Speaker 1: His Excellency has accepted my advice and the election will
Speaker 1: be held on the third of October. The main issue
Speaker 1: in this election campaign will be that of economic competence.
Speaker 2: The main issue will be It's just over two years
Speaker 2: into his first term and John Howard has taken the
Speaker 2: country to another election. In that short time. He seized
Speaker 2: the medal of economic credibility away from Labour and we've
Speaker 2: written the argument about who could be trusted to manage
Speaker 2: the economy.
Speaker 1: We have turned a deficit inherited from mister Beasley and
Speaker 1: mister Keating of ten and a half billion dollars into
Speaker 1: a surplus a year earlier than predicted. We have delivered
Speaker 1: the lowest interest rates in thirty years for both home
Speaker 1: buyers and small business. We have delivered the lowest inflation
Speaker 1: rate in the OECD.
Speaker 2: The memory of Labour's reforms while in government was suddenly distant,
Speaker 2: and the constant reminder of the devastating recession of the
Speaker 2: nineties we're kept fresh in the mind of voters by
Speaker 2: Howard and his Treasurer Petty Costello.
Speaker 1: When our government came to office, Labor head the comonlaew
Speaker 1: of government on a path of Differson then right into
Speaker 1: the next century.
Speaker 2: Australia was going backwards. How dets economic management became the
Speaker 2: major selling point for Howard in every election from thereon.
Speaker 1: In Labor head, you pay for their economic incompetence time
Speaker 1: and time again, and if they got back in, they'll
Speaker 1: make you pay for it again. Don't go back to
Speaker 1: Labour Australia. Just canter Ford's Authorized by L Crosby for
Speaker 1: the Libook Patic Camera.
Speaker 2: I'm Daniel James and you're listening to seven Am. This
Speaker 2: is The Howard Effect, a three part series marking thirty
Speaker 2: years since John Howard's emphatic election victory. Today author Amy
Speaker 2: Rimikus on the economic revolution that defined his government, the
Speaker 2: tax reforms, the housing settings, and the policy choices that
Speaker 2: helped create the Australia we were all still living in.
Speaker 2: This is episode two in the Shadows of the Australian Dream.
Speaker 2: I mean, what was Howard's pitch on the economy and
Speaker 2: why did it work?
Speaker 3: Howard's pitch on the economy is one that would be
Speaker 3: very familiar to voters no matter what age they are,
Speaker 3: and that is fixing Labour's black hole.
Speaker 1: Labor left us despite all the protestations of mister Beasley
Speaker 1: and mister Keating a deficit of ten and a half
Speaker 1: billion dollars and we turned that into a surplus a
Speaker 1: year ahead of schedules.
Speaker 3: And Howard's greatest trick was, along with Peter Costello, his
Speaker 3: long term loyal treasurer, was teaching Australians that the household
Speaker 3: budget was very similar to the Commonwealth budget and that
Speaker 3: you didn't put things on the credit card, and debt
Speaker 3: was bad and surplus savings was good.
Speaker 4: In periods of growth, we must put away savings for
Speaker 4: the downturns. But far from saving, the previous government kept
Speaker 4: wretcheting up our debts, spending money it didn't hand.
Speaker 3: And as Paul Keating would famously say to Mark Laate
Speaker 3: them that, you know, Howard and Costello had been slapped
Speaker 3: on the ass by a rainbow because they came to
Speaker 3: government around the same time as a once in a
Speaker 3: generation mining boom, which meant that not only did they
Speaker 3: have all of this resource money coming in, they also
Speaker 3: had an increase of tax receipts that has virtually been
Speaker 3: unseen in Australia, you know, since and that meant they
Speaker 3: had a lot of money to spend, and they did
Speaker 3: spend while also managing to have a surplus.
Speaker 5: Here in Western Australia, evidence of the mining boom is
Speaker 5: everywhere you look. This is the Capital Perth as you
Speaker 5: can see the skylines dominated by cranes building new office
Speaker 5: space for companies like Chevron, hp Rio, Tinto and Woodside.
