Writing for The Saturday Paper in April 2017,
Mike Seccombe gave us a hint of the disappointment Bill Shorten and Labor would suffer two years later. “[N]ever tell voters they’ve got it good. Speak NOT to their economic reality but to their economic illusions”. This is a lesson Shorten might’ve learned in an interview with Melbourne’s Neil Mitchell on 3AW around the same time in which the interviewer tried to tie Shorten down on just what defined rich.
After some sparring, Mitchell proposed the number $180,000 which Shorten refused to acknowledge as rich. As only 3% of the population were pulling this in 2017, it seems a fair number. Yet, Shorten would not be drawn in and Seccombe described the media ridicule of the loser of the unloseable election (Mark II) that occurred at the time. How could a Labor leader not view $180,000 as rich? Perhaps, you can see where we are heading.
Seccombe goes on to describe an MLC survey of Australians that found nearly 60% of Australians don’t think $1million in assets make you rich. Half of this surveyed group believed that you needed $150,000 to live comfortably. Further, “Thirty-three per cent of people earning $40-$69,000 per year aspire to greater wealth [and] 45 per cent of people earning $70-$99,000, 55 per cent earning $100-$149,000, and 71 per cent of people earning $150,000 admit to wanting more.”
This points to wealthier people being less content than the poor. People in the $40-$80k income range find the variation of income in their social circle to be comparatively small. However, if you move to the top 10%, which is $94,000 and above by 2017 figures, those in your decile cover a huge range of income that includes Gina Rinehart. Even if you’re at the bottom of that top 10%, your social circle is likely to include some very wealthy people.
Which brings us to the Capuchin monkey. See the clip below. As one of those at the bottom of the 10%, you are likely to be in a cage next to the grape eaters. What does all this mean? It suggests that aspiration is now such an integral part of our makeup that anyone who challenges it is likely to be flayed.
Income Distribution and Monkeys
We had a preview of the Scott Morrison vs Bill Shorten battle on this issue in Parliament during Turnbull reign. The Government had placed a “budget repair levy” of 2% on people earning over $180,000 which was due to come off in June 2017. Labor’s Assistant Finance Minister and deputy leadership aspirant, Jim Chalmers, attacked the Liberal Party in Parliament over its failure to extend the levy. Turnbull invited his Treasurer Scott Morrison to respond. Scomo gave us a cameo performance foreshadowing his later attacks on Shorten by reminding the Parliament of the Neil Mitchell interview and the fact that the top 10% of earners are not rich.
That is where we are. We have a Morrison Government and our aspirations are undisturbed. Yet, there is a broader context and it is very reason for this website. Just what are we repairing about the budget? Why is it so hard to address the needs of the disadvantaged and poor in our society? Here is the lesson. When Shorten was in Gladstone in Queensland in April he was confronted by workers on $250,000 a year wanting a tax cut. What Labor was offering was a reintroduction of the 2% debt levy. This was all framed within Chris Bowen’s “we will have bigger surpluses’,
What Went Wrong?
Labor’s plan was to shift money from the rich to the poor and middle class. They were going to remove tax credits for franked dividends affecting 3% of the population, grandfather negative gearing out of existence, increase capital gains tax on shares and investment properties, reintroduce a “debt repair levy” on people with incomes over $180,000. Can you hear the Capuchin’s stirring in the adjacent cage?
There are good reasons to tax the rich. One of the best is that people shouldn’t have excessive control over resources. As billionaire Nick Hanauer explains, give him a billion dollars and most of it will go into bidding up shares and the property market. Share it among 100,000 people and it will create jobs and income. Inequality is also bad for social cohesion. If you don’t address it, the wealthy have to build stronger cages.
And there is the aspirational argument. If you link assisting the poor with taking from the rich, you create three groups of enemies; those who are rich and know it, those who are rich and don’t know it and those who identify with the rich through aspiration. Randall Wray explains the problem from a USA perspective but it fits here just as well. In short, if you want the Capuchin’s at each other’s throats, link taking from the rich to give to the poor..
On the other side, there was NO need to link addressing the needs of the poor and middle class with challenging the wealthy. By all means go after the wealthy if that is you plan but keep these issues separated. Each of the three groups above resent money given to the poor. This is amplified by the taxpayers’ money fallacy. Each of these groups think the money is coming out of their pocket. Government propaganda supports this spurious notion.
Don’t Link Tax with Inequality
Which brings us us to the final point. We have this false notion that budget responsibility demands we balance. Just like a household, the Federal Government has to balance the books. This is simply nonsense. For example, Australia has run close to 80% deficits since 1901.
Finally, let’s be clear about what a surplus is. A surplus is when the Federal Government takes more money OUT of the economy than it puts in. Why would we want that when we have public hospitals and schools that need additional facilities and services? This is despite the resources we need to address these problems and many others being available. Why wouldn’t we want to put them to use. Why would we leave poor people without a job or a home? Is mental illness a desired policy outcome. If it is, keep going.
