over 1976 but eased
in the first half of 1977. This was pr2.marily as a result of a
surplus of unsold new dwellings carried (Dyer in some states from
the high volume of speculative building which had run well ahead
of underlying demand in 1976; there was also a reduction in
finance approvals in the March quarter 1977. (Activity data are
shown in Table C.) Both the number and, more markedly, the
value of finance approvals increased in the second half of 1977
but this has not yet tnanslated into stronger activity. In fact
commencements of new dwellings fell :in each quarter of 19-7 and
(,ompletions have fallen in each of the last three quarters.
More details on recent trends follow.
The value of housing loan approvals by major lenders (table- A)
reached an all-time high in the September quarter of 1977, after
recovering from a low level in the March quarter. Permanent
building society approvals were very strong in the September
, largely
quarter then fell away in the December quarter; thi:7'
reflected a reduction in the flow of funds to Queensland
societies following a failure of confidence in societes in that
State. Savings Bank approvals continued at a high level in the
December quarter. In January/February approvals of savings
banks were about the same as the December quarter average;
building society approvals were above the December quarter
average but well below the peak September quarter.
In recent times housing loans outstanding have been growing more
rapidly than many other financial aggregates.
As Table A shows, the proportion of finance•oing into new
dwellings fell slightly in the second half of 1977. This
new/total ratio has been running a good deal below levels of
earlier years (a decline from around 46 per cent in 1968-69 to
around r) per cent in the last few years). The 1-elative
importance of funds flowinq to new, as opposed to existing
housing, while of some importance in assessing the short-term
impact of finance on activity, can be easily exaggerated unless
due consideration_ Is given to the adequacy of the housing stock
for the current and prospective needs of the population. With
the large post-war expansion In the stock of houses, the
exist_ing housing stock (including alterations and additions) has
increasingly satisfed housing needs, in part because of
location preferences, the 'rise in building costs and the
uncertainties about the final cost of onstuction. It should
also be noted that finance for the purchase of existing housing
flows through to new house purchases when vendors make such
purchases with sale proceeds.
ONFIDEN'I
R-71-2209-12
VI&
CONFIDENTIAL
•
a
2
The pattern of finance flows described above for the national
totals has been fairly uniform across the states, observed
variations in activity trends being due mainly to the different
stock situations. Thus the fall in private commencements (Table
C) in the first half of 1977, while fairly general, was heaviest
in Victoria and South. Australia, where the stock carry-over from
1976 was largest. These states recorded further falls in the
second half despite increased finance; private commencements
also fell in New South Wales, but largely in the 'other' (mainly
multi-unit) dwelling segment, and in Western Australia, where
excess stocks did not emerge until well into 1977 following a
lengthy period of unsustainably high activity. Commencements in
Queensland and Tasmania rose in the second half. Overall, the
decline in private commencements continued throughout 1977, but
abated markedly in the second half.
Government commencements, which of course are unrelated to
private mortgage finance flows, were lower in the second half
than in the first half of 1977; sizable declines were confined
to Victoria and the Northern Territory.
There are signs that the decline in local government approvals
for private dwellings is bottoming out, although an upward trend
has not yet emerged. Commencements will lag, but the decline
could be arrested during the June quarter.
As already noted, more people are satisfying their demand for
improved accommodation by modifying existing dwellings. In
1974, work done on alterations and additions (valued at more
than $10,000) constituted about 3.5 per cent of new building
work; in the first half of 1977 the proportion was almost 8 per
cent. (Estimates including smaller jobs are at least twice as
large.). To some extent this development has reduced the impact
on the construction industry of the declines in, commencements of
dwellings.
PROSPECTS
With excess stocks of unsold houses apparently close to being
worked off in most states, there should be a more direct
connection, between housing finance and new building in 1978 than
in 1977.
Lending by housing finance institutions in the period ahead will
depend heavily on their intake of funds and on their liquidity
needs. Deposit intakes by housing finance institutions will
reflect the overall liquidity growth in the economy and the
reaction of investors to the recently changed pattern of
interest rates, and their expectations about future interest
rate developments.
CONFIDEN
R-71-2209-12
• CONFIDENTIAL
3
In more detail:
Domestic seasonal influences and external account
developments will be important determinants of short-term
movements in primary liquidity; beyond this quarter,
expansion in primary liquidity seems likely.
Concerning interest rates, little data are yet available
to assess the effect on funds flows of the new
relativities. To 3 April, net raisings of Series 11
Australian Savings Bonds have averaged about $3.8 million
a week; but the average over the past three weeks has
fallen to about $0.5 million. The yield on Australian
Savings Bonds is under close review.
Expectations of falling interest rates could be
encouraging some depositors to switch funds from housing
finance institutions (most of which are at call and/or
carry a variable interest rate) to fixed interest
securities although the significance of this effect is
hard to judge.
The February tax reductions will serve to boost household
disposable income; some part of this will flow on to
deposits with major housing lenders.
A factor hearing on the lending levels of savings banks
will be the speed at which they adjust to the changed
prescribed asset ratio. The rapidity of this adjustment
will be contingent on the need to maintain a satisfactory
level of liquidity, particularly keeping in mind the
seasonal rundown in the current half year and on their
views about longer-term trends in deposit growth.
Expectations about further declines in official interest
rates may also have continuing influence.
Lending by the permanent building societies (especially,
of course, in Queensland) will also be influenced by
considerations of desirable liquidity levels.
Housing lenders are well aware of the Government's wish to
encourage housing lending, particularly in those states and
areas where the capacity of the * building industry is
underutilised. Within this general policy it has been left to
individual lenders to determine the extent of their lending in
the light of their own balance sheet positions and assessment of
the housing situation in their own area of ope rations.
Overall, with the seasonal liquidity rundown immThent, finance
approvals for home buyers seem likely to flatten out at around
the level achieved, in the last quarter of 1977 before resuming
growth in the second half of 1978. The outlook for speculative
NFDF\
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•
r.." Ilk I "IIP" 11 A
N IN1 1 I L.
building activity has improved with the rundown in excess stocks
of dwellings. Finance companies, which are a major source of
funds for builders and developers, appear well placed to meet
demand from this segment of the dwelling construction industry.
On the basis of this outlook for lending, the decline in
dwelling investment evident in 1977 should be arrested in the
first half of 1978 and there should be a moderate expansion in
residential construction activity later in the year.
SUMMARY
Recent indicators portray a declining activity picture. This is
seen largely as the consequence of the excess stock position
which had built up in 1975 when construction rates ran well
ahead of underlying demand. In the latter part of 1977 and into
1978 lending has been quite strong. Although lending is likely
to level out in the liquidity rundown, anticipated funds flows
should be sufficient, in conjunction with the petering out of
the stock adjustment, to prevent a further decline in new
construction activity. Subject to the funds intake of housing
lending institutions, there are prospects for a moderate lift in
activity as the year progresses. Of course, the bulk of new
finance will, as usual, go to finance transactions in existing
houses as people satisfy their changing housing demands in this
way.
Funds flows over coming months will be heavily influenced by
seasonal and other factors and, as usual, a number of
uncertainties surround the various projections. The funds
intake and liquidity of the major mortgage finance institutions
will require continuing close attention in coming months.
Treasury
Reserve Bank of Australia
7 Apr 1978
CON -1DENTIAI...
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NI I AL
• CON
A. FINANCE TO INDIVIDUALS FOR HOUSING a
($m - Seasonally Adjusted)
SAVINGS TRADING PERMANENT SU13 FINANCE TOTAL RATIO '
BANKS BANKS BUILDING TOTAL „1:0MPANIS(7 NEW/ TOTAL
SOCIETIES h
1973 1,287 841 975 3,103 na na 1,170 37.7
1974 1,120 451 550 . 2,121 na na 746 35.2
1975 2,086 596 1,388 4,070 na na 1,217 29.9
1976 2,126 718 1395 4,239 .7.3 4,612 ,362 32.1
1977 999 603 ,703 A
4,,• 5 344 4,60 1,370 31.8
1976
Mar' Qtr 516 175 397 1,088 75 1.163 338 31.1
Jun Qtr 536 167 279 982 109 1,091 327
Sep Qtr r;44 195 319 1058 94 I 152 338 31.9
Dec Qtr 534 191 • 401 1,125 95 1,220 361 32.1
1977
Mar Qtr 458 137 409 .1,004 (.:r?_, 1,097 332 2 .1
Jun Qtr 474 139 432 1,045 94 1,139 327 31.3
546 163 476 1,185 ,0 1,263 367 31.0
Sep Qtr to
Dec Qtr 534 173 396 1,103 79 1,182 348 R1.6
1078
37 - -
Jan 184 146 na na 122 31.6
Feb 170p 30p 134 36 14 as /as as na
Half years
1976 I 1,052 342 676 2,070 184 2,254 665 32.1
11 1,078 386 720 2,183 189 2,372 699 32.0
1977 I 32 276 841 2.,049 187 2,235 659 '..)e) '')
j c.... C..
II 1,080 336 872 2 , 288 1'7 2,445 715 31.3
a excluding loans for alterations and additions
not seasonally adjusted
banks and permanent building societies
preliminary
as not available
N
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1.11111•111MI N
• NFIDENTIAL
B. FINANCE APPROVALS: ALL SOURCES
(' 000 original figures)
NEW NEW TOTAL
81, 11 251 788 88,857 268,1-196
75,617 231,262 83,514 246,190
22 , 523 72,1187 .311 24,768 76,612 .32,'1?
19,766 67,262 .294 21,415 71,207 .301
19,895 59,935 .332 21,705 614,037 .339
21,226 61,507 .345 2"-?, , 052 6r,3,929 .3'30
?0,9211 63,0811 .332 22,685 67,323 .337
1977 Ma, 17,922, 57,332 .313 19,71,3 61,073 .-r)-7,
Jun 18, 211 55,786 .926- 20,031 58,958 .3140
Sep 30,216 60,184 .3,36 22,4145 611,341 .349
19,267 .7)7060 .332 21,325 ,61,818 .345
39,661 127,197 .312 143,120 135,241t .319
42,150 124,591 .338 45,737 133,252 . 3113
36,134 113,118 ,31g 39,744 120,031 .7i31
118,1411 . '.:31-i /43,770 126,159 .347
Source ABS 5609 "Housing Finance f - .., ,,rner 'Occupation"
CONFIDE:NI //:\
R-71-2209-12
•
C. INDICATORS OF DWELLING SECTOR ACTIVITY
(Seasonally Adjusted)
APPROVALS ( 1 000) COMMENCEMENTS * ( 1 000)
PRIVATE PRIVATE
DWELLING
GOVT TOTAL INVESTMENT
PRIVATE TOTAL
AUST AUST AUST ($s, 1974-75
OLD SA WA TAS ACT NT
AUST AUST NEW VIC prices) % aang
2.7 3.3 ma 109.6 16,3 128.0 2,426
117.4 133.1 28.7 31.1 18.3 11.1 13.8
975 13,1 144.0 3,064
22.2 14.0 18.7 3,6 3.2 na 130,8
1976 137.6 150,8 31.5 36.5
2,6 2.2 0.8 115.4 13,8 129.0 2,858
116.8 130,9 31.4 30,7 22.1 9.2 16,8
1977
.1,tarter:
4.2 0.9 0.8 0.3 33.1 34.7 36.8 781
1976 Sep 33.9 37.7 6,0 9.2 /.. 9 3..9
4.3 1.0 o.6 0.2 33.6 3.9 37.7 788
Dec 34.6 38.5 8.7 9.6 5.9 3.5
2.6 4.9 o„6 0.7 0.1 3-0 4.1 35.0
1977 Mar 30.3 :34.5 8, 4 8.1 5,4
4,4 0.6 0.4 0.4 28.9 3.6 32,5 72
Jun 28.9 31.4 7.9 7.7 5.0 2.3
2.4 3.7 0.8 0.5 0.2 23.2 3.0 31.1 701
29.2 32.3 8.1 7.4 5.7
Sep
o.6 0,1 27.3 3.1 3).4 683
6 .0 1.9 1 6
Dec 28.4 32.8 7.0 7,5
Three months
to Nov 28,2 31.8
Three months
to Feb 27.8 30.7
half-year:
7.6 74.5 1,569 (4.3)
11,8 7.2 6. 5 1.9 1. 0.5 66.7
1976 II 68.5 76.2 16.7 18.8
67.5 1,474 (-6.1)
13, 4 4.9 9.5 1.2 1.1 0.5 59.9 7.7
1977 I .59. 2 65.9 16.3 15.8
1,384 (6.1)
1. 3 55.5 6.1 61.5
15,1 14.9 11' 4. 3 7,3
II 57.6 65.0
Seasonally adjusted by EHCD
R-71-2209-12
Governor
Deputy Govern
HOUSING
Treasury's Mr Freney 'phoned at 11.30 to discuss
revisions to the Treasury/Bank paper on housing. The revised
paper was to go to the Treasurer at lunch-time.