Speaker 2: The legend of Howard the steady economic Manager was forged
Speaker 2: in the glow of the resources boom, swing commodity prices,
Speaker 2: swelling tax receipts and budget surpluses. Yet history looks different
Speaker 2: when reviewing the record of his time as Treasurer in
Speaker 2: the phrase years.
Speaker 3: The thing about all of this, though, is that when
Speaker 3: we think of Howard, we think of that truism that
Speaker 3: he was a great economic manager, But a lot of
Speaker 3: people don't actually go back to when he was Treasurer
Speaker 3: himself in the Malcolm Fraser government. When he finished his
Speaker 3: tenure in nineteen eighty three, inflation was running at about
Speaker 3: eleven percent, unemployment was sitting around ten percent, and yes
Speaker 3: he was dealing with the hangovers of stagflation, which was
Speaker 3: a global financial crisis that swept most of the industrialized world.
Speaker 3: But it also is the time when he got the
Speaker 3: nickname honest John.
Speaker 1: Does John Howard believe it was to plague himself as
Speaker 1: honest John, honor, as honest John, as just the sort
Speaker 1: of honest.
Speaker 4: State that we can expect in Australian.
Speaker 3: Politics, from which was meant as a derogative term for
Speaker 3: him because he often would not tell the truth about
Speaker 3: what was going on with the budget. And that's all
Speaker 3: down to the fact that he was slapped in the
Speaker 3: ass by a rainbow with the mining boom, and he
Speaker 3: essentially used that to teach Australians that I can give
Speaker 3: you all of the tax cuts in the world and
Speaker 3: also deliver surpluses, aren't I amazing? And we know thirty
Speaker 3: years on that is not the case. And all of
Speaker 3: that spending that he did is a massive reason of
Speaker 3: why the budgets in the position it is today.
Speaker 2: Out of all the economic reforms cemented into what would
Speaker 2: become known as middle class welfare, it was his changes
Speaker 2: to taxes relating to housing investment that are still being
Speaker 2: felt by generations of Australians today.
Speaker 3: The really big thing that he hated was the capital
Speaker 3: gains tax that Hawk had put in place. He really
Speaker 3: hated it, but by the time that he got into
Speaker 3: a leadership position where he could address that it had
Speaker 3: been baked into the tax system so much that he
Speaker 3: couldn't get rid of it. So what he and Costello
Speaker 3: did was they came up with the capital gains tax discount,
Speaker 3: which is fifty percent. So if you sell a house,
Speaker 3: you know fifty percent of that profit is essentially tax free.
Speaker 3: Is the most simple way to explain that. And what
Speaker 3: that did was it completely turbocharged the housing market because
Speaker 3: it suddenly made investment in housing a sure bet.
Speaker 1: To encourage investment, the capital gains tax has been virtually
Speaker 1: hard with special provisions for those in small business who
Speaker 1: worked hard all of their lives and what to retire
Speaker 1: on the proceeds of their effort and hard work.
Speaker 3: And he essentially laid it out that this was the
Speaker 3: way for mums and dads to build further wealth, that
Speaker 3: this way they could then extend that wealth by buying
Speaker 3: a second house that would help set them and their
Speaker 3: children up for the future. And it had almost an
Speaker 3: immediate impact on housing prices in Australia. He would say
Speaker 3: that no one was complaining to him about their house
Speaker 3: prices going up.
Speaker 1: I haven't found anybody in seven and a half years
Speaker 1: shake the efficiently and say how I'm angry with you
Speaker 1: for letting the value of my house increase.
Speaker 3: And it also had the added benefit for Kim of
Speaker 3: entrenching those battlers because they suddenly saw their houses increase
Speaker 3: in value, which added to their individual wealth. But between
Speaker 3: two thousand and two and two thousand and four, prices
Speaker 3: increased by more than forty percent in Sydney, nearly sixty
Speaker 3: five percent in Brisbane, and almost thirty percent in Melbourne.
Speaker 3: It was so immediate that by two thousand and four
Speaker 3: the Productivity Commission was warning about the impact of this
Speaker 3: policy on the housing stock and what it meant for
Speaker 3: housing prices.
