June 2017

Comment

The new Forgotten People

By Judith Brett
The wider cost of Australia’s housing affordability crisis

Seventy-five years ago, at 9.15 pm on Friday, 22 May 1942, following a program of “plantation melodies”, Robert Menzies made his 15-minute broadcast to the Forgotten People. He had begun regular Friday night broadcasts on the Macquarie Radio Network in January, just weeks before the fall of Singapore, and would keep them up until April 1944. They were part of his strategy to keep himself in the public eye as he languished on the Opposition backbench while Labor led Australia at war.

Menzies had been prime minister when war was declared, but resigned in August 1941 after he returned from a long trip abroad to an acrimonious government and a party room where plotting against his leadership of the United Australia Party was rife. (The Coalition government, led by the Country Party’s Arthur Fadden, lost a vote on the floor of the house soon after, in October, and Labor’s leader, John Curtin, became prime minister.)

Menzies decided to stay in parliament, and he used these broadcasts to reflect on his political values, finding, he told his brother Frank, that there was a political philosophy in them. In 1943 Angus & Robertson published a selection of the speeches under the title The Forgotten People and Other Studies in Democracy, and the text of the Forgotten People broadcast itself was also circulated as a pamphlet. But it’s unlikely that these broadcasts had much impact at the time. People had other things on their mind as Australia confronted the possibility of a Japanese invasion. Early in 1942 Japan had bombed Darwin and decimated the 8th Division in the Dutch East Indies, taking 22,000 Australians as prisoners of war.

The term “the Forgotten People” seems never to have been used again. But after I published the text of the speech in full in 1992 at the beginning of my book Robert Menzies’ Forgotten People, and argued for its significance, it has lodged in the Liberal Party’s historical memory, as if it were always there.

In May, on the 75th anniversary of the broadcast, the Menzies Research Centre hosted a gala dinner at Old Parliament House, at which actor Peter Cousens performed the speech. Menzies’ daughter, Heather Henderson, was a special guest, as were John Howard and Alan Jones, and the centre is republishing the text of the broadcast as a booklet. All this is to the good. Political parties need myths of origin, and, apart from Menzies, the Liberal Party’s myths are thin on the ground. But myths that survive do so because they carry important truths. At the core of Menzies’ broadcast to the Forgotten People is an argument about the importance of home ownership for people’s wellbeing and civic identity that makes uncomfortable reading for the contemporary Liberal Party.

In 1942, around half of Australians were living in homes they owned or were paying off. Menzies’ broadcast was pitched at the middle class, which he located between the rich and powerful and the unionised working class. Home ownership was a marker of middle-class status, of having had a high enough income and sufficiently regular pay to raise and service a mortgage. Menzies praised the frugality and self-sacrifice of those who were able to acquire “a stake in the country”. Most working-class families rented.

Menzies’ speech is filled with markers of the class divisions of the day, but it also evoked the deep human needs home ownership fulfils as the basis of a secure family life and a sense of independence, and as a place of pleasure and recreation. A house “which is ours, to which we can withdraw, in which we can be among friends, into which no stranger may come against our will”, who wouldn’t want that?

Menzies did not only present home ownership as a benefit to individuals and families, however. It was also the basis of a stable society. “The home is the foundation of sanity and sobriety; it is the indispensable condition of continuity, its health determines the health of society as a whole.”

Since the 19th century, Australian Liberals had been promoting home ownership, developing suburbs so that restless immigrants would settle down and raise families. In 1888 the Building Societies Gazette claimed that “To have a home which he himself reared or purchased – a home which … he calls his own, will make any man a better citizen.” Citizenship was not then primarily understood as a set of rights bequeathed by the state. It was a quality inhering in the person: their strength of character, their sense of duty to others, their independent mindedness, their reliability. Owning your own home was not just evidence of your sterling qualities; it gave you a secure base from which to develop them. It steadied you, gave you a sense of responsibility.

In 1888 a speculative housing boom was under way. It went bust spectacularly a few years later. Nevertheless, by the end of the 19th century Australia’s home ownership rate of 50% was one of the highest in the world and certainly higher than in the UK or the US. With wars and the Depression this level didn’t move much until after Menzies and the recently formed Liberal Party won government in 1949 and transformed Australia’s housing system.

Labor’s solution to the severe housing shortages at the end of World War Two was to build public housing; the Liberal Party’s was to encourage home ownership. There was a bit of class-based sparring: some Labor men thought that owning a home would turn workers into capitalists, and some Liberal landlords scoffed at the home-owning pretensions of the lower orders. But these were voices on the margins. What people wanted after the privations of the Depression and the sacrifices of the war were homes of their own.

