Monday, October 18, 2004

Fair Dinkum

The Australian Election

In my quest to broaden the scope of Big Ell's Blog I have asked for help from people the world over. Only two have met my strict criteria, Sean Reilly and Stephen Burton. Sean (the Gentle Rant) caught the fever and created his own Blog, so if you want to read him look at the links on the side. I am down to one correspondent who will hopefully stick around for awhile. Stephen Burton (SB) is based in Brisbane, Australia and enjoys many of the same things as Big Ell; politics, music and drinking cold beers on the veranda. His business and law backgrounds not to mention his understanding of Lacanian pyschoanalysis will make him an important contributor to Big Ell's Blog. Take the time and read his excellent piece on the Australian Election.

How to Destroy Your Political Opponents Supporter Base, Create a Miracle Economy and Drive a Nation into Fear – The Story of the Re-election of John Howard in Australia

Australia this week voted to return the Prime Minister John Howard and his conservative coalition for a fourth successive parliamentary term. Howard dominated his Labor party rival Mark Latham with a highly effective campaign of fear and negativity targeted directly
at Australia’s middle class.

Labor has traditionally been Australia’s working-class party, drawing the majority of its support from middle class families and trade union members. During the 1970’s and 80’s Australia was dominated by Labor governments. Labor in this decade in Australia has completely lost its way, lost its supporter base and lost its credibility as a viable alternative political force. This has occurred predominately through the conservative coalition’s strategic attack on Labor’s supporter base.

The story goes like this; the conservative government implemented a funding policy 3 years ago whereby anyone buying their first home in Australia is entitled to a $7000 federal government grant of assistance. This money goes towards making up the requisite down-payment on a mortgage in a country that has one of the lowest levels of savings in the western world. Without this $7000 most people in their 20’s were typically prohibited from entering the home owner market. No longer.

The result of this is that the housing market skyrocketed as new home buyers entered the market in their thousands. House prices have gone through the roof in all capital cities in the country. Houses worth $230 000 only 5 years
ago are now often worth $500 00 or more. Home owners suddenly have found themselves to be sitting on massive sums of equity in their homes, so what to do? Go to the bank and borrow against it.

Now everyone in Australia is borrowing truck loads of money to get that new BMW, go on that holiday, or renovate their home by adding that swimming pool or back deck. Who wins? The Australian banks win as they now own the legal title to the majority of all private residences in the country. They are a clear winner making billions in interest repayments. Who else wins? The tradesmen who work in the building and construction industries also win as they suddenly can’t keep up with demand for new homes and renovations to existing ones (the wait for a builder in Brisbane is about 9 months currently) No surprise that the construction industry has the highest multiplier effect of any industry, that is, has the highest rate of financial run-on through all areas of the economy. So, now the economy booms (on the back of bank money) and Australia has seen consistent growth of about 3.5% each year for the last 3 years. Australia seems to be booming and the government can, and does, take the credit for Australia’s miracle economy yet nobody really stops to think about how it has been constructed. What you are reading is completely unspoken in the Murdoch dominated Australian media.

What about the first home buyers? Yes, they get have their new home, for a hugely inflated sum and now, like the nouveau rich are saddled with hundreds of thousands of dollars in debt. So everyone looks great in their new houses and cars but if you scratch the surface in Australia you find a massive bubble of debt, an inflated property market and your average Australian just managing to make the mortgage repayments each month. There is no room for any surplus spending in a country where the middle class is already taxed at 51%.

So what does this have to do with the election? Well, the government that handed out this money, the government that intervened in this market, now has the luxury of being able to turn around and tell those with mortgages “you had better vote for us because if you don’t, the economy will go down the toilet and interest rates will rise and you will all lose your homes”. What a brilliant tactic. The middle class, conned into borrowing billions are now scared to death about the prospect of interest rates going up. The conservative government, author of this apparent miracle economy can then run a scare campaign against Labor claiming that only they can competently manage Australia’s great economy. Labor’s supporter base, the middle class, now completely swallowed by bank debt have deserted the Labor party and voted for the coalition out of a fear that a return to Labor will see a return to high interest rates. It only took the mere mention of the prospect of an increase in interest rates under Labor to send the electorate running for the polling booths to vote for the coalition.

Lets not worry that the interest rates are set by the reserve bank and not the government. How can interest rates remain low in a country in the grip of a spending boom? They can’t. Regardless of the government, they will rise, and when they do middle Australia will be sent to the wall.

Australian voters have chosen to overlook the coalition’s right wing social agenda which is returning Australia to the middle ages. Australians in this election have said “if we can’t see it, we don’t care about it, and all we can see now is our new home and god knows, we’ll do anything we can to hang onto it”.

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