Speaker 2: But Howard and.
Speaker 3: Costello were so worried about the backlash from those middle
Speaker 3: class votors that they didn't want to do anything, even
Speaker 3: though we knew as early as the two thousands that
Speaker 3: this was having a detrimental impact on housing costs for
Speaker 3: the future.
Speaker 2: Howard was securing his own narrative around housing prices and
Speaker 2: the fact that removing a tax benefit that created wealth
Speaker 2: for his battlers was a ligne no government could cross
Speaker 2: without betraying the very people it claimed to represent. Its
Speaker 2: impact on future generations was of no immediate political consequence.
Speaker 3: He completely deflected from it almost immediately. And there's a
Speaker 3: phone call with ABC six twelve Brisbane Radio, you know,
Speaker 3: in the early two thousands, where an older woman named
Speaker 3: Phyllis rings up to speak to the Prime Minister on
Speaker 3: the Morning show and she was talking about how worried
Speaker 3: she was for her children and grandchildren being able to
Speaker 3: afford a house and Howard very famously says, no one
Speaker 3: is coming up to me in the street and complaining
Speaker 3: about their house prices going up, And she said, well,
Speaker 3: let me be the first. I want to complain because
Speaker 3: I want to downsize my property, but I am buying
Speaker 3: and selling in the same market and what I would
Speaker 3: want to buy is almost as much as what I'm
Speaker 3: selling my house for. But I'm also very worried about
Speaker 3: what my grandchildren are going to be able to do,
Speaker 3: and how it just deflects from this. He's just like, no,
Speaker 3: this is a good thing for Australia. Everyone's going to
Speaker 3: become more wealthy. And that woman Phyllis was right. Her
Speaker 3: grandchildren would now be trying to buy in this market
Speaker 3: and short of having the bank of Mum and Dad,
Speaker 3: they would find it almost impossible to buy in Australia,
Speaker 3: is certainly impossible to buy in a comparatible area to
Speaker 3: where they grew up. What he never spoke about and
Speaker 3: people didn't seem to realize until it was too late,
Speaker 3: was that sure, mom and dad, investors, you can buy
Speaker 3: a house. That's not going to have too much impact
Speaker 3: on the housing market. But Howard was helping the investor class.
Speaker 3: He was helping the already wealthy buy more properties and
Speaker 3: then create scarcity to ensure that the market would increase
Speaker 3: to a point where if they sold, they would make
Speaker 3: a profit. And that's what's happened. You can look at
Speaker 3: ATO data and you can see that about you know,
Speaker 3: I think it's about two and a half thousand people
Speaker 3: control more than thirty thousand rental properties in Australia. And
Speaker 3: they're doing that because they've leveraged all of the little
Speaker 3: tax incentives and all of the little bonuses that Howard
Speaker 3: had put in place thirty years ago to make it
Speaker 3: easier that if you have wealth, you can continue to
Speaker 3: build wealth, and you can also continue to make things
Speaker 3: alone a lot more expensive for anybody coming up after you, coming.
Speaker 2: Up buying the middle class void by the mining boom,
Speaker 2: Howard funded sweeping tax cuts and rewired the tax system
Speaker 2: so higher earners received larger breaks than those on lower incomes.
Speaker 2: In doing so, he shifted more of the relative burden
Speaker 2: down the scale in trench middle class welfare and made
Speaker 2: those concessions politically near impossible to unwind.
Speaker 3: So what he did was he basically rebalanced our tax system,
Speaker 3: so if you were at the higher end of the
Speaker 3: tax system, you started getting much higher tax breaks than
Speaker 3: if you were at the lower end of the system.
Speaker 3: So he just reorganized those tax receipts to better fit
Speaker 3: his view of the world, which is that if you
Speaker 3: made money, you clearly deserved more of a break, and
Speaker 3: that we could give that to you.
Speaker 1: At the heart of our new tech system lies the
Speaker 1: largest personal income tax cut in Australia's history, twelve billion
Speaker 1: dollars to give Australian workers genuine reward for their efforts.
