JOHN MENADUE. The growing social divide.

Nov 9, 2017

There are ominous signs that Australia is breaking up into different social tribes.  Our claimed egalitarianism and social mobility are under serious challenge.  A mixed society is the best guarantee of social cohesion and social improvement.  That social cohesion arising from ‘inclusive growth’ is also good for the economy. But social cohesion rather than economic growth is the key national building block. 

The breakup of social solidarity is evident in many areas.


The pernicious consequence of $11 billion p.a. Australian government underpinning of private health insurance is underwriting a two-tier health system, with the wealthy increasingly gravitating to private hospitals and private care, and the public system being reserved for the less wealthy.  The wealthy jump the public hospital queue by going to private hospitals and the Australian government is underwriting that process.  We are heading in the disastrous direction of the U.S. health system which is based on private health insurance.

The data tells the story of how government-subsidized private health insurance is dividing us up into different health tribes.  Only 35% of the most disadvantaged people in Australia in the first and lowest quintile have private health insurance.  In the most advantaged and highest quintile, 79% have private health insurance. To those that have much ,more will be given!

The social solidarity envisaged in Medicare is becoming seriously eroded.  The Coalition is deliberately doing this and the ALP does not seem to care.  $11 billion of taxpayer money is being used each year to break up our universal health services provided through Medicare.


The funding of education on a ‘needs basis’ has been seriously eroded with large amounts of public funds going to wealthy private schools, both independent and Catholic.  As Dean Ashenden in Inside Story has pointed out:

“Australia now has an unusually high concentration of students at both ends of the spectrum and a relatively small proportion of schools with socially mixed enrolments … The Catholic sector established to help the poor has offloaded much of that task to government schools. … A quarter of students in Catholic schools are not Catholics and a half of all Catholic students, and almost certainly a relatively poorer half, are now enrolled in government schools.”

In largely wealthy areas of Sydney, for example, well over 80% of students go to private schools.  By contrast in Western Sydney there are numerous suburbs in which over 85% go to public schools.  Billions of public money is being spent annually to fund division  in our educational sector.  Yet schools should be a key area where young people of different social backgrounds mix and learn together.

The principle of needs-based education and schools as the focus for all students of different social backgrounds is being seriously challenged. Without a much higher social mix of students, Independent and Catholic Schools should not be funded.

Housing and the generation gap

ABS statistics show that 65 to 74 year olds were on average $A480,000 wealthier in 2015-16 compared with twelve years before.  But 35 to 44 year olds were only $A120,000 better off.  Even worse, 25 to 34 year olds were only $A40,000 better off over the twelve years.

The biggest factor in this growing division between generations is property. Yet the Property Council does all it can to keep property prices up and exclude young home seekers.  Not surprisingly, home ownership rates among households headed by 25 to 34 year olds fell between 1981 and 2016 from more than 60% to 45%.


In addition to this growing exclusion of young people from home ownership, the social amenity of people living in relatively underprivileged areas is becoming  more degraded.  In Sydney for example, development is being concentrated in areas such as Canterbury, Bankstown and Rhodes that are already disadvantaged socially, educationally, environmentally and in access.  The intensive ‘development’ is being concentrated in these Labor-aligned areas. The Coalition homeland in leafy suburbs is being relatively untouched.

The recent campaign against Council amalgamations in NSW is another example of this social exclusion.  The wealthier suburbs like Woollahra did not want to share services and wealth with poorer councils, despite the obvious efficiency benefits of larger councils.  The debate was dressed up in terms of democracy and localism, but in reality it was about self- interest with the legacy councils determined, at great expense, to keep themselves as governments for the rich.

Local government in Australia is the one level of government where representation correlates most closely with socio-economic status.  To protect their position and their privileges, the legacy councils fought hard to remain exclusive rather than share resources and benefits in a more mixed community.  The wealthy of Vaucluse didn’t want to associate and share with the people of Malabar.

Wages and Incomes

Perhaps the most obvious social and economic division is reflected in poor wages growth of less than 2% last year.  This slow wage growth has been associated with an attack on penalty rates in particular and an unrelenting and more general attack by  the Turnbull Government and some in the media, such as The Australian and the  Australian Financial Review, on the trade union movement.This is despite the trade union movement fighting for its life against the entrenched power of business and governments.

We had a Royal Commission to attack the trade unions but not one to expose the activities of the banks. This was all before Michaelia Cash and her Registered  Organisations Commission urged the AFP to raid the AWU for a small  donation 10 years before to GetUp. God help us!

While wage growth has been stagnant, profits, executive salaries and tax evasion are increasing.

Wealth in Australia does not go to those who invent or make things, but to those who can twist the arms of government for political favours to advance profitability. Rupert Murdoch has developed a unique business model to attack or seduce governments in return for business concessions.

Regulatory capture takes many forms – mining licences, gaming and liquor licences, TV licences, land-zoning and numerous other areas such as health and transport where lobbyists are able to extract enormous concessions from governments at the expense of the community.  This regulatory capture is a major cause of growing inequality. Rent seekers and lobbyists are corrupting public life and promoting a growing sense of unfairness and privilege.

Even our Productivity Commission is now calling for economic policies in favour of greater fairness.  It calls it a ‘shift in the dial’.  This follow repeated calls for more inclusion and fairness in society by the IMF, OECD and even the Bank of England.

Society must set the boundaries for the market and not the reverse. In recent decades, the market has been intruding more and setting the boundaries for society.  We have seen it in so many areas – privatization, commercialization, contracting out, deregulation and the undermining of public services like health and education.

The signs are ominous of growing social division and alienation.  It is ready-made for populists who chant slogans but have few answers.

Will it be left to the populists to exploit the growing social division and alienation, or will our major parties grasp the nettle with sound policies and programs that include everyone.


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