Most of the changes were of a minor character; I
agreed that they be accepted. We initially disagreed over the
rewording of an existing paragraph, which we thought looked a
bit too rosy, but which Treasury wanted to keep in:
"Indications are that in most areas both
private and government commencements have
bottomed out. However, local government
approvals for dwellings have not yet begun
an upward trend; an increase in commencements
may occur during the June quarter."
Eventually, we agreed to replace that paragraph by:
"There are signs that the decline in local
government approvals for private dwellings
is bottoming out although an upward trend
has not yet emerged. Commencements will lag
but the decline could be arrested in the June
quarter."
The revised paper was to be typed out in Treasury;
a copy will come to us on Monday.
Research Department
7 April 1978
DWStammer/nc
cc. Mr Brady BFD
R-71-2209-12
BRJ:GA
CONFIDENTIAL
Tie Treasurer
INFORMATION PAPER ON HOUSING
As foreehadovedt attached is a joint Troasury/1o5orve
Bank paper on housinc finaccl and activty. S;jct
to your co;acurrence we will 6ubmit it to the Cabinot
Secrctariat fcr distribution to the mc;mbern of the
Monetary Pollcy Committee aa an Infomatioll pap(-r.
You will probably aleto ith to nond m copy to flr Groom
and a cover letter is attachod for that purposQ.
You have mcently had briefing on the mor poic—
orIented clf,pocts of thici eubject. when the item appearz
on the Acenda wo call resubmit ttte, main points as
aide-memoir° for any discussion that migit arisc.
Pvo
tY Firnt Ascietnnt Socrotriry
21 Mar 1978
Copy to:
The Secretary
Mr Stone
Mr Daniel
Mr Prows°
Mr Argy
407 FNTiAL
R-71-2209-12
CONFIDENTiAL
HOUSING FINANCE AND ACTIVITY - INFORMATION PAPER
RECENT TRENDS
Private dwelling activity expanded strongly over 1976 but eased
in the first half of 1977. This was primarily as a result of a
surplus of unsold new dwellings carried over in some states from
the high volume of speculative building which had run well ahead
of underlying demand in 1976; there was also a reduction in
PIT, finance approvals in the March quarter; (Activity data are
shown in Table C.) Both the number and, more markedly, the
value of finance approvals increased in the second half of 1977
but this has not yet translated into stronger activity. In fact
commencements of new dwellings fell in each quarter of 1977 and
completions have fallen in each of the last three quarters.
More details on recent trends follow.
The value of housing loan approvals by major lenders (table A)
reached an all-time high in the September quarter of 1977, after
recovering from a low level in the March• quarter. Permanent
building society approvals were very strong in the September
quarter then fell away in the December quarter; this largely
reflected a reduction in the flow of funds to Queensland
societies following a failure of confidence in societies in thM
•
In January/February, approvals of Savings Banks were about
the same as the December quarter average; approvals by
ft
permanent building societies were above the December quarter
average but well below the peak reached in the September
quarter. In recent times, loans outstanding for housing
have risen more rapidly than many other financial aggregates.
dwellings fell slightly in the second half of 1977. This
new/total ratio has been running a good deal below levels of
earlier years (a decline from around 46 per cent in 1968-69 to
around 30 per cent in the last few years). The relative
importance of funds flowing to new, as opposed to existing
housing, while of some importance in assessing the short-term
impact of finance on activity, can be easily exaggerated unless
due consideration is given to the adequacy of the housing stock
aJri-e-N,J for the ftee4e-ftti$4-444-gioewth rateof the population. With the
large post-war expansion in the stock of houses, poirage=isoial 1t-42 4,)0Li
s-t-et.M.(including
,
alterations and addit4pri) t La-t CAP-AL Cep
part because of locationuthe risein building costs and the
uncertainties about the final cost of construction. It should
also be noted that finance for the purchase of existing housing
flows through to new house purchases when vendors make such
purchases with sale proceeds.
\
r—
R-71-2209-12
CONE- L.-,ILPik`q.
HOUSING FINANCE AND ACTIVITY - INFORMATION PAPER
RECENT TRENDS
Private dwelling activity expanded strongly over 1976 but eased
in the first half of 1977. This was primarily as a result of a
surplus of unsold new dwellings carried over in some states from
the high volume of speculative building which had run well ahead
of underlying demand in 1976; there was also a reduction in
finance approvals in the March quarter4 (Activity data are
shown in Table C.) Both the number and, more markedly, the
value of finance approvals increased in the second half of 1977
but this has not yet translated into stronger activity. In fact
commencements of new dwellings fell in each quarter of 1977 and
completions have fallen in each of the last three quarters.
More details on recent trends follow.
The value of housing loan approvals by major lenders (table A)
reached an all-time high in the September quarter of 1977, after
recovering from a low level in the March quarter. Permanent
building society approvals were very strong in the September
quarter then fell away in the December quarter; this largely
reflected a reduction in the flow of funds to Queensland
societies following a failure of confidence in societies in that
State. Savings Bank approvals continued at a high level in the
December quarter. T .pe-flects some taking up of-±rans• that
(would otherwise have been made by permanents, official
encouragement for housing lending, and gradual portfolio
adjustment following the change to 'a 45•per cent prescribed
asset ratio.
As Table A shows, the proportion of finance going into new
dwellings fell slightly in the second half of 1977. This
new/total ratio has been running, a good deal below levels of
earlier years (a decline from around 46 per cent in 1968-69 to
around 30 per cent in the last few years). The relative
importance of funds flowing to new, as opposed to existing
housing, while of some importance in assessing the short-term
impact of finance on activity, can be easily exaggerated unless
due consideration is given to the adequacy of the housing stock
for the ftee4&-fti44-4.44-zroth7rate-of the population. With the
CP C4 Sire.
large post-war expansion in the stock of houses,
•
)
14 rk
„ '../ • (including
alterations and additon) ! o4 ea;
.. v-e,ixit ,
part; because of location ltl e rise in bui ldin rz costs and the
uncertainties stout the final cost of construction. it should ;6.4„.
also be noted that finance for the purchase of existing housing
flows through to new house purchases when vendors make such
purchases with sale proceeds.
o'-" r'''' "-r
f L.
R-71-2209-12
CON FIDENTLA,L
2
The pattern of finance flows described above for the national
totals has been fairly uniform across the states, observed
variations in activity trends being due mainly to the different
stock situations. Thus the fall in private commencements (Table
t
C) in the first half of 1977, while fairly general, was heavies
in Victoria and South Austral ia, where the stock carry-o ver from
1976 was largest. These states recorded further falls in the
second half despite increased finance; private commencements
also fell in New South Wales, but largely in the 'other' (mainly
multi-unit) dwelling segment, and in Western Australia, where
excess stocks did not emerge until well into 1977 following a
in
lengthy period of unsustainably high activity. Commencements
Queensland and Tasmania rose in the second half. Overal l, the
decline in private commencements continued throughout 1977, but
abated markedly in the second half.
Government commenements, which of course are unrelated to
private mortgage finance flows, were lower in the second half
than in the first half of 1977; sizable declines were confined
to Victoria and the Northern rli rri ir.nru
There are signs that the decline in local government approvals
for private dwellings is bottoming out, although an upward
trend has not yet emerged. Commencements will lag but the
decline could be arrested in the June quarter.
,u u e aout 3.5 per cent of new building
work; in the first half of 1977 the proportion was almost 8 per
cent. (Estima tes includi ng smaller jobs are at least twice as
large.) To some extent this development has reduced the impact
of
on the construction industry of the declines in commencements
dwellings. "tralready noted, thor pcople are satisfy ing 1.heir'
emand for improved accommodation by modifyirR existing
dwellings. . um es,
,41010151164010oremm
PROSPECTS
With excess stocks of unsold houses apparently close to being
worked off in most states, 'there should be a more direct
connection between housing finance and new building in 1978 than
in 1977.
Lending by housing finance institutions in the period ahead will
depend heavily on their intake of funds and on their liquidity
needs. Deposit intakes by housing finance institutions will
reflect the overall liquidity growth in the economy and the
reaction of investors to the recently changed pattern of
interest rates. interest rate- expectations are also
ccL ft/$.4 CV
rOJ1/4-7'
R-71-2209-12
LONFIDENT;P,L
•
The pattern of finance flows described above for the national
totals has been fairly uniform across the states, observed
variations in activity trends being due mainly to the different
stock situations. Thus the fall in private commencements (Table
C) in the first half of 1977, while fairly general, was heaviest
in Victoria and South Australia, where the stock carry-over from
1976 was largest. These states recorded further falls in the
second half despite increased finance; private commencement3
also fell in New South Wales, but largely in the 'other' (mainly
multi-unit) dwelling segment, and in Western Australia, where
excess stocks did not emerae until well into 1977 follnwing a
lengthy period of unsustainably high activity. Commencements
Queensland and Tasmania rose in the second half% OverFill, the
decline in private commencements continued throughout 1977, but
abated markedly in the second half.
Government commenCements, which of course are unrelated to
private mortgage finance flows, were lower in the second half:
than in the first half of 1977, sizable declines were confined
to Victoria and the Northern Territory.
1.444.4.aeres—are thatti—inaoat-areas both- private and government7
,gollamencements hava-4ottomed out. However, local governmnt
rn_all-.4*.anti-trend: an
am4povals for dwell-L_ags have not yet....u
increase. in commencements may-occur k
it 1974, work done on alterations andperadditions (valued at more
cent of new building
ii- than $10,000) constituted about 3.5
work; in the first half of 1977 the proportion was almost 8 per
cent. (Estimates including smaller jobs are at least twice as
arge.) To some extent this development has reduced the impact
on the construction industry of th.e... declines. . in comencements of
dwellings... -a-Teady noted, morThcople are satisfying Lheir -
\\Nee
. - ethand for improved accommodation by modifying existing _ •.--
dwellings. . - - .. --
PROPECTS
With excess stocks of unsold houses apparently close to bein7
worked off in most state!-7, •therc should be a more direct
connection between housing finance and new budidincr, in 1978 tnan
in 1977.