Speaker 3: Before that, we'd had a more progressive tax system, where
Speaker 3: the more you made, the more you paid in income tax.
Speaker 3: But Howard kind of he didn't, you know, completely put
Speaker 3: the onus on lower income and middle class income, but
Speaker 3: he did rebalance it so they were paying a lot
Speaker 3: more comparatively to what people were paying at the upper
Speaker 3: ends of the scale, and he built that into the
Speaker 3: pack system. So essentially that means that anybody coming after
Speaker 3: Howard could not walk back these tax cuts without paying
Speaker 3: a massive political cost. And we still see that, you know,
Speaker 3: we saw that in twenty nineteen when Labor started raising,
Speaker 3: changing negative gearing and also having a look at, you know,
Speaker 3: how the tax system was organized.
Speaker 1: Bill Shorten's about to take the biggest risk so far
Speaker 1: as Labor leader. He's going to tackle negative gearing used
Speaker 1: by more than one point two. Everyone knows that negative
Speaker 1: gearing is overdue for reform under Labour's.
Speaker 3: Proposed We're seeing it now as we're starting to have
Speaker 3: a conversation again about capital gains tax.
Speaker 5: The government is now strongly hinting it's considering changes to
Speaker 5: the capital gains tax discount, and a growing number of
Speaker 5: prominent voices have thrown this.
Speaker 3: If we saw it with the Stage three tax cuts,
Speaker 3: where the Liberals sought to bake in higher tax breaks
Speaker 3: for higher income earners, which is a continuation of Howard's policy,
Speaker 3: and they didn't bank the mining boom in any significant
Speaker 3: way like they did pay off debt. They were famous
Speaker 3: for that, and they did create the Future Fund, which
Speaker 3: is basically a big investment pot that the federal government
Speaker 3: sets up to help pay future bills. And they also
Speaker 3: set it up, they said, to pay the retirement benefits
Speaker 3: that were coming to the Commonwealth public servants. So they
Speaker 3: were aware of the generational bload that was coming on
Speaker 3: the budget. But most of the windfall from the mining
Speaker 3: boom did get baked into tax cuts and into spending.
Speaker 3: I mean, if you want to go back to the
Speaker 3: analogy that Howard and Costello loved using, which is like
Speaker 3: the household budget, it would be the equivalent of you
Speaker 3: winning two hundred and fifty thousand dollars and the lotto
Speaker 3: and then spending for the rest of your life as
Speaker 3: if you were going to win two hundred and fifty
Speaker 3: thousand dollars in the lotto forever, when you weren't.
Speaker 2: Despite saying in the lead up to the nineteen ninety
Speaker 2: six election that he would never introduce a GST, oh.
Speaker 1: Way, GST will ever be part of our policy, never ever,
Speaker 1: never ever, it's dead.
Speaker 2: In ninety ninety eight he took a ten percent goods
Speaker 2: and services tax to an election, and it only costume
Speaker 2: government we pay enough taxes as it is.
Speaker 1: It's just why I should it go outly ten cents.
Speaker 2: But it does add up in the long run. So
Speaker 2: I don't think it's the how it's going to lose
Speaker 2: an election over this, but he will do the election
Speaker 2: over this, and I've always voted libering. His government lost
Speaker 2: the popular vote with fifty one percent of the two
Speaker 2: party preferred result going to the LP, losing eighteen seats
Speaker 2: in total, but he clung on and so the GST
Speaker 2: was pushed through the new parliament.
Speaker 3: The introduction of the GST, it did almost cost him government,
Speaker 3: but he was intent on doing it because again to him,
Speaker 3: that was a very fair way of working out the
Speaker 3: tax system. The more that you bought them, the more
Speaker 3: that you individually paid, and that made sense to Howard.
Speaker 1: There is no doubt, my fellow Austradians, that this country
Speaker 1: desperately needs a new taxation system.
