Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I commend Senator McAllister for bringing forward the Productivity Commission Amendment (Addressing Inequality) Bill 2017. The Greens would support, in principle, any enhancement or refocusing of our attention on what is arguably one of the greatest issues of our time. My party talks a lot about climate change. But economic inequality, while it is tied to issues like poverty, as Senator Patterson outlined, and issues like climate change, is all-encompassing and one of the biggest challenges that we face—and not just here in Australia but right around the world. What we can do here is put a lens over every piece of legislation we look at and ask ourselves: is it making economic inequality worse in this country? When we deal with foreign aid or participate in overseas conflicts, international treaties and international trade deals, we should ask ourselves: are we making inequality worse around the world? These are the questions we should ask ourselves every chance we get.

Having said that, I have spent nearly every round of estimates since I became a senator asking the same question to our agencies here in Australia, especially to Treasury officials: what holistic approach do you take to tackle the issue of economic inequality in Australia? The answers have always been a source of disappointment. Whether it is the Reserve Bank, focusing on inflation and interest rate targets, and everything else will fall into place, or APRA focusing on financial stability, or ASIC investigating matters in relation to the Corporations Act—the one thread that is missing is a holistic approach to one of the greatest challenges of our time.

Whether the Productivity Commission itself is the right body—and I am happy to be advised on that, and on what kinds of legislative implications that might have—I would be interested to hear more and I would certainly be interested to hear from the Productivity Commission itself about this amendment. It is independent—fiercely independent. It has produced some good work. I do not say that lightly. We do not always agree with some of its recommendations; nevertheless, we respect the fact that it should be independent.

Recently I met with the economics committee, with the Reserve Bank governor, in a private meeting. I will not go into any details of that private meeting. The Reserve Bank governor in Australia has been playing a very interesting role in public debate. He has been commenting on issues like economic inequality, lack of infrastructure spending, housing risks, and pressures to the financial system. He sees himself as having an interesting role in at least informing public debate. That is probably the closest thing I could say. And of course the Reserve Bank produces occasional papers which allow them to do research projects. So, the governor has played a very important role; nevertheless, I would like to see a much more holistic approach to this issue in Australia.

So who does tie together the threads on economic inequality in Australia? It is left to the not-for-profit sector or the private sector, and here I have an excellent report called Inequality in Australia 2015which I am not using as a prop; I am just having a look at it. It is produced by ACOSS, who tie together the threads and do their own research. It is very well respected. While these kinds of things are critical for the public debate—and I am about to summarise some of the key findings in a minute—it would be good to see the government taking a holistic policy approach to economic inequality.

What we often overlook when we think about economic inequality is that it is very closely tied to the politics we are seeing around the world at the moment—the backlash we saw in the US, which allowed Donald Trump to get elected. Many commentators have, I think rightly, pointed out that one of the key underlying reasons he was elected was that there was discontent related directly to economic inequality in the US—not poverty, as Senator Paterson alluded to as the critical problem, but economic inequality. And with Brexit— the reaction we saw in the UK—it was economic inequality. I would say— and I know you would be very interested in this, Acting Deputy President Bernardi—that the outcome of the recent UK elections, with the rise of Jeremy Corbyn, is another sign that economic inequality is being taken very seriously by voters and citizens, who have a considerable amount of frustration.

We have seen all these issues rise to the surface following the GFC, during which the financial system around the world was shaken up. We are seeing retaliation against globalism building all around the world, including I suppose Mr Trump himself, reflecting the views of his voters—cancelling the Trans-Pacific Partnership Agreement and other policy initiatives. And we are seeing it in this country. Let's not hide our head in the sand; economic inequality is a very significant issue here, and I will go through some statistics in a minute. Obviously it is not anywhere near what we are seeing in other countries. Nevertheless, it is an issue that should be addressed. In fact, I might go to some of those issues right now, because they tell a very important story and paint a very stark picture of how we should be responding to these issues in the legislation and the policies we look at in this place.

