May 2019

Comment

The government’s appeal to self-interest groups

By Judith Brett
The Liberal Party has little left but pitches to the hip pocket

Parties that win elections appeal to both the interests and the values of electors. Many people vote from the hip pocket, but not all. Historically, the Liberal Party could count on a good deal of electoral support from voters who responded to its claim of being more virtuous than Labor, more respectable, less tied to the selfish sectional interest of the working-class union movement, more committed to the wellbeing of the nation as a whole, and of having the experience in business and law required to provide good government and strong leadership.

These claims had most pull in the 1950s and 1960s when Australia was governed by the well-spoken and reassuring Mr Menzies. They received a severe battering when Gough Whitlam wooed a section of the middle class across to Labor with his social democratic vision and modernising nationalism, and another hit when John Howard broke the bipartisan commitment to keep issues of race and migration out of political contestation. More recently, installing three prime ministers in six years has destroyed the Liberal Party’s claim to provide stable leadership. This election campaign there seems little left to the party but appeals to the hip pocket. Even the politics of race have turned against it.

With the old language of ethnic nationalism no longer workable in a multi-ethnic nation, and civic nationalism having little emotional power, both the Labor and Liberal parties have struggled to explain to people living in Australia what binds them together. The problem, though, has been greater for the Liberals since Howard flirted with fears of Asian migration and multiculturalism in the 1980s. He backed away from these fears as he headed for government, but the Liberal Party has not been able to break free from the suspicion that, when cornered, it will play the politics of race.

This is the backstory to Lenore Taylor’s 2011 report in The Sydney Morning Herald claiming that Scott Morrison, who was then Opposition spokesman on immigration, suggested to shadow cabinet that they capitalise on the electorate’s anxieties about Muslim immigration. The report, which was not contested at the time, was revived by Waleed Aly on Network 10’s The Project in the wake of the massacre in Christchurch. Morrison then vigorously denied the report’s accuracy. Like most people, he was shocked by the gunman’s hate and he sympathised with people mourning their murdered family and friends. As prime minister he needed to reassure Australia’s Muslims that they are valued members of the community, and as Liberal leader he needed to distance his party from the explicit racism of its far-right fellow travellers. Christchurch was his government’s Tampa moment, but the dynamics were reversed.

In August 2001, when the Norwegian container ship MV Tampa saved refugees from a sinking wooden fishing boat, Prime Minister Howard refused to let them land in Australia. “We will decide who comes to this country,” he said. Then came the attack on New York’s twin towers on September 11. At the election in November that year, Labor had little choice but to go along with a policy of tough border protection. But the Christchurch massacre has since shown that the hard, exclusionary borders designed to keep us safe by keeping dangers out also encourage violent racism and division inside the nation. It was the Liberals this time who had little choice but to backpedal hard.

The task would be easier were the Liberal Party’s traditional claims to the virtues of financial probity and disinterested service in better shape.

Ever since its formation, the Liberal Party has claimed to be the party of financial responsibility supported by hard-working people who save and plan for their retirement. It is the party of the ants in Aesop’s fable, looking ahead and storing up food against the coming winter, unlike the blithe grasshopper playing his fiddle and enjoying the summer without a thought for the cold to come. In the fable, when winter arrives and the starving grasshopper begs the ants for food, they refuse. Compassion and charity are not high on their list of virtues. We told you so, they say. Nowadays the improvident are not left to starve, but the ants’ self-righteousness can be heard in the cries of our self-funded retirees.

Virtue is only ever imperfectly correlated with wealth, which many wealthy are loath to admit. In The Sociology of Religion the great German sociologist Max Weber wrote of the need of the fortunate to believe that they deserve their good fortune. Good fortune wants to be legitimate fortune, he said. So when a party policy threatens accumulated wealth, we hear vigorous protestations of virtue, as from the many self-funded retirees opposed to Labor’s proposed franking credits reform.

This is a complicated area to navigate for people without a share portfolio or self-managed superannuation fund (i.e. the majority.) Nonetheless there are two key facts to consider when judging the moral worth of Labor’s policy. First, since 2006 self-managed superannuation funds pay no tax at all on their income when the trustees are receiving a pension. A retiree can have an annual income of $100,000 or more and pay no tax. Second, since 2000, franking credits (tax refunds to shareholders in Australian-owned companies for company tax already paid) have been given as cash refunds to people (and superannuation funds) who pay no tax. Prior to this franking credits were only used to reduce tax. These cash refunds are thus a reliable source of income for people living on their self-managed super funds. Both of these policies were introduced when Howard was prime minister and Peter Costello was treasurer, in part to shore up the Liberal Party’s electoral support among older Australians.

Less than a month after he became treasurer, in September last year, Josh Frydenberg requested that the House of Representatives’ Standing Committee on Economics undertake an inquiry into the implications of removing refundable franking credits, to be chaired by Tim Wilson. National Seniors Australia reported in its submission that “Self-funded retirees believe strongly that obtaining and maintaining self-reliance, self-­sufficiency and independence from taxpayer funded sources of income, such as the Aged Pension, are important personal values.” It sees Labor’s policy – which proposes franking credits not be refunded if the recipient pays no tax – as a direct attack on these values. No surprises here: self-reliance and independence are core Liberal values. But just how morally credible are the claims to self-reliance and independence?

