JOHN Howard’s mean spirited and craven governance left a legacy of problems for the next government to clear up, from Defence project debacles to massive indebtedness.

From this perspective, it’s useful to think about money flows – like the way blood flows around the human body – where the flows come from and where they end up.

Living off debt

Under Howard/Costello, Australian housing prices rose to become the world’s most unaffordable. Basically, Costello created housing and debt bubbles that were then used to define our economic success.

The International Monetary Fund has stated that our property is the most overvalued in the developed world, and that 25% of the increase in value cannot be explained by economic factors (1). The RBA has also stated that houses in Australia will ‘never be’ affordable (2), probably a direct result of Costello tax policies that preferentially funnelled investments into real estate, thereby pushing up housing prices.

The high prices trapped people into huge loans that were barely affordable. If those house prices drop as the housing bubble bursts, there’s going to be a lot of serious pain and social problems, particularly if people’s homes become worth less than their mortgages, so that their debts exceed their assets.

Howard’s ‘economic’ success was always bogus, relying on a resources boom and debt fuelled growth that did not deliver infrastructure improvements or provide any real long term productivity benefits.
Instead, government policies drove much of our manufacturing and creative industries off shore, thereby creating a massive balance of payments problem that is placing us near the very bottom of the list of wealth producing countries (3). Now, if we need a manufactured product we usually have to buy it from overseas so that every purchase contributes to our current account deficit.

A recent ABC 4 Corners program (4) revealed the terrible impacts on individuals and families created by overwhelming debt and declining discretionary budgets. Pundits are predicting 300,000 households could forfeit their homes in the near future. That would create a vast underclass of homeless working families.

Think about it…a million people from the suburbs with nowhere to live.

Political influence

Howard’s initiative of making political donations more secret by raising the reporting limits to $10,000 has, happily, already been reversed by Kevin Rudd’s government.

Unfortunately, Howard’s political influence goes much deeper than that.

Under Howard, federal departments like Forestry were allowed to define their mission and goals in terms of industries that they should support (5), instead of in terms of value to communities and taxpayers.

In the case of Forestry the official line (6) is that ‘DAFF’s goal is to assist our forestry industry to grow, improve and capitalise on new opportunities while…’ 

This produces very different outcomes than a community oriented goal such as ‘DAFF’s goal is to help the communities of Australia achieve the best and most sustainable value from public forests’. This would require the department to determine what were the best and most sustainable options and act accordingly. The industry assist method only requires that the department avoid too much damage consistent with maximum industry growth.

Because departments are focussed on industry outcomes, when community members write to such departments complaining about the impacts that the industry’s activities are having, their complaints are easily declared contrary to industry needs and therefore without substance. Even independent studies by experts can be declared irrelevant on this basis.

Such distortions are a key part of Howard’s politicisation of the public services.

This creates the irony of highly subsidised industries, like forestry, that are net tax takers having more influence than taxpayers on how taxes are deployed.

It works out as ‘we pay, favoured industries say’.

Howard’s priorities

John Howard’s priorities are revealed by a recent campaign asking how Australians might better allocate taxpayers’ funds. The budget priorities for 2007 were:
• Automotive industry subsidies - $1.6 billion
• Company cars tax concessions -  $1.1 billion
• Aeroplane fuel tax concessions - $800 million
• Plantation forestry expansion (MIS) $400 million +
• Public transport - $100 million
• Solar energy $200 million
• Wind energy $0
• Energy efficiency $100 million
The huge gifts of taxpayers’ money being donated to industries like automotive and plantation forestry can be contrasted with the fact that University students now have to borrow (i.e. get into debt) to achieve an education so they can later provide the community with vital services.

Overall, Howard’s governance is based on Reaganomics – the plutocrats’ claim that if the wealthy get wealthier, it will all ‘trickle down’ and somehow benefit whoever deserves it. The economically disadvantaged become idle wasters who should no longer be given a ‘free lunch’ by government, they should be made to battle for their incomes.

The politics of division and advantage are two of his major strategies.

Taxed into submission

Howard’s ‘never ever’ GST, added a huge 10% price increase on just about everything because his craven approach to its introduction allowed State governments to avoid giving tax & charge reductions that compensated for the GST. Instead we got a massively complex and unfair system that took 10% more from Australians’ wallets and pushed up business compliance costs and add more to prices.

With income tax, GST and State and Local government charges, close to 50% of Australians’ income goes to government (30% income tax + 10% GST + rates, charges, duties and so on). Increased charges like power/water prices on top of this hit lower income groups hardest. Many are already scratching for enough food to put on tables so the requirement to pay more dollars from their dwindling discretionary budgets quickly makes it impossible for them to cope. Many people are now forced to put their vital discretionary purchases (e.g. food) onto credit cards so that they can live, adding to their expanding debt load.

They are only able to postpone disaster.

This expanding group of people is being driven into debt and poverty as a direct result of federal government wealth distribution policies that take from the poor and give to the rich – that is to corporations.

The number of people impoverished is increasing as government charges and interest rates bite into dwindling discretionary budgets, where food and fuel price increases are slashing people’s ability to eat and travel to work.

The sad fact is that the bigger government gets, the more costs they create for the rest of us and the tougher it is for low income families.

War on workers

Having pushed lower income families to the breadline, Howard then waged war on their security by destabilising their incomes and their jobs via Work Choices and AWAs. His government also favoured private health care while leaving public hospitals, education and other services under funded which created further financial pressures for lower income earners whenever they needed medical services.

Small wonder then that Kevin Rudd appealed to those impoverished families and individuals.

So it appears that our governments have been using our money to freely subsidise undeserving corporate interests, like company cars, after impoverishing Australians with crippling taxes that have led them into mounting debt and unable to afford non-government alternatives to public health and education.

These wealth redistribution policies that ‘take from the poor to give to the rich’ are expanding the pool of Australia’s working poor with every passing day.

The good news is that now we know where the dysfunctions are, they can be changed.

It is within the power of the Rudd government to start to turn this situation around by making corrections to these and other wealth transfer policies and practices, free up billions of dollars for the citizens, and show that they are genuinely interested in the welfare of lower income earners in Australia.

They will need to act quickly, before the next budget is too influenced by departments working on behalf of industries without commensurate balance to taxpayers’ interests.

Watch this space

Mike Bolan
Mike is a complex systems consultant, change facilitator and executive and management coach.

(5) DAFF forestry goals

Mike Bolan

This expanding group of people is being driven into debt and poverty as a direct result of federal government wealth distribution policies that take from the poor and give to the rich – that is to corporations.