Howard's Snatch and Grab

John Winston Howard’s battlers felt a distinct chill as they watched him deliver his campaign speech in Brisbane yesterday. They were right to shiver. Howard had declared war on Australia’s poor.

He revealed that, if re-elected, he will work quite deliberately against their interests.

Although Howard is seen as the best political performer of his generation, he is often oblivious to the subliminal messages he sends out. His latest clanger came in a bold declaration during his campaign launch, that is central to his bid for re-election on 24 November: ‘I want to complete the transition of this nation from a welfare State to an opportunity society,’ Howard said.

It should be unthinkable that a sophisticated modern politician, leading an increasingly prosperous nation, would boast of attacking the poor particularly as roughly one Australian voter in five depends on one some kind of welfare payment. But, effectively, that is what Howard did.

Naturally, Howard wants to emphasise what he will do, rather than what he has already done as the politicians keep telling us, this election is about Australia’s future. Howard seldom hides his achievements, but this time he let the Australian Bureau of Statistics (ABS) explain his success at redistributing Australian incomes in ways that favour the rich.

Figures released by the ABS last week show that the Howard Government has been no slouch at this game. The implications of the figures are startling. They show, for example, that the share of national income captured by the poorest 20 per cent of Australians has actually fallen while the Coalition has been in power.

That is, Australia is leaving its pensioners and working poor behind as its national prosperity rises. These ‘battlers’ as Howard patronisingly calls those in the bottom 20 per cent of earners had an 8.3 per cent share of Australia’s incomes back in 1996-97, when the Coalition started its first term. But that had dropped to 7.9 per cent by 2005-06, the latest period for which such figures are available.

‘So what?’ you might ask. ‘That’s just pointy-headed economic talk.’

It isn’t. Those figures imply that, over the life of the Howard Government, almost $2 billion has been transferred from Australia’s poor to those who are much better off. That has been achieved, quite simply, by leaving the poor out in the cold, as the good times pass them by.

What, though, of those who get the pick of the fruit at the top of Australia’s income tree? Those lucky enough to fall into the nation’s top 20 per cent income bracket now get a significantly bigger share of total income than they did in the early years of the Howard Government. Their share of the total take has risen from 37.1 per cent to 38.5 per cent over the same time which means their incomes are now almost $2.7 billion a year higher than they were when the Howard Government came to office. This is a handsome ‘prosperity dividend’ for already well-heeled Australians.

Image thanks to Fiona Katauskas.

The Government can certainly point to the fact that the incomes of, say, Australia’s poorest 10 per cent have risen quite significantly over this period. They gained a very useful $48 a week. Thank you. The top 10 per cent, however, saw their incomes rise by $247 a week over the same time.

By any standards, John Howard’s achievements in the field of income transfers have been nothing less than biblical: Unto the rich, much more has been given; And from the poor, relatively speaking, even that which they had has been taken away.

The ABS’s report clearly exposes this. It reveals, for example, that the number of families and other households in Australia whose net wealth exceeds $10 million more than doubled to 16,200 in just two years. (True, the ABS warns that the 2003-04 figure, which found just 7,500 in this very fortunate situation, should be ‘used with caution’ and there is good reason for that. But this is still the best estimate we have.)

The figures clearly show that the pace at which the fortunate few are accumulating wealth in Australia has accelerated sharply over recent years. Booming property and share markets have been very good indeed.

But we aren’t all winners. The ABS also shows, for example, that 75,600 Australian families and households now have negative net wealth. Their debts are bigger than their assets. That number has also risen sharply, soaring by a third over the same period.

Howard is now brazenly boasting that there is much more to come, by way of income distribution. Yet he still doesn’t see why he frightens so many people.

Labor once tackled Howard in Parliament over the sharply rising property prices that now frustrate thousands of young Australian families who want a home of their own. His reply was callous he simply said he had received no complaints from people who had become richer as their property values rose. It was a very revealing comment.

WorkChoices is undoubtedly the heaviest weight Howard put into his own saddlebags before he reached the starter’s gate for this year’s election. Critics call that plan which no longer dares to speak its name a ‘low wage policy.’ While highly skilled workers stand to do well out of it, those who most need protection will, in all likelihood, suffer as they are forced to trade away valuable rights like overtime and penalty rates.

Still, Howard might well have got away with it if he had not been so clumsy implementing the plan. His last minute fix, the Fairness Test, has effectively nobbled the entire operation by basing its critical comparison on the old, supposedly dilapidated, pay system that the new scheme was meant to replace.

But back to the ABS figures. The Australia that the battlers see is very different from the one the wealthy enjoy. Young families with big mortgages now tremble at the Reserve Bank of Australia’s (RBA) macho talk of raising interest rates, yet again, to beat inflation. They found the RBA’s revelation that Australia’s big banks are already paying an extra 0.3 percentage points for the money they borrow to lend to their customers particularly terrifying.

Although the big commercial banks measure their profits in billions of dollars, they are also warning that they will raise home loan rates, regardless of what the RBA does. They say they must do that to cover the extra borrowing costs they are incurring as a result of the US sub-prime crisis.

The RBA’s quarterly report, released this week, leaves little doubt that further official interest rate rises are in the pipeline, and many Australian families will find that they can’t meet their payments if that happens. Australia too could well have sub-prime troubles on its plate.

The US experience has already caused property prices in many American cities to collapse. Anyone who believes it can’t happen here is foolish. It can and did in the 1890s and the 1930s. Those times were also marked by very sharp divisions between the rich and the poor.

Any drift back to that kind of inequality carries real dangers. A popular song, from the 1890s, when many Australian farmers were forced off the land by bank foreclosures, which zealous police eagerly enforced, says it all:

There isn’t much to choose
‘tween the bankers and the screws

John Howard’s plan is a big step backwards for Australia’s social cohesion. He still, operates and thrives on division.