Two glaring challenges to these claims to virtue are repeatedly ignored. First, the complainants, and the Coalition government, only ever talk of income, never of assets or wealth. The National Seniors submission is filled with quotes from retirees who claim only modest income, such as this one:

I am 89 and I am a self-funded retiree who has staunchly resisted a need to accept a pension … Financially I am on the borderline but unable to claim pharmaceutical benefits. Most of my remaining assets are invested, as I was advised when I retired at 70 that this was the most independent and logical way to secure a future income … I have depended upon the franking credits for a livelihood and my entire lifestyle has been based on that consideration. It’s a bit late to change now. —Jude B.

Well, Jude, you could maintain your income by spending some of your capital each year. You must have a good deal of it, or you wouldn’t be able to depend on your franking credits. To be sure, this would run your capital down, but it would likely see you out. The purpose of superannuation was never to provide you with an income in retirement and leave all your life savings intact. And likely you already own your house, hence you will have something to leave in your will.

Second, the Coalition and the self-righteous seniors ignore the conditions that enabled them to accumulate their wealth: the low cost of tertiary education, the high wages and employment in their working years, the inflation of property prices, and the very generous regulations that allowed them to shift more of their savings into the tax haven of a self-managed superannuation fund than is possible today. They may well have scrimped and saved, as they are fond of saying, but they did it under much more favourable financial conditions than young savers experience now, many of whom will struggle to buy a home and pay it off before they retire, let alone accumulate a share portfolio. This policy debate has a nasty generational edge, and is far more about self-interest than virtue.

Another special virtue the Liberal Party once claimed was that it was the party of the national and community interest, whereas Labor was the party of class- and self-interest. When working-class men first started winning seats in parliament, the middle- and upper-class men already there were scathing: with their regular parliamentary salaries and their railway passes, these sons of toil had never had it so good. The implication was clear. Labor politicians were in it for the money, both for themselves and for their supporters. Once they got their hands on the Treasury they would start providing taxpayer-funded benefits to the improvident and undeserving, and giving in to the industrial muscle of the militant unions.

There is still a legitimate debate between the parties over how to balance tax policy with expenditure, and how to encourage effort and enterprise while supporting all people to develop their potential and live satisfying lives. But there is not much force left in attacks on Labor as the specialist party of self-interest, when ambition and self-interest has been so blatantly on display in the Liberal Party over the past few years. There’s the parliamentary party’s difficulties in uniting behind a leader to begin with, and the spectacle of so many government ministers resigning rather than facing the task of rebuilding the party from Opposition (not to mention the lower superannuation pension some parliamentarians would receive if they retired as a shadow minister or backbencher).

Then there are the sexual harassment scandals, the lack of transparency around donations to political parties, and the quick transition of so many ex-politicians and their staffers from political office to well-paid jobs in the public and private sectors, even as lobbyists in the very areas they once oversaw. Such self-interested behaviour bedevils all parties, and in 2016 the Australian Electoral Study found 74 per cent of those surveyed agreed that “people in government look after themselves”. It is a bigger problem, though, for an incumbent government with its head on the block than it is for a party in Opposition.

Adding to the Liberal Party’s moral deficit is its long resistance to a royal commission into the banks, as well as its reluctance to embrace the need for a federal anti-corruption body with real teeth. In December last year, Morrison and Attorney-General Christian Porter announced the establishment of a Commonwealth Integrity Commission, but it would not hold public hearings. Morrison did not want the commission to be used as a political tool or a “plaything” for those with an agenda. In the wake of the shocking revelations about the behaviour of bank executives, not to mention the decades-long cover-up of sexual abuse by the churches, is he serious? Public hearings allow ordinary people to express their hurt and outrage, and to shame the powerful who have harmed them and their families.

The benefits of competition between self-interested individuals was the moral core of neoliberalism’s reform agenda as it argued for deregulation and for private enterprise to take over many government-provided services. Both major parties embraced a neoliberal agenda, but the Liberal Party’s embrace was more enthusiastic. The costs of neoliberal policies to the common good are now only too apparent in increasing social inequality, a degraded environment and a fast escalating climate crisis. The tide is turning back to social democracy’s faith in government action. As Rebecca Huntley shows in her Quarterly Essay, Australia Fair, unlike the political elites the majority of Australians never actually lost their faith in social democracy.

With the moral cupboard so bare, the Liberal Party has little option but to rely on self-interest to save the furniture if not win the election. The tax offsets in Treasurer Frydenberg’s election budget put money straight into voters’ pockets, as do the one-off energy payments to welfare recipients. The flattening of the tax schedule promises even more for the pockets of the already well-off. Many of them will vote Liberal anyway, but some in heartland seats are poised to change their vote because the Coalition has been unable to develop credible policies on climate change. The party must be hoping that enough of its supporters are as morally bankrupt as it has become, happy to trade the planet’s and their children’s future for a pocketful of silver.

Judith Brett

Judith Brett is an emeritus professor of politics at La Trobe University. Her latest book is From Secret Ballot to Democracy Sausage: How Australia Got Compulsory Voting.

Cover May 2019

May 2019

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