Inequality in Australia is higher than the OECD average, which I think is a recommendation and a conclusion that people would be surprised by. A person in Australia who is in the top 25 per cent income group has around five times as much income as someone who is in the bottom 20 per cent. Strong employment growth over the past 17 years has helped to reduce inequality, and I think Senator McAllister alluded to this, as those at the bottom end of the income distribution had greater access to the workforce and more workforce related hours. However, wages growth was very unequal over the period and acted to increase inequality. Over the 25 years to 2010 real wages increased by 50 per cent on average but by 14 per cent for those in the bottom 10 per cent of workers, compared with 72 per cent increases for those in the top 10 per cent of income earners in this country. In other words, the wealthier you are—the more money you earn—the better you have done over this period.

When we look at an average of 50 per cent increase across the board, let's break that down: if you are poor in this country, or a low-income earner, you have hardly any of that 50 per cent increase. That is nearly all gone to the top 10 per cent income earners in this country. It is no wonder the Reserve Bank governor this week, once again contributing to public debate, has called on workers to stand up for their wage increases. And I will acknowledge Senator McAllister and her colleagues, who have been in the Productivity Commission estimates and have continually raised this issue around penalty rates and cuts to penalty rates and why these things were not considered by an institution such as the Productivity Commission in relation to inequality—what kinds of impacts that is going to have on the economy—because it is actually an accepted fact that economic inequality, particularly when it becomes more acute, is a drag on economic growth and the economy. That is why wage rises themselves can be very useful for stimulating economic activity, because of course with the circular flow of income that money, that pay, gets reinvested back into the economy.

Increases in investment income, for those at the very top of the distribution, increase inequality, with investment income for the top 10 per cent doubling between 2004 and 2010. This increase is responsible for most of the increase in inequality over this period, despite forming only a small component of income. Looking at the demographics of this, people who are more likely to be found in the bottom of the income distribution are those over 65, sole parents, people from non-English-speaking countries and those reliant on government benefits as their main source of income. And may I say that since I have been in the Senate—for five years—they have been the target of policy in this place, especially by the Liberal government, to raise revenue to balance budgets. The most vulnerable people in this country have been targeted.

Remember the zombie budget cuts of 2013, and how the Greens and mostly Labor and other people in this place stood up to Joe Hockey's and Mr Tony Abbott's cruel budget? That is taking action on inequality; that is running the inequality lens over every piece of legislation that we consider in this place. So, why is it that these demographics are clear yet have been the target of our economic policy and legislation in this place? It is exactly the opposite of what we should be doing. And I want to see more of what we saw in this chamber this week: taking $6 billion off the big banks—$6 billion of tax that will pay for schools and hospitals from some of the wealthiest companies in the world. People who are more likely to be found in the bottom income distributions are the ones at whom we should be targeting our policies towards tackling inequality.

Income is not evenly distributed across the states and territories. We all know that. For example, people in my home state of Tasmania are more likely to be in the bottom 20 per cent, whereas people in Western Australia are more likely to be in the top 20 per cent. So, why do Western Australian senators come in here, Senator Bushby—through you, Chair—and ask for more money from my state of Tasmania, when we have a GST system in this country, horizontal fiscal equalisation, that is designed to transfer wealth from the wealthier states to help the poorer states? We are a federation. That is what this was set up to do. There are those states that, through an accident of geography, for example, do not find themselves sitting on some of the biggest mineral deposits in the world, but those states that do should be sharing that income with other states. Yet we constantly hear in this place that Western Australia should be getting more money and Tasmania should be getting less.

Let's talk about the distribution of wealth in Australia today. Wealth is far more unequally distributed than income—that is the really bad news. The average wealth of a household in the top 20 per cent wealth group in Australia, so the top 20 per cent of richest people in this country, is around 70 times the average wealth of a household in the bottom 20 per cent in this country—70 times. Who wants to get a jelly bean for guessing what the key reason for that is? I will tell you: it nearly all comes down to land prices and real estate. The top 10 per cent of households own 45 per cent of all the wealth in this country, so the richest 10 per cent of Australians own nearly half of the wealth in this country. Most of the remaining wealth is owned by the next 50 per cent of households, while the bottom 40 per cent of households—get this—nearly the bottom half of households in Australia own just five per cent of this country's wealth.