Lending by housing finance institutions in the period ahead will
depend heavily on thei intake of funds and on their liquidity
nec!ds. Deposit intakes by housing finance institutions will
reflect the overall liquidity growth. in the economy and the
reaction of investors to the recently changed pattern of
t rates. interest rate - oxpectations are alo r
intere:,
ciL r ,s2",
r9.14-7-
R-71-2209-12
..p
10_4, bv.ta fr-r
0401 ,t-4L;- I •
vV%-FC.
0 -
Domestic seasonal influences aind external account
developments will be important determinants of short-term
movements in primary liquidity; beyond ,t,he June quarter,
a further expansion :!t1 primary liquidity seems likely.
Concerning interest rates, little data are yet available
to assess the effect on funds flows of the new
relativities. To nct raisings of Series 11
Australian Savings Bonds have averaged about kJ, )11
week, tapering down in the more recent weeks. Pr-rir.t.±.
44-4- 21;r1The yield on th Auctralian
Savings Bond ty 4,,
et
e4,
6,14 4,v"AL:- t.41 •
Expectations of falling interest rates could be
encouraging some depositors to switch funds from housing
finance institutuions (most of which are at call and/or
carry a variable interest rate) to fixed interest
securities although the significance of this effect is
hard to judge.
The February tax reductions will serve to boost household
disposable income; some part of this will flow on to
deposits with major housing lenders.
A factor bearing on the lending levels of savings banks
will be the speed at which they adjust to the changed
prescribed asset ratio. The rapidity of this adjustment
will be contingcnt on the need to maintain a satisfactory
level of liquidity, particularly keeping 411 mind the
seasonal rundown in the current half year and on their
views about longer-term trends in dcpcsit growth.
Expectations about further declines in official interest
rates may also have ms's to0.9.4;r,v1•5
Lending by the permanent building societies (especially,
of course, in Queensland) will also be influenced by
considerations of desirable liquidity levels.
Housing lenders are well aware of the Government's wish to
encourage housing lending particularly in those states and areas
where the capacity. of the building industry is underutilised.
Within this qeneral policy it has been left to individual
lenders to determine the extent of their lending in the light of
their own balance sheet positions and assessment of the housina
situation in their own area of operations.
Overall, with the seasonal liquidity rundown imminent, finance
approvals for home buyers seem likely to flatten out at around
the level achieved in the last quarter of 1977 before isiorew4fm, r-e-2 ImeNZ
..44adr in the latter half tn. 1978. Th(.: outlook for speculative
I
R-71-2209-12
CON FUJENTAL
14
building activity has improved with the rundowvin excess stocks
of dwellings. Finance companies, which are major source of
funds foT puilders and developers, appear well placed to meet
ri
demand ciare this segment of the dwelling construction industry.
On the basis of t741-4, outlook suggested above for lendingi for hom
purchasers and for speculative building, the decline in dwelling
investment evident in 1977 should be arrested in e.1,444T 1978 and
there should be a moderate expansion in residential construction
activity later in the year.
SUMMARY
Recent indicators portray a declining activity picture. This is
seen largely as the consequence of the excess stock position
which had built up in 1976 when construction rates ran well
ahead of underlying demand. In the latter part of 1977 and into
1978 lending has been quite strong. Although lending is likely
to level out in the liquidity rundown, anticipated funds flows
should be sufficient, in conjunction with the petering out of
the stock adjustment, to prevent t..1',Whrri9lix in new
construction activity. Subject tytmajor rlenring r institutions.)
recaiv.ing an adequate infLow-44:-&mds, there are prospects for a
moderate lift in activity as the year progresses. Of course,
the bulk of new finance will, as usual, go to finance
transactions in existing houses as people satisfy their changing
housing demands in this
Funds flows over coming months will be heavily influenced by
seasonal and other factors and, as usual, a number of
uncertainties surround the various projections. The funds
.
intake and liquidity of the major limiirmr. institutions will
require continuing close attentio in coming months.
Treasury
Reserve Bank of Australia
r 1978
AO -
R-71-2209-12
• CONFIDENTIAL
5
A. FINANCE FOR HOUSING BY MAJOR LENDERS (a)
(Seasonally Adjusted - $m)
SAVINGS TRADING PERMANENT TOTAL NEW RATIO
BANKS BANKS BUILDING NEW/TOTAL
SOCIETIES
1973-74 1,138 722 754 2,614 972 .372
1974-75 1,723 439 707 2,869 897 .313
1975-76 2,082 669 1,549 4,300 1,318 .307
1976-77 1,997 645 1,553 4,195 1,348 .321
1976-77 Sep 535 200 316 1,052 344 .327
Dec 530 182 389 1,100 350 .318
Mar 471 136 415 1,022 329 .322
Jun 478 143 445 1,066 ...DR
..) J.,' .RI4
1977-78 Sep 532 168 466 1,166 373 .320
Dec 537 163 384 1,084 337 .311
1976 II 1,065 382 705 2,152 686 .319
1977 I 949 279 861 2,089 668 .320
1977 II 1,069 331 850 2,249 704 .313
(a) Loan Approvals to individuals by Banks and Permanent Building Societies
for construction or purchase of dwellings.
Source: Seasonally adjusted series of the Reserve Bank.
I
R-71-2209-12
• -0ND g L... r t IA L
6
B. FINANCE APPROVALS: ALL SOURCES
('OOO original figures)
PRIVATE TOTAL
TOTAL RATIO NEW TOTAL RATIO
NEW
61,50y .345 23,052 65,929 .350
1976 Sep 21 226
20,924 63,034 .332 22,685 67,323
Dec
.313 19,713 61,073 .323
1977 Mar 17,923 57,332
.326 20,031 58,958 - .340
Jun 18,211 55,786
60,232 .336 22,479 64,389 .3219
Sep 20,250
57,991 .333 21,356 61,849 .345
Dec 19,298
42,150 124,591 .338 45,737 133,252 .3143
1976 II
113,118 .319 39,744 120,031 .331
1977 I 36,134
.335 43,835 126,233 .347
1977 II 39,548 118,223
Source: ABS 5609 "Housing Finance for Owner Occupation"
o (s---.
L acik
L..
R-71-2209-12
1NDI7C23 OF DJaLING S.,:f,CTOR ACTIVITY
A,.'7.tjus te.i)
AFP77VALS (IOW) COMSNCEMENTS * 1000)
•
PRIVATE PRIVATE
DWELLING
PlaVATE TOTAL GOVT TOTAL INEET&ENT
',UST AUST NEW VIC ,LD SA WA TM") ACT NT ALIST AT.IST RUST (S., 1966-67
prices)
11,1 13,8 n 109,8 18,3 128.0 1,222
117.4 1 33.1 28.7 31.1 18.3 2.7 3.3
576 137.6 150.6 31.5 36.5 22.2 14,0 18,7 3.6 3„2 130,8 1 3. 1 144.0 1,539
1577 116.8 131,0 31 30;, ? 22.1 9.2 16.8 2.6 2.2 0.6 115.4 1 3.2 129.0 118.
-,„ 0.0 4.2 0.9 0.8 0,3 33. 1 3,7 36.8 39 4 (+27.5)
1336 o„ 37.9 37.7 9.2 3.7
D 3436 38.5 8.7 9. 5.9 4.3 1.0 o,6 0.2 33.6 37.7 397 (1q.r.,)
30.3 34.5 8.4 8,1 5.4 4.9 0.6 0.7 0.1 31,0 4,1 35.0 375 (4-2.')
Jun 28.9 31,4 7.9 7.7 5.0 2. 3 4.6 0.6 0,4 0.4 28.9 32.5 364 (-4./
$' 29.2 92. 3 8,1 7.4 5.7 2, 4 :3.7 0.b 0.5 0.2 20..2 5,0 31.1 343 (-129)
Dec 20.4 ..)4 •
Q 7.0 7.5 6.0 1.9 3.6 0.6 0.6 0.1 27.3 3,1 3",), n.a
lialf-year
19M, 68,5 76.2 16.7 18.8 11.3 7. 2 8.5 1,9 1,4 0,5 66.7 7.6 74.5 791
1 97i 16.3 15.8 10.4 4,9 9.5 1.2 1.1 0.5 59.9 7.7 67.5 739
LT. .37.6 65.1 15.1 14,9 11,7 4.3 7.3 1,4 1.1 0.3 55.5 6.1 61.5 na
* Stmsonall:y djusted by K800
R-71-2209-12
•
Governor
Deputy Gover
Housing
Mr Freney, Treasury, 'phoned (subsequent to
Dr Higgins' call). He'd heard, via PM & C, that the Prime
Minister has sought (separately) the views of the Treasurer
and Minister for EHCD on the housing situation. The views are
required by the end of the week.
Treasury will be having another look at the Treasury/
Bank paper on housing prepared for (but not sent to) the
Monetary Policy Committee. The Treasurer gmiht be wanting to
send this on to the Monetary Policy Committee. Treasury would,
if necessary, come back to us.
Research Department
6 April 1978
DWStammer/ss
cc Mr Brady, BFD
R-71-2209-12
• Governor
Deputy Governor
Paper on Housing prepared for Monetary.
Policy Committee of Cabinet
Dr Higgins 'phoned to say the Treasurer did not
intend, at this stage, to put the paper on housing activity
and prospects to the Monetary Policy Committee of Cabinet.
The Treasurer requested that the paper not be circulated to
other paiNaAshs,
Research Department
6 April 1978
s7
c DWStammer/ss
cc Mr Brady, BFD
R-71-2209-12
"
CONFIDENTIAL
Joint Treasury/Bank Paper on Housing
Dr Higgins phoned to discuss the suggestions we'd
made on the revised draft of the paper on housing finance and
activity being prepared for the Monetary Policy Committee of
Cabinet. (The comments we offered are attached.)
The first seven of our suggestions were incorporated
in the new draft, as were the 9th and 12th suggestions, But:
on p. 4, line 7: he said he I d much pref er "there should
bell to "there could bell;
on p. 4, line 16: he said held much prefer "should"
to "could",, We discussed these two suggestions for a
while; given the extent to which our earlier
suggestions had been taken on board, I said I could
agree to adopt his preferred wording in these two
on p. 4, line 11: he said held much prefer
"overwhelmingly" to "importantly". I said we wouldn't
be keen on that change, We then agreed on the word
He suggested a change in wording on P. 3 to take on
board the decision of the Monetary Policy Committee to lower
the yield on ASB. The following sentences on P. 3 are to be
deleted: "To date, net raisings of Series 11 Australian Saving
Bonds have averaged about $6 million a week. The yield on
Australian Savings Bonds is currently under review." The
replacement sentences are, "To date, net raisings of Series 11
0
Australian Savings Bonds have averaged about S6 million a week,
tapering down in recent weeks. A decision was taken on 16 Marc
to lower the yield on Australian Savings Bonds and net
subscriptions in the weeks ahead are likely to be negligible."
Dr Higgins also let us know that the Treasurer
would be sending a copy of the paper to the Minister for
Environment, Housing and Community Development.
I asked for a copy of the retyp
Research ' Department
21 March 1978
DWStammer/ss
cc Mr Bradj
R-71-2209-12
R-71-2209-12
.
Joint Treasury/Bank Paper on Housing
Treasury this morning sent us a revised draft of the
paper on housing finance and activity being prepared for the
Monetary Policy Committee of Cabinet. A copy is attached.
The redraft incorporates almost all the drafting
suggestions we made. However, in a few spots there are changes
to our proposed wording which alter the tone of the message;
after further discussions with BFD, I've sent the attached list
of suggestions to Treasury.
