The government has hit its Lowe point
A lack of inspiration and courage has meant it may stay there for a while.
After the fastest rate hiking cycle in a generation, RBA Governor Phillip Lowe has told us all to cut spending and work more, breaking modern records and shattering the median mortgage repayment in ways not experienced in recent memory. As corporate profits soar in contrast to the most rapid fiscal tightening since the 1980s, a swathe of Australians are suffocating under the pressure of a hundred-hand-slap by the RBA, falling out of financial security while they capitulate to mortgage repayment rises that exceed household incomes and push families to the brink.
Around the watercoolers, smoko sheds and talkback stations of both major political persuasions, the cost-of-living slices through the perception of normality, becoming one of the most talked about issues in the Australian household. Unlike the rationale for acquiring overpriced second-hand nuclear submarines with no ability to crew or maintain them, most Australians can relate to having to repeatedly sacrifice something for the good of this country’s bi-polar economy at the suggestion of the RBA, but they also see a section of the wealthiest profiting seemingly exponentially from a different system that requires them to sacrifice nothing much at all.
The rate rises reflect an expectation from the RBA that it's the masses that ought to be taking on the burden of fighting inflation, while the big end of town can carry on with their responsibilities as "wealth creators" in relative peace. The lack of any meaningful reform (or any intention to do so in the future) from a government trained on the same strict diet of neoliberalism as its predecessor, reflects a fiscal rigidity within the government, and a lack of imagination. As a result, policy adheres by default to a broken system in situ, one that has been gamed by the previous coalition decade to favour the corporate profit machine.
The major corporations talk endlessly about “wage-price-spirals”, but a lot less about the disproportionate and inflationary profits they are benefiting from. Inside the towers of Elysium where the lights and split systems are always on, the profits have never been higher. Every quarter rebounding out of a pandemic, whether it be Westpac, Qantas, or even Harvey Norman, all the big earners that have earned more than ever thanks to healthy portions of Jobkeeper and a political system engineered to ensure their wealth continues at all costs. This morbid paradigm is run effectively by neoliberal politicians disingenuously divining the innards of the legacies of their predecessors like incoherent haruspices, the very predecessors they built into effigies to secure election victories.
Outside, on the fringes of capital cities, semi-rural municipalities and in-and-around the nation’s regional centers, power bills start to spike in the winter, many are feeling financially colder than last year, and some are insolvent and selling their homes. For the first time in two generations, millions of Australians, many of who are young and aspirational in the spirit of generations of before, are faced with buying food or paying for utilities, while some have sold their homes under unfavourable circumstances, showing cracks in the continuity of the way of life in this country and isolating a generation and their children from something they were raised to believe would be available to them: a reasonable economy regulated by elected leaders that ensured a fair market economy for its people to prosper in.
Due to the ghoulishness of this consecutive fiscal jab to the face of Australian households, combining with obscene corporate profits in obscenely difficult times, the oppositions reticence to apply any pressure due to their economic vision continuing under Labor leaves the minor parties and independents alone to push the issue, and the government is free to let the corporate profits run wild without really doing a thing to fix the issue. This status quo deprives the government of gumption to address things like capital gains tax reform, corporate profit tax and laying a finger on the negative gearing crisis that begets a housing crisis that begets a societal crisis.
So, what’s it matter to Philip Lowe anyway? Everything he does from this point only bolsters the paycheck he will receive when he marches off to a private sector paddock to retire on obscene amounts of private sector money. As Australia beats the world by a country mile on Reserve Bank inspired fiscal tightenings -- with high house prices relative to income, brutal mortgage affordability and frozen wages, what is the endgame for our independent bank and its governor, and his successor, whoever they may be?
If the RBA is doing its job, it’s the government alone who is responsible for ensuring the sharp rises are met with tax reforms and policies that capture a higher share of corporate profits. Instead of locking up protesters for expressing concern at the gathering of fossil fuel exploration lobbyists and talking about mediocre election promises, mandates and the blessing of voters, the government could look to sound out the brave reforms it needs to make despite what middle ground it has imagined exists within its disjointed Canberra crucible.
We are the second biggest global exporter of fossil fuel, seeing mining companies making pharaonic wealth from endless extraction via government subsidy, and we cant even establish a sovereign wealth fund to see some money back to the people to help mitigate the ecocide that gets dug out of newly approved coal and gas projects. The government would have the permission to review negative gearing, enact a corporate profits tax – it could look to break up the duopolies and restore competition, it might reinstate a mining tax with the support of the population, but those within it are captured by the private interests of the mining giants like those before them, and governments of all major party persuasions perpetuate a status quo that is creating a wealth disparity not seen in this country in a lifetime.
As further news about half-a-billion dollar renovations for RBA offices merges with the boiling temperatures of unsustainable living arrangements metered out via rate rises by its increasingly cartoonish governor, the consecutive rate rises look increasingly unreasonable. Even if they are required, they only highlight the inadequate approach to reforming a broken economy by a government that at looks to the Business Council of Australia as a barometer for poverty instead of the growing class of poor and destitute that scream at this government to no avail.
How long can the Australian people watch sheepish CEOs announce another quarter of miracle profits, while warning in stern voices of apocalyptic times facing their companies ahead? On thermal current rate rises, sits aloft the big four banks, riding like winged horsemen on the screams of evaporating mortgages. The banks posture at the top of the highest apex of the rollercoaster track to drain the last corners of the lower-middle classes, who languish increasingly unbeknownst in a bipartisan-fuelled economic carriage poised to hurtle down the other side. As the tradecraft of the banks turns to flipping the forfeited houses of crushed mortgage holders, and a demoralised population has rugs pulled in front of them, it’s time for the government do more than tell Australians to ring up the bank to have a chat about their circumstances with the friendly and helpful staff.