RN BREAKFAST WITH FRAN KELLY
MONDAY, 5 DECEMBER 2016
SUBJECT/S: Widening inequality in Australia; levels of home ownership; value of unions
FRAN KELLY: The widening between the rich and the poor manifests itself in different ways around the world. Here in Australia the marker between the haves and the have-nots is fast becoming whether you've managed to get your foot on the property ladder or not. That's just one of the drivers of rising inequality in this country according to Labor's Assistant Treasurer, economist Andrew Leigh. Later today he'll give the second of three speeches he's written on inequality, in which he'll also identify Australia's tax system, falling union membership and increased market concentration as factors behind the widening gap between the rich and poor in Australia. Andrew Leigh, welcome back to RN Breakfast.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks Fran, great to be with you.
KELLY: Before we get to the reasons why inequality is on the rise in this country, let's get some perspective here. Because the gap between rich and poor in Australia is nothing like that in the US where CEO pay has skyrocketed and some states don't even have mandated minimum wage. Here in Australia we have a high minimum wage, a comprehensive welfare system, a national health scheme, and a state pension system. What really do we have to worry about?
LEIGH: You're right to say that inequality here isn't as bad as in the United States, but certainly if you look across the advanced world we're in the top third of the most unequal countries. We're a nation where inequality has risen markedly over the course of the last generation. The top one per cent's share has doubled; earnings have risen three times as fast for those at the top of the distribution like financial dealers and anaesthetists, compared to those at the bottom like cleaners and check-out workers. And that great egalitarian-
KELLY: So the rich are getting richer is the point?
LEIGH: They are indeed. You're right to say that, unlike the United States, it hasn't been true that the middle has completely stagnated, but we're a nation that prides ourself on our egalitarianism. A nation where we like sitting in the front seat of taxis, we don't much like tipping, we don't have private areas on the beaches. Egalitarianism is central to the notion of what it is to be Australian. And that's why it really matters that that egalitarian ethos is under threat from this continual rise in inequality we've seen.
KELLY: And the notion there of the egalitarian ethos – how directly is that linked to the gap between the rich and the poor?
LEIGH: Well, you can have your ethos going away from your economics for a little while but eventually you start to get into trouble. Right now we've got the home ownership rate as low as its been in six decades, inequality is the highest it’s been in seven decades, we've got more people behind bars – as a share of the population – than in a 110 years. So on many of these indicators we're increasingly becoming a more divided society. What I want to do is to see a restoration of, not just Labor values, but Australian values. That notion that "Jack isn't as a good as his master but maybe better". That we are a nation that looks after first those who have the least.
KELLY: Let's talk about home ownership. The great Australian dream, as we know. It's often used as the indicator of egalitarian Australia. You've just pointed out it's at its lowest level in more than six decades. But since reaching a high of 70 per cent back in the sixties, the rate of home ownership has been relatively stable – in the mid to high 60 per cent range – so do you think the difference at the moment, rather than being about less people owning their homes, is more about the level of debt that households have gone into to be able to buy a home?
LEIGH: Debt is certainly a concern. That's one of the reasons why I am worried about would happen if we lost the AAA credit rating, because so many people are so over-stretched right now. But you can see the harbinger of what might happen in home ownership from looking at home ownership rates among young Australians, which are ten percentage points lower than they were a generation ago. And looking at the gap in home ownership that's opened up between high and low income Australians. You know when I was born some 40-odd years ago, high and low income Australians had the same rate of home ownership – equally likely to own a home. Of course, the rich had bigger homes, the poor had smaller homes. But that's transformed now. Low income households are increasingly being locked out of the property market and I'm worried that the Liberal Party doesn't seem to much care about it. You go back to Menzies' "Forgotten People" speech and he talks about that desire to have, 'one little piece of earth with a house and a garden which is ours.' But the modern Liberal Party stands up for landlords, not for homeowners. It's a very strange thing.
KELLY: As your words there convey, this speech is pretty partisan I think. And you have already declared today that equality is a Labor value as well as an Australian value. I'm sure the Liberal Party would argue the same. But if we learned anything from recent elections here and in the United States and in Brexit, is that the general public are abandoning the mainstream parties. No different in this country. The primary vote for Labor was extremely low and at the moment it's even lower than it was at the time of the election. Labor doesn't seem to be perceived as the champion of Australia's forgotten people either.
LEIGH: I'm absolutely concerned about the decline in the major parties' share that you see not just in Australia, not just over the last few years, but across the advanced world for recent decades. But you don't solve that by becoming a snake oil salesman, you solve it by going straight to the truth of the matter. On the issue of inequality, there is a clear partisan divide. Labor does ourselves no favours if we fail to speak out about the impact that declining union membership has had on widening the gap between rich and poor.
KELLY: What is that link?
LEIGH: Let's take the simple example of the gender pay gap. If you're in a union, the gender pay gap is half as large. Let's take the example of the Indigenous/non-Indigenous wage gap. If you're in a union, that gap closes by two-thirds. Unions are one of the strongest forces for egalitarianism in Australia today. This war on organised labour that we've seen from the conservatives over the course – not just of this Government but under John Howard as well –is having the impact of driving away the dream of Australian egalitarianism.
KELLY: Well again that is a very partisan view; union membership has been dropping for 25 years, 30 years? Not all Coalition governments in that space.
LEIGH: That's certainly true. This Government and its predecessor have taken a particular approach which is focused on trying to degrade the reputation of unions and trying to take away the ability of unions to make their case. Unions have fought in the past for the green bans in Sydney which saved Centennial Park and the Botanic Gardens. Unions have been behind equal pay for women and equal pay for Indigenous Australians. They didn't just give you the eight hour day and the weekend and sick leave, they've also fought for a more egalitarian wage structure. Without unions you end up with this increasing pay at the very top, the tripling of CEO pay for the biggest Australian firms while wages stagnate down below. So yes it is partisan, I make no apology for that Fran, because we have to tackle this issue directly.
KELLY: Andrew Leigh, thank you very much for joining us.
LEIGH: Thank you, Fran.
KELLY: Andrew Leigh is Labor’s Shadow Assistant Treasurer, he will be speaking about the rise of Australian inequality this afternoon in a public address for the Per Capita think tank. It's three speeches he's preparing, this one is Explaining the rise of Australian inequality; ‘Just Ideas’ Talk Number Two.