R-71-2209-12
•
With Compliments
7.44.•411 cu./ Viii.64
Ve4. 0, c ..4.• "4* AAAA;%1
/041044444 -~T*0.04 4104* tgA4 Atiegy..c
(Ak. Clore elkolwi I/4C fratisi 4%4
friA.d.A.cda4.0( .4"ok 01,A4 04440V%. 91 0/04
Ahrti ?
&A. 4fa Iffaie; 1•4444
THE TREASURY
CANBERRA, A.C.T
R-71-2209-12
CCNFIDENTIAL
Facsimile Message from
Reserve Bank of Australia Sydney
Message o.
The following are our suggestions on your revised draft
of paper on housing finance and activity:
v'p. 1, line 15: replace "lifting sharply" by "recovering"
i7p. 1 final ine: after confidence add in societies"
v/p. 1(b), line 1: replace "increased" by "continued at a high level"
P. b line : delete colon
tXp. 3(b), line 3: delete semi-colon; after "year" add "and on"
b), line 4: replace semi-colon and and" by full-stop
3(b), lines 5-7: replace existing words by "(Expectations about
further declines in official interest rates
may also have an influence)."
p. 4, line 7: after "and" add "there could be"
4, lines 9: delete "is expected to occur"
p. 4, line 11: replace "overwhelmingly" by "importantly"
p. 4, line 16: replace "should" by "could" "
,‘V-table C: would suggest including series on private approvals
Please Note: Copy should be single spaced typewritten, and kept as close as possible to head line to reduce transmission time.
R-71-2209-12
CONFIDENTIAL
•
DRAFT
Thell:easurer
INFORMATION PAPER ON HOUSING
As foreshadowed, attached is a joint Treasury/Reserve ,
Bank paper on housing financo and activity. Subject
to your concurrence we will submit it to the Cabinet
Secretariat for distribution to the members of the
Monetary Policy Committee as an information paper.
You have recently had considerable briefing on the more
policy-oriented aspects of this subject. When the item
appears on the Agenda we shall resumbit the main points
as an aide-memoire for any discussion that might arise.
C.R. Rye
First Assistant Secretary
17 Mar 1978
CONFIDENTIAL
•
VErS 1.
.Z4f1 k's".ne
R-71-2209-12
•
The Secretary to Cabinet
INFORMATION PAPER ON HOUSING FINANCE AND ACTIVITY
Attached is a paper on Housing Finance and Activity
prepared jointly by Treasury and xlie Reserve Bank.
The Treasurer has agreed that it be submitted for
information to the Monetary Policy Committee of
Cabinet. Would you please arrange for its distribution
to the members of that Committee.
F.H. WHEELER
Secretary to the Treasury
17 Mar 1978
R-71-2209-12
~
HOUSINCFINA-~E~~~TIVITY - I~~t~I~p~~
^~Private dwelling activi~y expanded ~lrunsly uve, 1~76 bu1 eay~d
in the fir t half of 1977. Thi~ wa~ primariIy as ~ ,eyult uf a
~ ' . . ,,. - - .. .. . . - - ' _ - -__ '. + ` +'`~ ~. .~
.'~.'
surplu~ of unsold new uwe~~u,yy car,z~u uv~`' ~,` ~u"`= ~`~
the h volume of ypeculative buildin8 which had ,un well e ead
of underlying demand in 19~5; the,e was ~Isu a ,e6uction in
finance app/^ovals in the M9rch Activity d e
yhown in Table C). Both the number i~nd ' )ou,e markedly, the
value uf finance approvaIy increayeJ in the secu/~d half of 1977
but thiy han not yet intu 4stronyer activity. In fact
comnenceynent of new dweIlings fell in e~c|~ yuarte, uf 1977 ~nd
completiony have fallen in e~ch uf the Iast th,ee qua,ters.
More detaily on reLent lrends follow.
The ~~~~~ of hou~ing luan appruvals by nejur lende,s (table A)
reached an all-time high in the qua,tu' of 1977, afte,
,~u=~m~~~~
l4~±i~`g from a low level in the Ma,ch vua,te,.
Perma/,ent building yoci~ty appruvals were very ~trun9 in the
September 9uarter then fell away io lhe Deceniber qua,te,; ihis
largely reflected a reduction in the fluw Of funds to Queen~land
yocietie~ fullowin~ -afailur~ uf cunfidence/in that State.
~
~
R-71-2209-12
.
% ~ ~~~
~ iny~~ank
` app'ovals~~~ ---- - --mbe, 9ua,tm,. ~hiy
°
*f ie~t~ ~ome takinq up of luans lhat would ot|'u`*vise have been
~y permanent official encuu,ayemext fu, huusin~ lendiny;
` , d 9radual porlfolio adju~lmeot fullowin9 the chan~e to a 45
er cent presc,ibed asset ,atiu.
-
's Table A ~hows, the propurtiun of finance :9oin8 intu new
wellinWs fell slightly in the yecund half of 1977. This
.~w/total ratio, has in recent ~eers been running a ~oud deaI
elow levels of earlier years (a decline froni around 46 pe, cent
n 1968-69 to around 3O pe, cent in the last few yea,$). The
~Iative importance of funds fluwing I. f.) new, as opposed tu
~
xiytin~ housin9, while uf yome ,n~wr~~ca inuUse ysin@
s,m imPact of fi/,ance ona can be easily exaW3erated
nleys due cunsideration is given to t{~e adequacy of the huuyin~
~ock fur the needs and the U,uwth ,ate of the populatiun.
ncreasingly, with the la'ge post ~~~ expansiun in the stuck of
ouyes, peuple have looked tu the ~~D~ housing slock
i~cludi t i y i ca nd additions) to satisfy thei, houyinW
part b cause of locatiun, the ,ise in building custs
~d the uncertainties about the final cust of conytructiun. It
~ould alsu be noted that finence fu, the purchase of exi IS t
~ fluws through tu new huuse purchay~~whe/~~vendo,s ~nake
.^
zh purchoyes with sal~ p,oceeds.
R-71-2209-12
2
~he uattern uf'finance fluws desc,ibed above fo' the nation
al
Lntal~ ha~ been fairly unifu,m ac,uyy the state~, ub<e,
ved
varietions in activity trendy being due nxainly to the
diffu`ent
-itoc4 ~itutations. Thus, the fall in p,iv~te cuUnmencemn
ets
<table C) in the firyt half of 1977, while fairly Wene,al,
wam
viest in Victoria and Suuth Aust,aIia, whe,e the stock
-arry-over fron 1976 was lar~eyt. The~e states ,ecu,ded
furthe ,
~alls in the second half despite increayed finance; p,ivat
e
~ommencements al yo fell in New South Wales, but la,9ely
in the
'other' (m,:ijinly multi-unit) dwellinU segment, and in Weste
rn
~ustralia, where excess stocks did n~t eme,ge until well
intu
977 fullowing a lengthy pe,iod cifunsustainably hi9h activi
ty.
~ononencements in Queensland and Tasmania ,o e in the secun
d
.alf. Overall, the decline in p,ivate commencements contin
ued
nrou~huut 1977, but abated ma,kedly in the second halfa
overnnent cummencements, which Of cuurse are un,elated
to
'ivate murt9age finance flowy, were luwer in the secund
half
oan in the first half uf 1977; sizable declines were confin
ed
o Victoria anJ the Northe,n Ter,ito,~.
~dicatiuns are t et in I oyt a,eas b h p,ivate and ~ove,
xnent
~~n ncements |/ave buttomed out^ However / ].(.)cal government
v'ls fur dwellin@s have nut yet ~e~an an upwa,d trend and
ase in commenc ell, enty yeemy unlikely until t|`e June
~
R-71-2209-12
' work ~une on ~lteraliun~ und addilions, v~lued at mo,e
han ~D1O r OOO~cuo~tituted abuut ~.5 yer cent of new building
.ork; in lhe first half uf 1977 the p,opu,tiun wa~ almust 8 pe,
ent. TT' incIudin9 ~m~lle, juby are at least twice as
a e.) Tu some extent men educed l{`e i If! pa~t
n the cun~truction indusl,y uf the decIiney in connnencemenls uf
wellin~s. As al'eady noted, ~nure people are yatisfyin~ thei,
emand fo, in/proved accunnnodatiun by mudifyin8 existiny
wellinys.
ith exceys stocks uf unsold huuses apparently cluse tu bein8
orked off in nm e,e s|`uuld be a more di,ect
onnection ~etwe~n {`ousi~,g finance and new builJing in l978 ihan
' 1977.
~nding by housing fin~nce inytitutiony im th~ periud a{~ead will
+p~nd {`e~vily on lheir intake uf fund* and on thei, liquidity
eeds. Depusit intakes by |`ouyin~ finance institutiony will
'flect the overall liquidity 8rowt|~ in the ecunonIy axd the
~action of investors tu the recently chanqed pattern of
~tere -int ,ates; interest ,ate fa pectatiuns are alsu ,elevant;
-
R-71-2209-12
CONFIDENTIAL
Domestic seJp.i,on,:.11 in-i-luencL., and external accof.Int
developments L.)e importdnt detc2rmindnts of short-term
movements in primary licluidity; beyond the June (luarter ?
a further e .7:pansion in priwry seems likely.
available
Concerninsi interest-rates, little data are yet
to asess the effect en fund,..i. flows of the ne,,A4
relAtivitieF. To datPy net raisiw.ls of Series 11
million a
AustrliPn Savin9s Bend<.i.- have averaged about T6
week. The yiel on the Australian S,,,ivings Bond is
currently under review.
ExpectEitions of falling interest rates could be
housin g
encouragiw:: some depositors to switch funds from
and/o r
finance-institutuions (most of which are at call
st
carry a variable interest rate) to fixed intere
is
securities althou01 the significance of this effect
hard to judge.
household
The Feb:.(1,ilry tax reductions will serve to boost
on lo
disposHble income; some part of this will flow
deposits with major housinfj lenders.
A - factor bearing on the lending levels of saviwls banks
ed
will be the speed at which they adjust to the chang
tmen t
prescribed asset ratio. The rapidity of this adjus
R-71-2209-12
will be ~onti~ment on~ the need to m~intai~~ a
`
~N
~ti~factory level uf liquidity, ya,ticularly keepi``y in
n`ind t| n L the cur,en'i half y e a i thei' ~
)c
'-
| views about lun~er-te,m trends in deposit
/
@~xpectatiun a~out fu,t|`er declines in officiaI inle'est
-
rates ~vh~~h n`ay
Lend permanent buildin~ socieitiey (especially,
Q f course, in Queensland) will al~u be influenced by
consideralion~ of deyi,able li~uidiiy lev~Is.
yu~in~ lenders are weIl aware uf ernmen~'y wI tu
~coura9e huusin~ lending particula,ly in thoye states and :Ii /`ea~
~ere the capacity o the building indu~t,y is unde,utilised.
ithin lhis ~eneral policy it has been left tu individual
~nders to determine the extent uf their lenJin~ in the li8ht uf
own balance s|/eet positiuns and ayseysment of the huu~ing
~tuation in their uwn a ea uf upe,atiuny.