Returned servicemen were already taking up war service loans in large numbers under a scheme set up after World War One and administered by the Commonwealth. The Menzies government diverted money from new public housing to building societies where it could be lent to owner-occupiers, and it sold off much existing public housing to tenants.

By 1954, 63% of Australians were owner-occupiers, and by 1966 it was 71.4%. In Melbourne that percentage was even higher, 82.3%, with higher concentrations still in new suburbs such as working-class Clayton, where 94% of houses were owner-occupied.

The desire for home ownership is still there among young and not-so-young Australians, but realising it seems all but impossible for many of them, especially if they live in Sydney or Melbourne. Another transformation of Australia’s housing system is under way, but it is going in the opposite direction from the one Menzies instigated. By early this year, almost 50% of all new housing loans were going to investors, and loans to first home buyers were at an all-time low in the most overheated states: 3.4% in New South Wales and 7.7% in Victoria.

There are many reasons why housing affordability has become a barbecue stopper, and these are regularly rehearsed in the media. And there are as many mooted remedies, some of which, such as grants to first home owners, have only made the problem worse. But one of the reasons is that government policies of negative gearing and generous capital gains tax discounts favour investors over first home buyers.

Many countries allow some form of tax deduction for losses made on rental properties but they quarantine this to the income from those properties. Distinctive to the Australian system is that rental losses can be offset against income from other sources, making it an attractive way for people to reduce their overall income tax as their wealth increases. Those who already own a house can use it to raise a loan to buy another, and then another. Those who don’t? Well, they can hope for a grant from the parental bank or an inheritance down the track – just like in the 19th century, when access to capital was a major determinant of one’s life chances. Otherwise, they can rent from the investors and risk eviction, when the investor decides to realise their capital gains.

The transformation of the housing system is profoundly disturbing. Every time I read about house prices going up again, I feel sick, even though the rise delivers me and my husband ever more massive windfall gains on the weatherboard house we bought in a Melbourne working-class suburb in 1980 for three times my annual salary. I hate feeling like I belong to an exclusive club that young people like we were then can no longer join. I feel ashamed when a young man delivering a book wistfully tells me it is a lovely house, knowing he could never afford it. I feel we have let young people down massively.

I love my house. It welcomes me home. It looks after me. And it remembers things for me, tucked away in drawers, in fragments of wallpaper at the back of a cupboard, and in the plants in the garden, grown from bulbs and cuttings from the gardens of my grandmother, parents, aunt, mother-in-law and friends. It holds my life. I have a recurring dream that we have sold the house. I am never quite sure why, and I feel confused and sad and a bit guilty, as if I have abandoned an old friend.

Sometime during the past couple of decades, homes and houses became property, and the emotional and psychological meanings of a home of one’s own were sheared off, leaving bare rungs on the property ladder, assets to leverage as mums and dads try to “get ahead” – “the one chance they’ve got to build some wealth”, as Treasurer Scott Morrison has told us. Modifying negative gearing is only one strategy to make housing more affordable for first home buyers, but the government’s refusal to do so has become symbolic of its disregard for the growing inequality between generations.

The budget did include acknowledgement of the problem, in a so-called housing affordability package, but its various measures are mere tinkering and will make little difference to first home buyers. As expected, there was no substantial winding back of negative gearing or capital gains tax concessions. Two largely political reasons explain this failure. First, because Labor took a modest modification of property investors’ taxation benefits to the last election, the Coalition sprang to the investors’ defence. It couldn’t be seen to be taking ideas from the Opposition, could it? Second, the Coalition is afraid of alienating its base, where this refers to Liberal Party branch members, not to those who vote for it.

But the base has become small, unrepresentative and selfish. Witness the fuss it has made over the slight reduction of tax concessions for superannuation and the ugly attacks by rich old men on the minister for financial services, Kelly O’Dwyer, while she was on maternity leave. They even threatened to stop donating to the party. In defining the Forgotten People, Menzies excluded people like this, “the rich and powerful, those who control great funds and enterprises, and are as a rule able to protect themselves”. In refusing to wind back negative gearing, the current Coalition government risks appearing beholden to them.

Judith Brett

Judith Brett is an emeritus professor of politics at La Trobe University. Her latest book is The Enigmatic Mr Deakin.

June 2017

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