Speaker 3: It's also something that really impacts lower earners and middle
Speaker 3: class owners more than it does the rich, because they
Speaker 3: tend to buy more essentials. They're constantly having to buy,
Speaker 3: you know, the cheap pair of shoes, or they're constantly
Speaker 3: having to do like you know, a grocery shop around
Speaker 3: those very essential basics that constantly, you know, we're propping
Speaker 3: up the GST, and so he pushed this through as
Speaker 3: a way of saying, this is going to make a
Speaker 3: fairrh Australia and in return, I'm going to give the
Speaker 3: states x amount of money.
Speaker 1: Every last cent of the GST revenue will go to
Speaker 1: the states. Every state in Australia over time will have
Speaker 1: more money to fund the roads, police, schools, and hospitals
Speaker 1: so important to our daily lives.
Speaker 3: And what it did is is essentially it's locked the
Speaker 3: States into requiring GST receipts in order to be able
Speaker 3: to do anything.
Speaker 2: Cap in hand, every time they want, every single.
Speaker 3: Time they want something. It's one of the only ways
Speaker 3: that the states can get money. And you know that's
Speaker 3: why we're constantly talking about raising the GST. But it
Speaker 3: also ideologically means that we constantly talk about this individual tax,
Speaker 3: the GST and raising that rather than taxing multinationals. And
Speaker 3: every single time, like you go to a public hospital
Speaker 3: or a road isn't built or whatever, the state government
Speaker 3: will inevitably blame the federal government for not giving them
Speaker 3: enough in tax receipts and all of that is just
Speaker 3: an implicit way to blame individuals for not essentially spending
Speaker 3: enough and you know, propping it up. So again, it
Speaker 3: was Howard readdressing the tax system to put more onus
Speaker 3: and responsibility on individual tax payers rather than richer people
Speaker 3: and corporates who actually could afford to be paying more
Speaker 3: tax to pay for the services that we all need
Speaker 3: and use.
Speaker 2: And finally, I mean, what is Howard himself said about
Speaker 2: his legacy in this area, particularly when it comes to housing.
Speaker 3: Oh, he has no regrets. Howard has absolutely no regrets.
Speaker 3: He essentially talks about it as he set up Australia,
Speaker 3: you know, for generations of wealth.
Speaker 1: I'd like them to remember that we tried to boost
Speaker 1: the Australian economy with a wide range of reforms such
Speaker 1: as taxation reform and industry relations Reforman he.
Speaker 3: Will just blame migration for Australians not to be able
Speaker 3: to afford housing when that's not true, or he will
Speaker 3: blame you know, supply Again, that is not true. In
Speaker 3: terms of Australia's population over the last ten years or so,
Speaker 3: that increased sixteen percent, housing stock increased by nineteen percent.
Speaker 3: But when you take into account, you know, scarcity or distribution,
Speaker 3: things become very very uneven. But Howard has not accepted
Speaker 3: responsibility for any of that. He hasn't accepted responsibility for
Speaker 3: the way that he set up the budget in terms
Speaker 3: of the middle class welfare that he baked in. He
Speaker 3: hasn't taken responsibility for the fact that the capital gains
Speaker 3: tax discount just absolutely just completely obliterated Australia's chances of
Speaker 3: being able to afford a home. He just essentially falls
Speaker 3: back on the or, well, if you work hard enough,
Speaker 3: you'll you'll be able.
Speaker 2: To get it.
Speaker 3: It's always about the personal responsibility with Howard, and that's
Speaker 3: always been his get out of jail free card, in
Speaker 3: that it's always your fault if you're not getting ahead.
Speaker 3: So yeah, Howard has not taken any responsibility, but he
Speaker 3: hasn't taken much responsibility for anything at all that he
Speaker 3: did to Australia.
Speaker 2: Amy, thank you for your time.
Speaker 3: Thank you.
Speaker 2: In the next episode of The Howard Affect.
Speaker 1: Multiculturalism is a concept that I've always had a bit
Speaker 1: of trouble with. I take the view that if people
Speaker 1: were to emigrate in your country, it's on the basis
Speaker 1: that they adopt the values and the practices and the
Speaker 1: standards of that country, and in return they're entitled have
Speaker 1: the host citizenry respect their culture.
Speaker 2: That's tomorrow, See you then