'erall, with t|,e seasun~l liquidity runJuwn i~mninent, finance
provals fur hune buyers y ee m likely to flatten uut at a,uund
a level achieved in t| /e layl qua,ter uf 1977 befure y,uwirig
ai~' i/, the latter half (If 1978. T|/e outluo4 fur speculative
`
R-71-2209-12
4
k~
n in excess stuc
im p, uv ed w ith the rundow
ity \/ay
~ui1diny activ
ur suu,ce of
co m pa ni es , which a,e n/aj
inance
of dwelIin~s. .F tu meet
lu pe rs , ap pe ar well placed
ers und deve
Funds for build dust'y,
uf th e dw el li unstructiun in
seC44men t
Jemand fur this
r h ome
estcd abuvc for lendin~ fu
s of th e outluok suy9
/ On the bayi dwelling
ve bu ild in g, the decIine in
d for specula ti
purchasers an rly 1978 and K-st
7 sh ou ld be arrested in ea 7
ident in 1.97
inve~tment ev
activity
ex pa n< _; iiu n in reyidential
moderate
a,
later in lhe ye
SUMMARY
his is
ec lin in ~ ac ti vity pictu,e. T
d
ory portray a
Recent indicat
e excess stuck
i
9 as th e co TV s e9uence uf th
1n y
Iseen ov ... rwhel Ill ion rates ,a\
u p in 19 76 when con~t,uct
position 1A 'J. |'ad built
rt of 1977 and
n g de 'n an d. In the latte, pa
underlyi
well ahead uf
u3h lendin9 is
be en qu it e ytron~. Althu
din~ has
into 1978 len d funds
u id it y .u n d own^ anticipate
out in the liq
likely to Ievel pete,in8 uut
X_
in co n ju n ct iun with the
flow~ s e sufficient,
ine in new
t, to pr ev en t a furthe, Jecl
justmen
of the 's -tock ad g
tiuns ,eceivin
t to m ej or l e .I ing institu
Subjec
constructio"~ ,ate
ts for a mude
"~ f fu n dy , th er e are p,uspec
f low u
an adeeuat e in e bulk of
yr og re s~ ey . Of course, th
~
'ty as the year
~lift in activi ctiuny in
u ~u nan e t,an- ~ ie
w ill , a
y w finance ds
housing deunan
le sa tis fy th ei, c|~an9ing
es as peop
~ existinq hous
~
~
~
R-71-2209-12
•
,11.•.4 •. • . •
noted ? funds flows over coming months will be heavily
nflItenced by season.91 and other factors and, as ul:ualy a number
f uncertainties surround the various projections. The funds
ntake and liquidity of the major lendin9 insi:itutions will
equire close attention in comminy months.
reasury
cd-c ff-e-11
Ivia.r 19 Ti.3
R-71-2209-12
FINNCE FriP HOUSING GY MAjOR LENDERS 1,a)
(SAally Adjusted - Tm)
E-AVINe.IS TR AD N(:". PIEF--, MANENT 1-1)17-"L NEW R (VI I 0
BANKS BANKS RI II LD I NG NEN/ TOTAL
SOC I ET I ES
1973-74 1 '133 722 71.34 2 7614 972 .372
P974-7S 1 772.3 439 707 2 y F.369 897 .313
197B-76 2 2 OS -2 669 1. 7549 4 y 7;00 1. y 313 .307
I. 976-77 1 y 997 E4S i ? EL.33 4 y 195 1 y 34'i3 .:1P1
1976-77 Se p S 3S 2_00 3 16 1,052 344 .327
D .:. c S--I° 182 339 1,100 -.3s0 .318
Ma r 471 136 41S ly022 -- .P9 .322
Ju n 473 1 47-1 445 ly066 33S .314
I 977-72 Sfip S32 46G 1,166 373 .320
Dec Fi 37 163 FIR4 1,084 3:17 .31.1
.T.7)76 II 1,06S 382 70C 2 y 152 694 .3 /2
1q77 I 949 27, ,961 2 y 029 6E4. .31 .3
l'DT7 II 1,09 331 E.30 2 F 249 710 .316
( ) Ap p ova to ill i y and Per mart 11 Bt.! tf les
I- or construction or F., r ha e of (..it4e. 1 1 .1)1(4
Sokar c L4 e .
R-71-2209-12
~ ' ~^ '~ . ~ 14~`-
`
I*
6
'DOO uriyinaI fi~u,es)
PRIVATE TOTAL
TOTAL RATIO TOTAL RATIO
975 Sep 21,226 61,5O7
Dec 2O,924 6~,O84
977 Mar 17,S23 57,3~2 .D 1-D 19,71~ 51,D7-n
Jun 18,211 55,786 .~2E 2O,O31 58,S5~
Sep ~O,25O 6O,232 .~36 22,479 ~49
Oct 6,621 7,~O9 2O,~24
Nuv 7,~ .331 8,126 2~,754 .~42
976 II 42,15O 124,591 45,7~7 C2-
977 I ]6,1~4 113,118 7 4 Al 12O,O~1
122,]24 .~~7 45,6]2 1]Oxr-Cie- .35O
977 II (e) 41,279
~ource: ABS 56O9 "Housin9 Finance fur Owne, Occupatiun"
~e) Munth uf [)ecember i~ estimated by a pto-rata of 2 month to November
~yures.
R-71-2209-12
•
C. INDICATORS OF DWELLING SECTOR ACTIVITY
(Seasonally Adjusted)
TOTAL PRIVATE COMMENCEMENTS* GUT* TOTAL PRIVATE
APPROVALS COMMS COMMS DWELLING
INVESTMENT
AUST NSW VIC OLD SA WA TAS ACT NT AUST AUST AUST (3m, 1966-67
('000) prices)
1975 133.1 28.7 31.1 18.3 11.1 13.8 2.7 3.3 na 109.8 18.3 128.0 1,222
1976 150.7 31.5 36.5 22.2 14.0 18.7 3.6 3.2 na 130.8 13.1 144.0 1,539
1977 107.0 31.4 30.7 22.1 9.2 16.8 2.6 2.2 0.8 115.4 13.8 129.0 na
Quarter:
1976 Sep 37.7 8.0 9.2 5.9 3.7 4.2 0.9 0.8 0.3 33.1 3.7 36.8 394 (+27.5)
Dec 38.5 8.7 9.6 5.9 3.5 4.3 1.0 0.6 0.2 33.6 3.9 37.7 397 (+18.5)
1977 Mar 34.5 8.4 8.1 5.4 2.6 4.9 0.6 0.7 0.1 31.0 4.1 35.0 375 (+2.5)
Jun 31.4 7.9 7.7 5.0 2.3 4.6 • 0.6 0.4 0.4 28.9 3.6 32.5 364 (-4.7)
Sep 32.3 8.1 7.4 5.7 2.4 3.7 0.8 0.5 0.2 28.2 3.0 31.1 343 (-12.9)
Dec 32.8 7.0 7.5 6.0 1.9 3.6 0.6 0.6 0.1 27.3 3.1 30.4 na
Half-year:
1976 II 76.2 16.7 18.8 11.8 7.2 8.5 1.9 1.4 0.5 66.7 7.6 74.5 791
1977 I . 65.9 16.3 15.8 10.4 4.9 9.5 1.2 1.1 0.5 59.9 7.7 67.5 739
II 65.1 15.1 14.9 11.7 4.3 7.3 1.4 1.1 0.3 55.5 6.1 61.5 na
* Seasonally adjusted by EHCD
R-71-2209-12
•
Governor,
Deputy Governo
Housing
The Treasury/Bank paper on housing finance and activity
for the Monetary Policy Committee of Cabinet:
I 'phoned Mr Freney to inquire about progress with
this paper. He said he was glad to have our comments and
he and his colleagues had "seen their way clear to taking
most of them on board". A revised version was with the typist;
this would be sent to us. Mr Freney noted it would be very
unlikely that the paper would go to today's meeting of the
Monetary Policy Committee.
The BFD/RD paper on housing for possible discussion
at EPAC next week:
We plan to get a copy of this paper to you late
Friday or early Monday morning.
Research Department
16 March 1978
DWStammer/jh
cc. Mr Brady, BFD
R-71-2209-12
0 DEPUTY GOVERNO
HOUSING
Attached is the message*vocadexed to Treasury concerning
the information paper on Housing being prepared for the Monetary
Policy of Cabinet. The message takes on board the comments
you made yesterday and has been agreed with Mr Brady.
Dr Higgins or Mr Freney is to 'phone me this afternoon
to discuss the paper. I suspect Treasury will be looking to
"brighten" up the message. If that is the case, and their
suggestions go beyond the guidelines you outlined to us, would
you like me to float the possibility of the paper going forwar
just as a Treasury piece?
L---rzAk
Research Department
15 March 1978 VA
DWStammer/kt
cc. Mr Brady, BFD
Le+
viA-A4 LA,J,
*-q,:itst
R-71-2209-12
COTIVDENTIAL
Facsimile Message from
To FRENEY, TREASURY, CANBERRA Reserve Bank of Australia Sydney
From STAMMER, RESERVE BANK, SYDNEY Message No.
The following are our suggestions for changes to the draft
paper on housing finance and activity. We would appreciate an
opportunity to comment further on the revised draft before it goes
forward and on the covering note to be sent with it.
RECENT TRENDS
para 1
"The value of finance approvals picked up in the second
half of 1977 but ..."
Comment:
The value of all finance approvals rose by around
7 per cent in the period, but the number of loans rose by only
3.5 per cent; increases for new housing are slightly lower.
p.1 para 2, 3
"The value of housing loan approvals by major lenders
(Table A) was a record in the September quarter of 1977, after
recovering from a low level in the March quarter. Permanent
building society approvals reached a high level in the September
quarter, then fell away in the December quarter; this largely
reflected a reduction in the flow of funds to Queensland
societies following a failure of confidence
in that state. Savings bank approvals continued at a high
level in the December quarter. This reflects ... asset ratio."
Comments:
PBS lending in the September quarter was only about
$10 million above that in December quarter 1975; given
the problems of seasonally adjusting the series, it
might be unwise to claim a record;
our figures show savings bank lending in the June quarter
1976 was higher than in the December quarter 1977;
your observation on portfolio adjustment needs rewording
(see below) and is better placed in the Prospects section.
R-71-2209-12
CONFIDENTIAL
• 2.
p.lb, para 1 (continuing on p.2)
"As Table A shows, the proportion of finance going
into new dwellings declined slightly in the second half of
1977. This ratio, which is relevant to the short-term impact
of finance on new activity, has in recent years been running
a good deal below levels of earlier years (a decline from around
46 per cent in 1968/69 to around 30 per cent in the last few
years). Increasingly, people have looked to the existing
housing stock (including alterations and additions) to satisfy
their housing needs, in part because of the rise in building
If
costs and the uncertainties about the final cost of constructions.
Comment:
The existing paragraph on the ratio of new/
finance is hard to follow and interrupts the flow of the
analysis. As far as the short-term impact of finance on new
activity is concerned, the ratio is important. Short-run
relative price factors could be included in any discussion.
p.2, para 2
Suggest:
"The number of finance approvals also picked up in
the second half of 1977."
Comment:
The increase in numbers was quite small - around 3 per
cent - and the level did not approach previous records.
p.2(b para 2
Suggest replacement of "Indications ... out" by
"Local government approvals for dwellings declined
in the December quarter and again in January. These falls
suggest that private commencements in most areas are likely
to remain subdued in the current quarter."
p.2(b), after para 2_
We suggest a paragraph be added.
The following is suggested:
R-71-2209-12
CONFIDENTIAL
• 3.
"In 1974, work done on alterations and additions,
valued at more than $10,000, constituted about 3.5 per cent
of new building work; in the first half of 1977 the proportion
was almost 8 per cent. (Estimates including smaller jobs are
at least twice as large.) To some extent this development
has reduced the impact on the construction industry of the
declines in commencements of dwellings. As already noted,
more people are satisfying their demand for improved accommodation
by modifying existing dwellings.
