JOCELYN PIXLEY. Trying to revive Howard-Costello market slogans.

Feb 4, 2019

The Coalition’s strategies for 2019’s election include reiterating Howard-Costello slogans. Australia’s 1996-2007 racist divisiveness is a factor while its economic policies copied decades of attacks (UK and USA) on social justice. But the sainted banks delivered the GFC just as Howard lost his own seat. Rudd-Gillard prevented the worst finance crisis fallout of other rich democracies but could not reverse Howard’s tax cuts for the affluent, largesse to private schools, lards of privatisations, plus a Goods and Services Tax on everyone else, while unions’ ability to gain fair wages was reduced. Can Howard slogans resonate in 2019?

Rudd-Gillard’s efforts at cross-party conciliation were lambasted, like Obama’s, yet Gillard left some fine policies. Abbott, abrasive forerunner of expansive misogyny and racism, conveniently denied the GFC as historical fact. He disinterred Menzies’ slogans against Commie red tape – over anything from our environment to banking.

Lib-DLP slogans, to Turnbull-Morrison variants, do not always define Liberals but policies are often incoherent, being rarely upset with explanations. Howard had bright slogans for Australians as ‘shareholder-citizens’ with access to newly ‘democratised credit’. Everyone could have their dream picket-fence home and retire, with tax benefits, to luxury. The GFC disrupted that utopia. By Turnbull’s sterner mantra of ‘laws of supply and demand’ for more regressive tax cuts, few were convinced – say, in Longman’s 2018 results.

None of us should have swallowed Howard-Costello refrains but, beyond vague unease of injustice or regressive celebration of choice, people like me in sociology only criticised economists pushing vistas of what “should happen”. The vista from apparently scientific laws that happened is a desert and disorder.

With experience, history and plain logic, more of us see that taxes are no charity as so often purported. When the well-off and corporations push most taxes down to those least able to pay, there is no ‘trickle-down’ of Turnbull’s ‘law’. Instead asset inflation (on houses, shares or Bitcoin) takes off on tax largesse, until its bubble bursts. That hits affluent tax minimisers first. Why this irony?

All debts become more burdensome under deflation yet the first to default/collapse are the gamblers on assets and money. Traders in financial markets tend to take out margin loans (and other ‘near’ loans) to bet on asset price rises or falls (going ‘long or short’). As debts become more burdensome, these assets are sold off in fire sales until no-one is a buyer but the jackals. Financial markets stop – the low waged and non-waged, enduring most of the taxes too, are unable to borrow, more default while the value of debt rises. It improves bank dividends from the crash of incautious selling of debt, if little else. While margin loans are first to be called, mortgage and business loans unravel too. As debts become difficult to service, banks foreclose on farms, small firms and houses: people’s homes and livelihoods, and banks and shadow banks try more dubious efforts to sell debt.

This pattern then sees debt deflation threaten, were taxes not raised progressively (on the wealthy and profits) to stem the initial asset inflation. Not for the LNP, which also fights unions too, with convenient if illogical attacks against fair wages essential for active economic sectors, and capacity to service debts. This is in banks’ direct interests (inconveniently!) since clients who avoid or pay off debts are ‘parasites’ sucking bank profits.

Taxes then are no charity, shown in leveraged financial market trading (and many other incoherencies). Although the Productivity Commission has produced earlier thoughtful reports, its 2019 Report on Superannuation appears not to know how financial markets operate (either). It covers itself with an “independent panel” but it seeks “top performers” among super funds over four years, to start weeding out “worst”. That relies on money market estimations, markets which operate quite the opposite to ordinary productive markets of different sellers and buyers. The reason asset (and money) markets are prone to bubbles far more than goods and services markets is because producers of the service or good are the sellers, to the buyers or consumers. Take sellers and buyers of milk: there may be gluts or shortages of milk, but not ‘bubbles’, since neither dairy farms nor milk buyers vanish totally, whereas in financial markets both disappear, since the difference between buyers/sellers does not exist. The trick (gamblers’ curse) usually for the big actors is to get out first – as the movie Margin Call showed (Turnbull maybe only experienced that bit). The Productivity Commission assumes financial markets make ‘judgements’, wrongly, since a super fund may buy/sell relentlessly to reach the “top” until it doesn’t, and cautious funds (ideally with lower fees or mutually owned) “perform” better over a long haul.

These examples bring to light wider problems – financial markets rely on regulations to keep a balance. But Costello’s baby ASIC was hamstrung on faulty grounds (like the Productivity Commission) that financial markets are efficient; provide information; make judgements and there are no bubbles! Other regulators are stuck in pro-competitive market metrics too, whereas a familiar home is not an asset to flip; an energy or (worse) water market gives no whatever judgement and relies on past (dead) data. The Big Four banks still mostly have holdings in fossil fuel. We await the banking RC’s report on laws broken (partly based on Gillard’s legislation attacked for the past five years). Perhaps before the Commonwealth election the LNP will change some policies, given the many dangers to our social fabric and life on earth. Or perhaps John Howard did destroy our egalitarian, cautious ethos.

Jocelyn Pixley was a full-time academic and is now Honorary Professor at Macquarie University. 


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