Australia loosens reins on banks

Australia has taken its first tentative steps to free its banks from tight government control. The steps came in a package intended primarily to boost the sagging home-construction industry.

The housing side of the package provides for federal government tax rebates costing $250 million for new and recent home buyers purchasing their first home.

The rebate applies only in the first five years of owning the new house. The maximum deduction starts at $700 in the first year if the buyer has children and

The new home buyer also gets a better deal because of a plan developed by the government for the banks - the chief housing financers. It is in this plan that the banks get a taste of deregulation, but only at the expense of concessions in home loans.

People who had taken out a home loan in the past two years would be given the option to defer for two years a new increase of 1 percent in home-loan interest. The banks would also look closely at altering present arrangements for home buyers to reduce repayments in the early years of a loan.

But the biggest concession by the banks would be to provide an additional $ 400 million in loans for housing over the next 12 months -enough for about 12, 000 extra loans. This would boost housing construction by about 15 percent.

In return, the federal government agreed to let banks increase interest rates on housing loans by 1 percent, to 13.5 percent. Banks could also increase the interest rates on bank overdrafts of less than $100,000 by 1 percent, to 14.5 percent. The government had previously completely freed the overdraft rate on amounts larger than $100,000.

And finally, the government agreed to allow banks far more freedom in the way they can offer interest on term deposits and on the way the banks must structure their loans.

The banks welcomed these developments as a step toward implementation of recommendations by the Campbell Committee, which reported last year to the government. The committee recommended unshackling the banks from government controls and proposed that foreign banks be allowed to establish in Australia.

The government still has a long way to go in meeting even the interest-rate requirements of the free market, which the Campbell report recommended.

The head of the committee, Keith Campbell, estimated the true interest rate on housing loans should be about 15 percent, not the new rate of 13.5 percent. But he also said the housing package was a step toward deregulation.

The federal opposition was caustic about the government's new plan.

Its spokesman on economic affairs, Ralph Willis, described the new housing policy as a ''capitulation in the face of strong pressure from the banks who, while willing to reap the benefits, are unwilling to shoulder the social responsibility which their privileged position confers on them.''