For the Prospects section, our preferred wording runs
as follows:
PROSPECTS
With excess stocks of unsold houses about dissipated
in most states, there may be a more direct connection between
housing finance and new building in 1978 than in 1977.
'Lending by housing finance institutions in coming
heavily
periods will depend/on their intake of funds and on their
liquidity needs.
Deposit intakes by housing finance institutions will
reflect the overall liquidity growth in the economy and the
reaction of investors to the recently changed pattern of
interest rates; interest rate expectations are also relevant:
Domestic seasonal influences and external account developments
will be important determinants of short-term movements in
primary liquidity; beyond the June quarter, a further
expansion in primary liquidity seems likely.
Concerning interest rates, little data are yet available
to assess the effect on funds flows of the new relativities.
To date, net raisings of Series 11 Australian Savings Bonds
have averaged about 6 million a week. The yield on the
Australian Savings Bond is currently under review.
Expectations of falling interest rates could be encouraging
some depositors to switch funds from housing finance
R-71-2209-12
UUNHULIN 11AL
institutions (most of which are at call and/or carry a
variable interest rate) to fixed interest securities.
The significance of this effect is hard to judge.
The February tax changes will serve to boost household
disposable income; a part of this will flow on to deposits with
major housing lenders.
A factor bearing on the lending levels of savings banks
will be the speed at which they adjust to the changed prescribed
asset ratio. The rapidity of this adjustment will be contingent
on the need to maintain a satisfactory level of liquidity,
particularly keeping in mind the seasonal rundown in the
current half year, and their views about longer-term trends
in deposit growth (it may also be influenced by expectations
about further declines in official interest rates). Lending
by the permanent building societies (especially, of course, in
Queensland) will also be influenced by considerations of
desirable liquidity levels.
Housing lenders are well aware of the governmentts wish
to encourage housing lending particularly in those states and
areas where the capacity of the building industry is under-
utilised. Within this general policy it has been left to
individual lenders to determine the extent of their lending
in the light of their own balance sheet positions and assessment
of the housing situation in their own area of operations.
Overall, with the seasonal liquidity rundown imminent,
finance approvals for home buyers seem likely to flatten out
at around the level achieved in the last quarter of 1977 before
growing again in the latter half of 1978. The outlook for
speculative building activity has improved with the rundown in
excess stocks of dwellings. Finance companies, which are a
major source of funds for builders and developers, appear well
placed to meet demand for this segment of the dwelling
construction industry.
On the basis of the outlook suggested above for lending
for home purchasers and for speculative building, the decline
in dwelling investment evident in 1977 iebt+4. be at
least arrested in the current hall' year; there could be a
R-71-2209-12
5•
CONFIDENTIAL
•
tmoderate expansion in residential construction later in the year."
Comment:
This suggested section would:
avoid giving an overly optimistic view of prospective trends;
remove the emphasis given to expectations of falls in
official yields as a possible restraining influence on
lending by savings bans, a point which we feel was
overplayed in your draft.
the final section wed suggest wording along the
following lines:
"SUMMARY
Recent indicators portray a declining activity
picture. This is seen as a consequence of the excess stock
situation which had built up in 196 when construction rates
ran well ahead of underlying demand. In the latter part •
1977 and into 1978, lending has been quite strong. Although in
the liquidity rundown period, lending is likely to level out,
it may • sufficient in conjunction with the • • •
the stock adustment to prevent a further decline in activity.
Subject • major lending institutions receiving an adequate
inflow of funds, there are prospects for a moderate lift in
activity as the year progresses. Of course, the bulk of new
finance will, as usual, go • finance transactions in existing
houses as people satisfy their changing housing demands in this way.
As noted, funds flows over coming months will be heavily
influenced by seasonal and other factors and as usual, a number
of uncertainties surround the various projections. The funds
intake and liquidity of the major lending institutions will
require close attention in coming •
omment:
The changes to the draft would:
make it less sanguine about prospects for finance and
activity;
R-71-2209-12
CONFIDENTIAL
• 6
omit the assertion about queues, on which the available
evidence is, at best, contradictory.
SOME OTHER POINTS
Tables A and B do not sit together very well - why
not show a number of loans by the major lenders and
perhaps a series for average value of loans?
Table C: No figures are given for private approvals.
The data for commencements by states do not correspond
to the series we use - what is the source?
Some figures in Table A do not incorporate recent revisions.
An up-to-date table is attached.
R-71-2209-12
HOUSING FINANCE
•
26
Seasonally adjusted - $ million
NEW HOUSING TOTAL HOUSING
Savings Trading Permanent Major Savings Trading Permanent -- idajor
Sub- Sub -
banks banks building life OtherN Total banks banks building life •Other(b) Tctol
total total
(b) societies (2) offices societies(a) offices
1969/70 204.3 78.2 186.0 468.4 24.3 n.a. 461.4 210.1 368.4 1039.9 61.5 n.a.
1970/71 257.9 85.4 224.4 547.8 21.6 n.a. 558.2 215.5 421.2 1194.9 56.1 n.a.
1971/72 262.7 121.7 331.7 716.0 19.5 n.a. 656.6 337.3 671.6 1665.5 57.1 n.a.
1972/75 400.6 235.4 491.4 1127.4 20.0 n.a. 1076.8 702.4 1146.1 2925.2 62.7 n.a.
1973/74 420.2 244.0 307.8 971.9 24.7 n.a. 1157.7 722.1 754.4 2614.2 77.9 n.a.
1974/75 512.9 160.7 223.2 896.8 12.5 n.a. 1725.4 438.5 707.2 2869.0 41.5 n.a.
1975/76 617.2 230.6 470.5 1518.3 16.5 n.a. 2081.9 669.2 1549.2 4300.3 78.6 n.a.
1976/77 654.2 225.4 488.0 '1347.5 25.6 408.6 1781.7 1997.0 644.6 1552.9 4194.6 96.6 883.3 5174.5
Quarters
1974/75D 120.7 34.0 34.6 189.2 2.7 n.a. 434.7 66.7 93.4 614.9 9.1 n.a.
M 159.5 44.4 47.6 251.5 2.3 n.a. 545.9 124.9 161.0 81.8 8.2 n.a.
J 157.4 54.2 102.6 314.2 2.2 n.a. 531.8 157.2 362.2 1051.2 8.6 n.a.
1975/76S 137.7 52.2 113.2 305.L 2.2 n.a. 495.1 152.0 393.4 1038.6 11.7 n.a.
D 148.1 54.4 136.5 338.9 4. 102.1 445.6 511.5 161.5 45777 1130.7 20.0 190.0 1340.7
M 153.0 59.8 123.4 336.2 4.6 75.7 416.5 528.2 172.9 399.4 1100.5 21.6 175.6 1297.7
J 178.4 6o.2 95.3 p 553.9 5.5 95.7 435.1 543.5 171.5 286.8 1001.6 25.2 218.4 1245.4
1976/77S 170.0 69.4 104.6 344.0 5.6 109.5 459.1 535.1 200.4 316.0 1051.6 22.6 244.5 1318.7
D 166.2 63.2 120.7 350.0 5.7 105.7 459.4 530.1 181.5 388.5 1100.1 24.4 232.1 1356.6
M 149.9 46.4 132.8 329.1 7.8 93.9 430.8 470.7 136.1 415.4 1022.2 27.2 207.7 1257.1
J 148.1 52.0 134.9 335.0 6.9 101.4 443.3 478.4 142.7 445.2 1066.3 23.1 199.0 1288.4
1977/78S 167.0 63.1 142.4 372.5 6.2 109.2 487.9 552.1 167.8 465.7 1165.6 24.4 216.4 1406.4
B 165.2 51.7 120.1 337.0 6.9 122.8 466.7 536.5 163.4 383.9 1083.8 30.4 244.1 1358.3
Months
6 2.1 151.8 136.4 338.2 7.8 56.1 402.1
11 91 LIJ 44.5 17.2 44.4 106.1 26.4 134.6 50.0
F 50.1 16.3 41.5 108.0 3.3 51.4 142.7 155.7 46.o 134.7 336.5 10.2 72.1 418.8
M 55.4 12.8 46.9 115.0 2.4 56.1 153.5 163.1 40.0 144.3 347.5 9.1 79.4 436.0
A 42.2 15.8 41.5 99.4 2.0 31.4 132.8 144.4 45.3 136.6 326.2 7.5 62.2 395.9
N 51.8 17.0 44.7 113,5 2.1 32.6 148.2 163.7 46.9 150.0 560.5 8.0 69.0 437.5
J 54.1 19,1 48,8 122.1 2.7 57.5 162.3 170.3 50.6 158.7 379.6 7.7 67.8 455.1
1977/78J 54.1 21.7 48.8 124.6 2.0 38.8 165,4 178.6 57.5 161.8 397.9 8.1 69.9 475.9
A 59.3 19.5 48.7 127,5 2.2 32.8 162.5 180.4 54,2 158.8 393.4 7.9 69.7 471.0
s 53.6 21.9 44.9 120.4 2.0 37.6 160.0 173.1 56.1 145.1 374.3 8.4 76.8 459.5
o 53.5 17.1 40.5 111.1 2.1 46.2 159.4 174.2 51.6 126.6 352.4 10.3 86.9 449.6
N 66.9 17.8 36.9 121,5 1.7 40.5 163.7 196.1 57.8 118.8 372.7 9.5 86.4 468.6
D 44.8 16.8 42.7 104.4 3.1 36.2 143.7 166.2 54,1 138.6 358.8 10.6 70.8 440.2
,
J
. .. . • . .•
individu51 month-to-month movement o. ( ) Not seasonally adjusted. Includes finance companies, terminating building societies,
„.„„„,,,,i tgi.hi Nro., A ""
R-71-2209-12
Deputy Governor
HOUSING
Following the Governor's request at the 9.30 meeting,
I phoned Mr Freney in Treasury to inquire about the nature of
the Treasurer's interest in the paper on housing finance and
activity going as a joint Treasury/RBA paper.
Mr Freney said that, in a paper they had prepared
to brief the Treasurer on housing for his meeting on 9 March
with the Minister for EHCD, they had suggested the M1n6..ter -r,,,„„
offer a paper on housing to the Monetary Policy Committee;
Treasury also ifloated the idea that this might be a joint
Treasury/Bank piece. The Treasurer marked on the file "
I agree with your suggestion regarding a Treasury/RBA paper
On the basis of this, Mr Freney rang me on 10 March
(diary note attached).
Research Department
14 March 1978
DWStammer/dj
avt- 1,17
R-71-2209-12
ID Governor JrtvP1'
Deputy Govern 4/
Mr Freney, Treasury, 'phoned. He began by noting that
housing trends and housing finance were attracting quite a bit
of attention at present.
The Treasurer had received a call from the Minister for
Environment, Housing and Community Development last night (there
had also been some pressures from HIA and other sources). The
Minister for EHCD had outlined a generally depressing view of
the housing sector. In response, the Treasurer had said that
the situation merited close monitoring but no policy change was
On a suggestion from Treasury, the Treasurer is to
volunteer a paper on the housing situation to the Monetary
Policy Committee of Cabinet. It waoeproposed to have this paper
go to the Committee early next week. The Treasurer looked to
have this paper a joint Treasury/RBA offering.
Mr Freney said Treasury would vocadex a copy of
draft of the paper to us by close of business today, they
would be looking for our reactions early next week.
