Listen to a Julia Gillard speech or a Wayne Swan answer in question time and chances are some variant of the phrase “managing the economy for working families” will get a run.
While Labor continues to trail the Coalition significantly in voters’ perceptions of economic competence, it’s much more competitive when it comes to perceptions of economic management in the interests of workers and what it likes to call “working families”.
It’s a key theme for Labor and one it will be hammering between now and the election. The Labor brains trust understands that while the Coalition are perceived as better economic managers, voters think the Coalition also tends to look after companies and the wealthy ahead of workers, while Labor will look after the interests of workers.
Reinforcing Labor’s obsession with the theme is that — partly by design, partly by accident — this government has delivered for working families who have their own homes. Labor is presiding over a low-inflation, low-interest rate, low-unemployment economy, in which wage growth has been broadly maintained (at about the same level as throughout the last decade, says the Reserve Bank of Australia). It has also made a significant dent on housing affordability, which has improved for seven straight quarters.
The strong dollar has also made major expenditures, like new cars and foreign travel, more affordable. And the government’s superannuation reforms, once they take hold, will ensure today’s generation of workers will retire with more money in their super accounts than they otherwise would have.
From the perspective of the government’s much-vaunted working families, it’s hard to identify how things could be better. The federal government is even trying to address the continuing state government-driven problem of rising utilities costs. Some might prefer the late Howard era of mining boom-fuelled tax cuts, a lower dollar and middle class welfare, but only if they didn’t have mortgage interest payments gobbling up their income due to high interest rates.
Not all of this is down to the government’s economic management, of course. The low inflation environment might be in part because the government’s fiscal contraction is ripping billions of dollars in demand out of the economy, but a higher household savings rate, more cautious consumers, the high dollar and greater competition via the internet have all played a role. Low interest rates partly reflect the extended period of global economic uncertainty and Europe’s depression though, again, Wayne Swan’s fiscal contraction has provided the RBA with greater scope to cut rates. Then there’s the mining boom and Chinese demand for our minerals.
But if you cast your mind back to the issues then-Opposition Leader Kevin Rudd was seeking to exploit in the lead-up to the 2007 election, you’ll notice that, almost by accident, this government has addressed two of the big issues on which Rudd differentiated himself from Howard: housing affordability and cost of living pressures.
Moreover, it has done so without the gimmicky, pointless mechanisms Rudd campaigned on — the First Home Savers Account, and consumer watchdog sites like FuelWatch and Grocery Choice, half-baked pseudo-schemes from a party that wanted to empathise with voters over (wildly overhyped) cost of living pressures but unwilling to actually do anything to regulate markets.
But where Labor has failed is in taking advantage of the benefits for housing affordability of low interest rates to take a long-term approach to that issue. For a time, the Rudd government appeared committed to taking a long-term approach by putting the issue of housing supply front and centre on the COAG agenda, complete with Treasury reports and commitments to intergovernmental action as part of “a housing supply and affordability reform agenda”. After Rudd was removed, the issue dropped off the COAG agenda as if it had never existed. Since then, only Joe Hockey has occasionally displayed some interest in it.
As a consequence, the biggest improvement on housing supply in recent years has been the election of the O’Farrell government in NSW, which breathed some desperately-needed life into the country’s largest property development market, one that was virtually killed off by NSW Labor.
The overall result is that, while housing affordability has improved significantly, renters are up against it in metropolitan areas. Working families who rent their accommodation have thus struggled to enjoy the full benefits of a low-inflation, low-interest rate, low-unemployment environment.
It’s a significant blot on Labor’s otherwise very strong record of managing the economy for working people, especially given it was actually on the government’s radar until Rudd’s demise. And it’s one it could still seek to address before it goes to the polls.
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