Home ownership is the particular asset I just referred to. Australia is one of the most concentrated places in the world for home ownership. Let me tell you why: the group with the top 20 per cent of wealth distribution owns over 80 per cent of all wealth in investment properties, and shares over 60 per cent of all superannuation wealth. Wealth held in the home is relatively evenly distributed across income groups, largely due to the high levels of home ownership of older retirees, who are more likely to be in low-income groups. One positive is that wealth inequality has declined since the global financial crisis because, obviously, we have seen a fall in asset prices, particularly in financial markets. That has now recovered, but it has increased over the longer term, Senator Seselja, between 2004 and 2012.

These statistics are stark, so why wouldn't a logical, rational person—a senator in this place who is fortunate enough and privileged enough to not only have the pedestal to raise these issues in debates like this today, but to put up legislation, as Senator McAllister has, that could try and hone our focus on tackling these issues—do just that? Why aren't we doing that? What kind of legislation should we be looking at? In my last few minutes I would say that, given these very black-and-white statistics on wealth ownership in this country, why do we still have perverse incentives that give property investors the opportunity to corner the housing market? That, by the way, is not just increasing economic inequality in this country, but is adding very severe risks to our financial system that have been recognised by international investors and, very recently, by the ratings agencies, who have basically said that we are close to a crisis in the housing market.

Why don't we kill two birds with one stone and remove these investment incentives—these perverse incentives like negative gearing and capital gains tax concessions? They are taking revenue out of the tax system that could be used to pay for schools, hospitals, pensions for retiring people and unemployment benefits, social safety nets and health care. That money is contributing to inequality and instability in our financial system. It is an absolute no-brainer, but no-one has the political courage in this place to tackle this. We have been banging on about this for nearly 10 years. Labor has a version of a policy to at least ratchet back some of those investment incentives, but we should actually remove them. Then we will have tens of billions of dollars that we can allocate to where it is most needed.

What other things could we be doing? We could be taking government money—debt, long-term capital issuances are at record low interest rates—and investing in the future of this country. The government could be playing an active role in our life by investing in productive infrastructure that would also tackle economic inequality, create jobs and growth—if I can use that term, as much as it makes me cringe—and, of course, reduce housing bubbles. The Reserve Bank governor has also said that investing in long-term infrastructure, especially public transport, is one of the best ways to reduce housing inequality in this country.

What else could we do? We could invest money in a federal housing trust to build accommodation for the many homeless in this country and those who cannot afford their own home. My colleagues Senator Rhiannon and Senator Ludlam over the years have done some fantastic work in setting up what a federal housing trust would look like. We have nearly half a million people in this country who cannot afford to buy a home. Where is the role of government? Where is the provision of low-income housing that we see in overseas countries, especially in Europe? It is almost non-existent. There is so much we could do; there are so many positive, proactive things I could talk about here today to reduce inequality. But, to go back to Senator McAllister's bill, unless we focus on economic inequality we are never going to fix it. We are always going to be burying our head in the sand. We are always going to be dealing with the short-term political issues of the day—which leadership struggle gets the most eyeballs on social media, in the papers or on TV sets? It is personality politics.

We are fortunate and privileged in this place to be able to tackle these issues. Other governments around the world are moving to tackle these issues—and they are not just economic issues or social issues. I would argue that economic inequality is one of the biggest sources of political instability around the world. I have read Thomas Piketty's Capital in the Twenty-First Century. It is difficult reading—I must confess that it took me a long time to read it, but I did finish it. There is a lot of empirical data there, and the conclusions are stark: we are entering a period of unprecedented economic inequality all around the world and it is creating political instability. We owe it to our democracy, which is the best system we have, to tackle this issue because it is, all around the world, undermining our democratic institutions. People are fed up. They do not believe in trickle-down economics. It has failed. The neoliberal experiment has failed. We need to find a new business model that looks after people and puts people before profit and has an increased role of government in our lives. That is what the Greens propose.