Research Department -..... ‘1•44,411.A.A.L.
10 March 1978
DWStammer/kw
cc. Mr Mallyon, BFD
R-71-2209-12
• Deputy Gover
Possible Information Paper on Housing to
Monetary Policy Committee of Cabinet
We'dm-discussed the draft information paper on housing
finance and activity with BFD.
We have important reservations about the paper:
it is not well drafted; but that could be fixed up
quickly enough. (See point 1 overleaf),
some statements need to be tied in more closely with
available data. (See point 2 overleaf),
the "Prospects" section is more sanguine than we are
inclined to be. (See point 3 overleaf).
The attached paper is a draft of a possible response to
Treasury: we would propose, if you are agreeable, to vocadex
our comments to Treasury tomorrow morning.
Research Department
13 March 1978
DWStammer/kw 4v
.4k1r=
.:d1
44-
VA
R-71-2209-12
[4
Comments on proposed Information Paper
on Housing Finance and Activity
o us in a 'phone conversation, the paper is
III
sumably, some tidying up of the expression
tands, the paper isn't as clear as it might
he activity picture - as distinct from the
esn't come out very clearly; the material
of lending between new and existing
e hard to follow, the prospects section
nd tightened.
2. The paper views some recent trends in a favourable light.
This might be a useful counterweight to the unreasonably
pessimistic view others are taking, but it is important that
individual arguments stand up to close scrutiny by others:
on p. 1 there is a comment that "Finance approvals
increased strongly in the second half of 1977...".
This is not true for the number of finance approvals.
on p. 1 there is a comment that "Savings bank approvals
were a record in the December • Our figures
suggest a figure • approvals in the June quarter of
1976 higher than in December quarter of 1977.
on p.2 there is a comment that The number of finance
approvals grew • in the second half of 1977,
approaching previous record levels". This statement
is • supported by the. seasonally
adjusted data we usually make reference toi.
on p. the net weekly intake of funds into ASB series 11
is compared with net weekly intake into all previous
series, including series 1. Others might look for
comparison with more recent series.
e) p. b) the comment is made that "speculative
building activity should increase since stocks of new
houses are at a more normal level". There could •
lags here: • confidence and other reasons, activity
may take a little while to pick up.
(f) p. there is the comment that there is no
indication of growing queues of unsatisfied "credit-
orthy borrowers. The evidence is as always,
somewhat contradictory but we suggest deletion of
gS (b) there is the comment that Indications are that
in most areas both private and government commencements
have bottomed out. This could be too strong
statement. Recent figures for local government
approvals suggest the possibility of a further small
fall in commencements in the March quarer. And, the
on government commencements is not backed up
elsewhere in the paper.
3. The 0-ospects section takes a somewhat more sanguine view
than we would be inclined towards. Our suggestions for that
section would be:
(a) to be more guarded in claiming (e.g. p. 3b lines 4-8
and p. 4 line 7) that finance is expected to support
moderate increases in construction activity. At the
R-71-2209-12
2.
least, these statements need to be tied much more
closely to the changed stock situation)
to mention existing policy, which is for an
encouragement of an increase in lending for housing;
major housing lenders are well aware of this;
to bring out more fully that the level of lending for
housing in coming months will depend heavily on funds
intake;
to reduce the emphasis given to expectations of falls
in official yields as a possible restraining influence
on savings bank lending.
4. On some other specifics:
We'd suggest a rewording of the section in brackets
in lines 4 to 8 of p. lb as follows: "(The speed of
this adjustment is contingent, however, on the need
to maintain a satisfactory level of liquidity,
particularly keeping in mind the seasonal rundown
in the second half of the year and possibly because
of the widely anticipated future reductions in
interest rates)." But this observation is a distracting
one so near the beranringof the paper, we'd suggest
it be incorporatedenth6TProspects section.
The final sentenceiseems to suggest that "close
watching" alone can "ensure" moderate activity growth.
In Table C, no figures are given for approvals of
private dwellings. And, the data by states do not
correspond with the seasonally adjusted series we
usually refer to. What is the source?
Research Department
13 March 1978
UgStammer/kw
R-71-2209-12
AUSTRAL_
R", 1 0 MAR 1978
To s TA NA tipt E XCRETARY'S DEPT.
SYDNEY
RSA gc- iEft4ci-i 0 WI F#SC J y
'(
tafaiSIN-73 FPJAT--KE
Oav1/4-6(
RECENT !
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4uartffr- Pet-mane-1,f Etui11ihi4
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it! .4 ;!or !---74-1,tfl!!:,er
4= i-11 in At fenevii EA - 117;Ufa
Savirts Pk werie 1-! *I • .S.;
R-71-2209-12
.r; t r
.4, '
-• , AA Edits
-----
BY VOCADEX t AUSTRAL
need, 10 MAR 1978
To STM E. ri-INI;71rwNTIAI SECIO3TARY'S DEPT,
SYDNEY
R4 '1k PAO NA f...1 y
HOUSINg viklAW-E A.O ACTIVITY
RECENT TREUOS
rrivattf A,.11 1 -04 Eive! hijt id
in 1-11 1 477. Th c-- of
(.4 fPola
Ihg velun4-i 1 : 1,,4ef !-u!:
cif u9=4-e- 7 1YIY“.$ dtj 17E;
it
i!? 1414!-Lh & tAlown
C). FitinLct. 11-,11- ly in the c.,L41114
tr:
fjf
r.
fit711 .
177 ti Ihig, has l'ot yt.1 tritd )rto
aLtiviy. I fact LCRIER.m.,-.. !lei.:dI Heil k-d11
quutar ff!f 1977 corm,let !lave 4c4I -1 .,.,#1n ihe
tv.at-trzr- :„ Mere r iiZ fre,i1J._ * 01)0w,
loan 1-;" 1 -,:ndert, A)
t4AS -in the SepiNtie fff vetovt-rivii!
frkep a Iii level jfl 11
Society app!-iivals te.w.thf-A .vg1 j..1! ihe
f€!i Iy in tf-
in 1'a Ciaenr4 LL i
eilnk werie a rtl.tlr'.; .vadrier.
R-71-2209-12
•
AUSTRALTA
Recd. 10 MAR 1978
31 VAD EX SECRETATIVS DEPT.
SYDNEY
eth.-rwzi.e
This relFit-c.ts („eme tati-finB uf
ftw !kJi4t;ifise
LY pt - u!
Lhe chciniles
lendinr4;ariavradul pot- ruu
es- tribeT !.-vtfed
-tti a 4G $! ut
.mIraqe6? - kuviP.v.,, u
adjutct_mnt w. by a 1-=- t-filvcv --;Az hulti
1
Ctittimonit4 Ct?eflf:!iTSet,uriiik-, in an iJ-01;
fuuce viiiLi.iu, 5n
9ail1'a (=_Qns,equnt
.- -IttLe qw-LI:t4 .11!to new
th -.t. -the vv(41,-Jrii,',1 cif fin,
Tb-le
T hi
„a-7•7
ik
iy4 the onti
new;14 t#4 1ti-4.10 treiat-ti PPQtweLiiv‘--- f2+
Howev,t- Zhe i11iIg (sf funds
irt:rri1UULt!.0r1
ciln 1' f::It-.711Y
ficiwzni4 tu4W1upp.tIzeiz; lu
unkt. Ir.! 'die ,1,-1-qu.3... of the
0%-- tfit
exas?,,efaThrikak
i 141 - LIVIUt
5-tAzt 4& ef the P'-q-- ula jolt e!TO
EA. fiNt
of !!vifet -14eant-, lit.
rat Tb 1431- 1;e pu!st 44-av expient2fk
•
,
, e04
the 1-q- tItess tr;Amg,41019041 tlittOu
,1ii1 (iir0.!- Aaitiulg to •
6“41
alterillion and ad4itiell-)can
•
• '
R-71-2209-12
ti
AUSTRALIA
k ( Recd. 10 WAR
1973
S YDNE
f" jj T
This is FO-lettd in a iLyn;i
1104 ‘ 0/9 firanc-e iu 41: orsienit
eLlin= in Mt.! Eirours4 4 p&r- Len-I 11)
art,und pe!- 1-E-1.--t1 in Ihe lacit -Fey' )t be
verne-mitc-d i_hat sltalific:an -; “c P e
•
tiPy f-ov
-“rh ttansai,ticall, tif-LUris
Tne uf .1_,ipt.!!!1,,- in iho
f,41 CI,
f11,1,s L.bt;‘,L- nd-tion&I
ttrt 1 i t i;
P !US 5 • hi? if- 41 I i t: L
c+ a kl,
j. wheri2 ihe
fluati =;-=tom 1-f!CiAde;1 fuvihos
falls 4.0 the ..
.;At-Lt,11-4 increal:ed
I I iv! NPt-) 1--La eg.; [`..mac r il -t the
;
mier mil l afr ftv.!;-- I 1.1;,! t±1 - 11
AilStrraii-a7 isOlferf.! excef„-„, 1_111 -Lt1
1-477 fulif2vtin9
Cul-FT,EnLemtznt$J ns,lanfl
, 1), uei:
Ov-t?rsall, ihe i!1 Loi:tmenten11._, centinued
Ittraticihoui 19775 but tint.
•
R-71-2209-12
OF
AUSTRALIA
t* —
I VO&DEx
SECRETARY'S DEPT,
SYDXEY
Guve,-!-etferA pii- :kci'if fuf,e e unr -:: it-J
Private mul'ict,itjtt fifswf., voL ;...wer
than in the -t- hle): uf_ t 1).
ed
to ',f1 4 tf-- WC-- V.
Ihc.37- t ir mo .
Jr—
I Wtsf -! ti-, sc,.-4,-
likely
-!ai _
4- 1.--tts-f-, f_cut ai
2 • - Tj;J
16,<1:
avvrovaI!...
.;c:Ilit-ettd in
the l&itF1 Uf =27 1 7, 01-:1- Vre Pirf -t111::111,7-1 ,!!-ftvit;, In 11116 1972.
tot
I i-klatI4,2eb fiat J
, ifiridc.,f- cfts.- , st-t--111.1;;1 lter, 1,-: thc-, y -el,
1
Depait 3.7 II 1-1 d&p,end ott
12.ett, -1,11 in Lhe
4.1
p.-attE.t-i, - ;ve
tevI --4f-unt J1nt.W2.11 be iip-
114 law.-.1411‘; Oil,: jut .
411-'1'.1 f-- lb Pt- itkl,,
' --.,.-- L1-,
r*- i-t'it f co-Ft:PF-1Y --1-„A* iht-i;-1its-
_ privaitf SI.E-CtQU fi. .:Fif.4.0 ex...1.1.‘,5,
-:. t!- :i,aLtif.211..,
R-71-2209-12
Ctincernin9 iltieq-est vatea s
the ef-Fett on Curvis fics of nf-w
Ly bvls(h:
at a kiie-l„:- S r 11 This L.,
21.,Pie-2
CeLval-±04.4 t-ifcent
Iv the lower vales r:1 the trjto- le121-73" ii e
chanai,s. will
finanLsat Ittfe uf vtfiul- 11 ti: heu!-=-11v4
pizt-telved lerk4ifit:
rifctf7t pt-ff,..j'by 0.g Pe!'