So, if you have come to this point and are still concerned about the need to repair the budget then you probably haven’t figured out where money comes from. For the country’s sake, it is of vital importance that you do so soon. Certainly before the next election. Government has failed us. Addressing the interests of aspirational Australians are now the key goal of government over the needs of the disadvantaged Australians or the concerns of the decent Australians. “We share a dream and sing with one voice…I want to to be rich”.
Nice piece, Warren.
Thanks Edward
Looks like a rather ironic twist on the notion of the “politics of envy” being an affliction of those in the lower half of the income spectrum. Looks like the bigger the income, the more unfavourably people compare themselves to those just a single step above them, probably because the $ figure difference is much larger for every fraction of a percent.
Actually, the only quibble I have with the article is: “Seccombe goes on to describe an MLC survey of Australians that found nearly 60% of Australians don’t think $1million in assets make you rich.”
I tend to agree with that as long as we are talking about the “asset” of housing (it’s not like it’s supplying the basic human need for shelter or anything). The $ value of your principle place of residence may have little to no bearing whatsoever on your day to day financial situation. For example, I live in Gladstone and when the LNG boom took off, the market value of my little shoe box absolutely exploded – yet I did not feel one cent richer and did not have an extra penny to spend. When the boom turned bust, the value of my house collapsed right back down – yet I did not feel a single cent poorer. If we have more than one house then it might rightly be regarded as an asset in a financial sense but we need to be clear if people were talking about having and living in one house or owning more than on house.
What can I say about the $1million doesn’t make you rich? We are mad. One of my great hates is speculation on residential housing. Turning where people live into speculative plaything is a crime. Note that our politicians are doing ok: https://www.businessinsider.com.au/australias-federal-politicians-own-a-staggering-524-properties-2017-4
A million dollars in CASH may make you relatively rich – the current price tag attached to your home may not.
While I strongly agree that the boom in housing as a speculative commodity has been a bad thing on multiple fronts, I think you may have overlooked the point I was trying to make – that the $ value of the house is notional. Just because “the market” says that a person’s house is worth a million dollars does not make them a millionaire. If they exchange it for a million in cash they still need somewhere to live since it is supplying the basic human need for shelter. It is likely that a comparable house will cost similar, leaving them financially no better off if they don’t own more than one house.
Put simply – no matter what your house is supposedly worth in dollar terms, you can’t live under a pile of dollar bills.
Have even those who would argue against the bubble of housing as a speculative asset – and I count myself among them – ,have some of them become so conditioned to see it as exactly that, that they think that someone who has lived in the same house for the past 50 years, is now in the final stage of their life and who – quite rightly – has no intention of leaving their lifelong home and community until failing health forces them into permanent care, that the current notional dollar value of their home necessarily means that they are rolling in money? That they own three Maserati’s and fly to Dubai every six weeks?
They may well be pensioners living a rather modest lifestyle in retirement after having earned a rather modest income their entire working lives, having scraped together enough to afford a modestly priced house 50 years ago – but the speculative boom in house prices over the past 15 or so years has caused the market to dramatically inflate the $ figure on the roof over their heads. How is that their fault? What if they don’t care about how much it’s supposedly worth and just want to be allowed to grow old and die in the home they made for themselves over a lifetime?
When the LNG boom came to town, the $ value of my parents unremarkable home went through the roof – hit three-quarters of a mil at one stage – and they simply didn’t care. It did not make one single cent difference to the amount of money at their disposal. When the boom went bust the $ value of their house collapsed back dramatically – again they didn’t care because it did not make them one cent poorer. The dollar value of their only house was and is an abstract concept, completely unrelated to their real financial status.
The point I am labouring to get across here is that we have collectively been so conditioned to conflate the word “house” with the word “asset” that large numbers of people of relatively ordinary means who have only a place of residence (no second homes) and who took out the loan before the bubble was allowed (encouraged) to begin inflating and blew the $ value of their home sky -high may be giving that response to the million dollar question for this reason.
I would agree that we as a society have become more self-centred and less egalitarian but I am putting it to you that there may be more than one reason for people answering the way that they did.
Perhaps a million dollars is stretching it – but at one stage I was well and truly on my way to being an on-paper millionaire through asset inflation as the value of my house appreciated to crazy levels. And yet far from being millionaires, we bought the house without any large income or wealth holdings to draw on – in fact, my wife was a junior classroom teacher and I was a school janitor. We were able to be the proud owners of a near three-quarter million dollar pad – simply because it’s market value was a mere fraction of that when we bought. It did not make us rich. We could have gone stupid raiding the ballooning equity in it but that isn’t free and clear wealth, that’s just more debt so we refrained, despite the bank sending us letters at the time encouraging us to do just that!
Have I managed to make my point clear?