By James Moylan
A budget speech is very different to a State of the Union speech in the US in not only tone but also in scope. There is no longer any place for big aspirations or dreams in an Australian Federal Government.
A budget speech is invariably full of highly partisan rhetoric and reductive ideas which seek to condense the whole of our society down to being a simple ‘economy’. Citizens become consumers and communal aspirations become only those things that can be represented in simplistic economic terms.
More money spent equals ‘better’ or ‘worse’. Less money spent equals a ‘saving’ or a ‘cost’. Efficiency equals cheaper. Optimum equals cheapest. When the stock market goes up, it’s good. When the stock market goes down, it’s bad. Debt is bad. Surplus is good. Higher interest rates are bad. Lower interest rates are good. A high Aussie dollar is bad. A low Aussie dollar is good. Etc.
As a result in modern Australia we now largely lack any sort of a ‘big picture’ narrative. After so many years of focusing so intensely on all of the economic indicators, and highlighting these as measuring all that is important about our society, we have so traduced the social mythology of our country that our citizens now find it genuinely difficult to identify any aspirations or dreams that we all hold in common. Our society is now represented to be, first and foremost, an economy. We are treated as if we are atomised and autonomous consumers, investors, and taxpayers. Government is conceived of as being a ‘service provider’ instead of a Commonwealth. Every question is assessed using economic dynamics that are represented as being simple natural phenomena. So in the Aussie lexicon and discourse there is no doubt that the market rules the politics – not the other way around.
So instead of common sense our country has been running on economic sense for the last twenty five years. Yet while this seems to have made all the bankers, financiers, politicians, and big businessmen very happy indeed, unfortunately it also means that we have reached the current ludicrous situation where our leaders seem absolutely blind to the obvious social realities being experienced by the majority. If this was the only problem then it would be of no great consequence. Our leaders have often been well removed from the day to day problems of the average worker. But this time it looks like our political leaders are intent on letting their ‘economic common-sense’ lead our society off a cliff.
Despite what our politicians might want to say, economic activity is not social activity. It is a by-product of social activity. Economic indicators do not measure aspirations or plans. Moreover when you surrender the leadership of a society over to eternally pandering to the health of an ‘economy’ – then the imperatives of the marketplace slowly become national imperatives, and then turn into national disasters. No wonder our PM has his money in a bank in the Caribbean. He can see what is coming. So can anyone with any perspective.
While none of our politicians will admit that we are in the midst of a huge housing bubble: all the market analysts all around the globe are short-selling Australian bank shares. They are as aware as our PM is that we are in a parlous economic situation. No wonder our PM is rushing to an election. When the housing bubble does eventually burst Australia will be plunged into a deep and extended recession and there will be hundreds of thousands of investors left penniless. It has taken decades to dig a pit this deep. So it will likely take a very long time for us to climb out.
In 1975 the average house in Sydney cost $28,000 and so with the average wage of $7,616 any Aussie worker could aspire to own a home or could simply forgo the idea and rent as the cost of housing was relatively cheap across all of our big sunburnt land. Then in the 80’s and 90’s Australia renovated its economy. We decided to become integrated within the ‘world economy’ and, at the same time we replaced our political common sense with economic rationalism. The term ‘socialism’ was abandoned by all sides of politics and (apparently) every Aussie politician took an oath in favour of unfettered capitalism whilst holding a copy of the bible.
Suddenly ‘tax breaks’ were good, ‘tax’ was bad, ‘trickle down’ economics would assure that if the marketplace was happy then we would also be well looked after. A rising economic tide would lift all the boats in unison. So there was no longer any need for outdated concepts like ‘the public good’ and the ‘social contract’. Instead of the unemployed we had ‘leaners’. All the good in the world was now condensed within the persona of the ‘hard working and investing mums and dads’ of Australia.
So, just like in the first celebrated tulip bulb bubble of the 1600’s, our politicians and our society began to move away from common sense and simple morality to thinking and acting in economically rational terms. As a society we have treated our housing stock exactly like the Dutch did their tulip bulbs. We have turned all of our common sense over to the marketplace so it now seems perfectly reasonable for someone within the property market in Sydney to be buying a property forty kilometres from the centre of the city yet still pay more than a million dollars. It seems perfectly reasonable to most Aussies that they might want to borrow a sum equivalent to twenty years of their before tax income just to buy a house.
However while it might seem reasonable to Aussies: the rest of the world is watching in amazement. It is one of the wonders of the modern financial world. The Australian property market has become the biggest Ponzie scheme in history. It takes a rare combination of social mania and lax oversight to allow such a massive bubble to develop.
Most Aussies would consider it ludicrous that a skilled artisan in 1637 in Amsterdam might borrow up to fourteen times his annual salary just to invest in a tulip bulb. Yet the Australian economy has become far more dependent on our housing bubble than was the Dutch marketplace before that very first speculative bubble burst. The Dutch at that time also had a worldwide trading empire. Currently all we have is our bubble.
A whole generation of Aussies have grown up being taught that the marketplace is our society. That the marketplace can and will supply all their requirements from birth until death. None of these youngsters have experienced a recession. They believe that house prices just naturally always go up. They believe it is perfectly natural for a worker on an average wage to borrow more than a million dollars just to be able to buy themselves a house. They believe that interest rates will always be low. They have no longer term perspective.
In fact our communal economic delirium is so pronounced that even while it normalises the most ludicrous of financial propositions, it also assists in providing governments with reasons to dismiss or ignore actual dangers. For example the mantra of the marketplace actively promotes the idea that we must continue to burn fossil fuels, and dig up and export more of the same, for the sake of the economic good health of the nation. Similarly we have seen the drive to privatise state assets send electricity prices soaring and our focus on economic rights has seen the establishment of two tiered education and health systems and promoted a widening gap between the rich and the poor. And despite living in an economy rather than a society (or more likely because of it) the amount of disposable income in the pockets of Aussies has been shrinking for just as long as the housing boom has lasted.
In the Netherlands in the mid 1600’s their tulip bulb mania eventually collapsed when the bubonic plague caused them to suddenly realise that they were actually paying vast sums of money for something that was ludicrously overpriced. Perhaps when the effects of climate change cause vast numbers of highly leveraged houses to be submerged under a few feet of water then it might have a similar effect?
However I suspect that the housing bubble will burst well before we get our feet wet.
Overseas analysts all agree that Aussie property prices will fall at least 40% when the crunch finally comes. They expect it any day. When it comes it won’t harm our politicians though. They have a guaranteed pension for life.