1 .1) 1LPZil:ci itiij
ttloye In c_ca!-.ave
,o7ctit_ip-Elttfd
litt wen,- i-
htlusltI9 IL,ansa
of furihet- In II: yifitia
R-71-2209-12
OF \‘
AUSTRALTA
Recd. 1 0 MAR 1978 I
pvefevence ft,v 1:111.J.F1119 ;Ate,v perlioliv
CC1J dar7q-ettid ObvittuiAy wm114 tu
ihe
re-zurT1-iit:O. Uf s!"-W14
H.atle vf _114 oF sAicti 6f!veltipt:!,firs. f ihe
ivei Qf fili4nLst 41I the 1,42111h1-.
expett-d lu
nflderte ilicrs aLliviiy, p.r 4,1tA;Ii.41.)y •
1c 4= new itrn,din9 .1-hould t-n: 1.e !iiotkf,
of
iiflO 4:voir
aFPrf"I'valf, 10 ;;c, =p4.411191e9.
1,41!
new
SpeLulative c4ik:did iic=t1-:Le !,,ikt, of
new htlia'.ze ai a tfo.e
are a majuv c.)141..Le 1,4 4-unt!- fot- 12ii-,-;
czs!cond hdf
of 1977 iin4 fiew wAI 1 1ad T!Ifeei
of Itie 40-1111h9 LcAlit-utticin
Aniathttf. iltfiuentinuIij1(.__ ,
inttruc-1- ien i 11''t tor
ccn‘iflenc_elp fl- t- in rfulii -ui:it Aiv11-Jihy
constf-ucticm.
R-71-2209-12
SECRETARY'S DEPT.
ccr\IF I DENT IA.
seen a_ the 1.
--ffla (2 4 V,' ihe slot-„k
Posi-+irin W.tch
5-01F-ad _f74. <1,1=1,.71. In ihif pirt 04 1977 eti.d
ient;i Nas bek-t: 1.-Afb!tqr io
rut--.4uwn 3sfeel Qui!r_ttliiLipaled
funds wilt suppfivt :-, f1 in new acl-Jvity. Of
f_0414"'S,41 b1 14 Ltf nEW Vollf u-ual
tr;Incciit.ns hou,
vt; pef.wle chf- 01/119
hausing dE-t!ian=j.- In this.;
fit:1-1- -to f.7.1_1Pvtiv -t:
•
F-tz4iTta,b1f, ,s4fli v ity :31-ew th hit irai:cicrito.4. titaJi
qu'l'-u!fs of untisfid bevrvwerti.
+1(04s. are 1.uit-d 1 lkvv,-41i1-114. Th& I do!
.,
ta.211,31 Wmomme watcf-Ii4 4-hey ,111.1-uri
actLvity 9P13,1t!
R-71-2209-12
r" rt
LL.‘ EC A/o
OF
AUSTRALIA
EX Recd. 10 MAR 1978
SECRETARY'S DEPT.
SYDNEY
CONIDENTIAL
5
LENDERS (a)
FINANCE FOR HOUSING BY MAJOR
ee-aonally Adjusted
TOTAL NEW RATIO
ENT
SAVINGS TRADING PERMAN
NN/TOTAL
BAKKS BAlaS BUTLDIHG
972 . 372
973-74 1,138 722
897 .313
'974-75 1,723 439
1,318 .307
975-76 2,082 669
1, 348 .321
6145 4,195
1976-77 1,997
7'16 1,044 337
197647 Sep 535 193
1,099 349
Dec 530 180
1415 1,026 333
Mar 471 140
45 1,066 335
Jr-rt 478 142
1977-711 Sep 532 162
8 .312
164 384 1,085
Dec
686 .320
705 2,143
1976 Ii 1,41455 373
2,092 668 .319
949 282 860
1977 1 214
704 '
...A
850 2,244
1977 II 1,069 326
..
lding Soc ieties
Loa n App rov als to indivi dua ls by Banks and Permanent Bui
(a)
of dwellings.
for construction or purchase
e_s, m.
C.44_3 0.-143-1-11 .4- 3 f t44 se
bt
R-71-2209-12
,woraimlaktee
41d ff AUSTRALIA
Recd. 10 MAR 1978
SECRETAI,Ar'S DEPT.- -
SYDNEY
CONFIDENTTAL
6
B. FINANCE APPROVALS: ALL SOURCES'
14000 origina1 figures)
PRIVATE TOTAL
NEW TOTAL RATIO NEW TOTAL RATIO
1976 Sep 27,226 6' .345 23,052 65,929 .350
Dee 20,924 63,084 .3i2 22,h85 67,323 =337
197( Mar 17,923 57332 .313 19,713 61,073 .323
Jun 18,211 c5,786 .326 20,031 58,9;81 .340
Sep 20,250 60,232 336 22,479 64,389 .3149
Oct 6,621 19,036 .348 7,309 20,324 .350
Nov 7,398 22,359 .331 8,126 23,754 .342
1976 11 42,150 124,591 .338 45,737 133,252 .343
1 917 1 35,134 113,118 .319 79,744
, 120,031 .331
1977 II (e) 41,279 122,324 45,632 .350
: "Hatming Finance or
(e) Month of December is estimFted by a pro-rata of 2 month to November
R-71-2209-12
rm %
di
t - OF 'Pr
e /t/O f i AUSTRALIA
V C) C.,. il; C.) E X
I
d MAR 1978
SYDNEY
CmirTrIITTAL
f
C_ INDICATORS OF DWELT-INC SECTOR ACTIVITY
(Seazonally Adjusted)
TOTAL PRIVATE COMMENCFm741..S*
APPROVALS
AUST NSW 1/IC QLD WA TAS
000) ('000)
1975 133.1 28.7 11.1 13.8 C.
1976 150.7 31.5 14.0 18.7 3.6
1977 107.0 31.4 30 . 7 22.1 16.8 2.6
1916 Sep 37=7
Dec 3L5
1977 liar 34.5
Jun 31.4
Sep 32.3
Dee 32.8
Falf-year:
IS NV j* f
16-.1 ic.g 1. I
• • ' _
tr.' ant .1 1,4 7*3
R-71-2209-12
11.""• It) VIANIY/0
SFCRETA:RY'S , Es:PT.
sts
•
•
•
•
GOV'T' TOTAL PRIVATE
COMMS DWELLING
ThVeS7hENT
40
NT Arm-lp 1966-67
ID
' VVVI ('000) price)
na 109.8 18.1 128.0 7,922
aim n0 . 8 171,1 144.0 1,539
0.8 11c.4 13.8 129.0 na
R-71-2209-12
-,v;11,VE 134
1oA011 10 MAR 1978
STt--1 ifiE01413TARY'S DEPT.
SYDNEY
ri is A itt t
sm. _ 4r. -
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R-71-2209-12
R-71-2209-12
BA
OF '44ti
AUSTRALIA
/vo f
Tecd. 10 1978 rarz
SECRETARY'S DEPT.
SYDNEY
frz taqi`ti s)
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7 A.
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R-71-2209-12
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iVE 44
,vo f OF
AUSTRALIA
Recd. 10 HAI.? 1978
cnwiinvNTTA_ S 'S DEPT.
SYDNEY
*."
Cf_mcerrizit;_.,
f
4-" 1 - t Ti: tht +i1
I Ly -e-,ii b-cIt(J
daia,
a el .ite S r Thj: ti
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R-71-2209-12
4N-tVE 4-4
OF
AUSTRALIA
Recd. 10
Pu-eference „
)1! perliolio
t del ht
:if trL
-
1.*±Vel: Of fiYc4n1- t,f II! the 1114brll,_ expuAti-d
1y
wr. new Atfr771.T.-11-4 - - -
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of 1977 1.!ew cyc,,1!
-47 ti9 tL (21 it '; d it i.
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COn - I“C+1-fin i„
R-71-2209-12
• /i/0 F. (
01
A-178TR A1,11
Reed. 10 MAR 197:
T rr!! T
127
11
;41 vi r T.
c4;1 10 the
1-1 0S41+.1. ,,-*77f id 1. t t-!en
I ,
..ithd iun44 ,
-1- 1)..!.n OeTitrol-h It pz±rt of 17477
.tas beetf itte
. - pun4uwri it-,
rtuinq 1114 -teIy .3.tfvei -Ju1f
fjnic # - wl_t urjtt tt4Wjeri ,31 3c15vity., 0f
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;.4,
2 :h€--y
R-71-2209-12
VE 11.4 47.
OF
A/0 f AUSTRALIA
Recd. 10 MARL. „.
SECRETARY'S DEPT.
SYDNEY
A FIN = .14-4
SAVINGS
1-..INT"r4 PEWAN ENT
BUILD I 4C-i-
172=1 t,
i
-1 -7
CI 71
197 4-75 3 n7
.-- FT,-
I
yLT
1 (1'47
3 23
1976-11 Sep
n-4-1(1
,;f:
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471
1, 0,6
j,j-n I ?1.
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hill 0 r
4 =,.---- %IC
k
R-71-2209-12
A),
OF v+4
Nc2 ff AUSTRALIA
Recd. 10 MAR 1978
SECRETARY'S DEPT. _
SYDNEY
7FTDRNTTAT-,
FTus.W.V r ; ALL Srm.177,74 Eara.
On00 original figures)
PRIVATE TiTrAL
ft-i
=e--,fr
V RAT-LO
•7 Th Se .
73
s Al V.,1,7L1 1c0
Dee t y_ •••
-
t 4
TT: _I ar 1.1,92q- c7
s
:7-1. -
r_41,54
I 86 .326 20,011
f. .10r1
etre r-1-21 -; f- $0324
7398 21 71 '21Z. rz, i1
r
2'2 7t=.11=
177 hc
1C-476 ..t
1 4 t7a,ai
ii5=1
Aj 120+031
1
1E477 iT 6=1) "'sr.
Lit)
r!___=_z ___ for toper
m,,4F1, —4, uY a 1_11-Q-1- Ln of 2 month to Novi5mtsr
figure,,
R-71-2209-12
ThDICATORS OF nidwi I 1-mr SECTOR
till y A
ft. zt s
3,11 V I
APPRO V ALS
t tILIV
AAA
z ri
R-71-2209-12
I Li I P.L_ PRIVATE
DRLING
N.
wal T
ii
=
R-71-2209-12
El ;OVV41410V--
DeU4y-404,44*KW--
Pr 7reney, Treasury* 'Atoned. He begnn notin_, that
housing trends and housing finance were attracting quite a bit
of attention at -resent.
reasurer -1'c! received call froz the *initer for
Environment* _!ousing and Community Levelopment last night (there
had also been some pressures HIA and other sources). The
.1.rliter for EHCD had outlined a generally depressing view of
the housing sector. In response* the Treasurer had told that
the situation merited close monitoring but no policy change vas
On a sugzestion fror res4 * the reet,urer iv o
volunteer s peptr on the. housing situation to the Monetary
Policy Committee of Cabinett, It wilis proposed to hsve this -,aper
go to the Committee early next wesk, Me Treasurer looked to
have this paptx a oint Treasury/RBA offering*
Mr Freney said "lreasury would vocndex a copy of a
draft of the paper to us by close of busines4 today; they
would be looking for our reactions early next week.
!-- esearch rtment
10 March 1978
:1fftammerikw
4
cc. rallyon* RFD
R-71-2209-12
F. 160
RESERVE BANK OF AUSTRALIA
,To
•
Date Time ........r .....::..........:J
WHILE YOU WERE OUT
of
Phone .6 302- 0 Ext.
TELEPHONED .7----PLEASE CALL
CALLED TO SEE YOU WILL CALL AGAIN
WANTED TO SEE YOU URGENT
Message ......
175
R-71-2209-12
R-71-2209-12
•
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