Assets for the next generation

Some things never change in Australian politics. When Labor is in Opposition there is always a great debate about our direction and policies. This was true of the Curtin Opposition in the 1930s, Whitlam in the 1960s and Hayden in the 1980s.

In one respect, this is not surprising. People have high expectations about Labor, the party of reform and progressive ideas. No one ever expects the Coalition to do much, just to preside, to preen itself and to put the country to sleep.

The weight is always on Labor to do things. That’s why people are keen to know what we stand for. I believe the answer is straightforward: Labor is anti-establishment.

We want to break down the concentration of power in society. We want to disperse economic, social and political influence as widely as possible.

This is the new dividing line in public life. It is not a question of Left versus Right, but a struggle between insiders and outsiders.

Too much power in our society is concentrated in the hands of insiders. Labor’s historic mission is to empower the outsiders, to fight for the underdog. With the rise of globalisation, our role has become more important.

Too much economic power is concentrated in the hands of big corporations. In recent times, these companies have won many more rights, particularly the rights of free trade and investment.

But in return, they have been reluctant to discharge their proper social responsibilities. The obscene level of executive salaries in Australia is just one sign of corporate irresponsibility and greed.

Labor can be pro-market without necessarily being pro-business. We must impose higher levels of corporate social responsibility in this country.

We also need to reduce the shocking level of asset inequality. The top 20 percent of Australian households owns 65 percent of the nation’s wealth, while the bottom 20 percent owns nothing at all.

The Howard Government has no strategy or policies to end this imbalance. In fact, it never mentions poverty as an issue.

Concentration of economic power tends to be reinforced by a similar concentration of power in the cultural life of the nation. This is reflected by the political nature of the Government's appointments to Australia's major cultural institution, the ABC.

Public culture has become an important public issue. Globalisation is not just an economic event. It also challenges our sense of social stability and cultural identity.

Not surprisingly, people want to take greater control of their lives, reclaiming a sense of identity and community. This means having a bigger say in the decisions of government.

The electorate wants to be heard, not just listened to. This isn’t happening under the current Government.

Even Liberal backbenchers concede that the Prime Minister’s first instincts are authoritarian. Look at his record on democratic reform.

No independent Speaker of the House of Representatives. No reform of the parliament and its committee system. No community cabinets or public consultation. No experiments with Internet democracy. No democratisation of our cultural institutions. And no Australian Republic, let alone a Republic with a directly elected President.

Under Howard, political power is concentrated in the hands of the few, not the many. Labor’s task is to flatten this hierarchical system and to dissolve the power elite. Our role is to re-empower the outsiders, to transfer assets and influence to the vast suburbs and regions of the nation.

Wherever power and privilege are concentrated - whether in the boardrooms of big business, the pretensions of high-society or the arrogance of big bureaucracies - we need to be anti-establishment.

The outsiders want us to shake the tree, to rattle the cage on their behalf. They want us to be less respectable and less orthodox, breaking down the powerful centre of society.

At a time when Labor’s identity and legitimacy are being questioned, the quality of our personnel is not a problem. Our MPs are the products of public housing estates, country towns and working-class families.

We entered politics for the right reasons; growing up on the wrong side of the tracks, determined to fight the system. Our task is to turn these instincts into a new program, one suited to the new politics. T

his is now happening under Simon Crean’s leadership and Jenny Macklin’s policy review. Already we have released ten discussion papers, with more to come.

Economic Ownership

In the paper on economic ownership five policy proposals are being examined:

1. Innovative home ownership schemes to respond to Australia’s housing affordability crisis.
2. The establishment of Nest-Egg Accounts, so that families can pass on an endowment of money and assets to their children.
3. The creation of Lifelong Learning Accounts to meet the growing costs of adult education and retraining.
4. The development of Employee Share Ownership Plans to increase worker participation and ownership.
5. The introduction of Matched Savings Accounts to help low income people save and accumulate assets (and break the poverty cycle).

In the new economy, there are no more jobs for life. People move in and out of careers and the workforce on a regular basis. T

he best form of financial security is a portfolio of assets, resources to fall back on during the tough times. The Keating Government gave Australians retirement security through its superannuation reforms - compulsory savings of $500 billion, rising to $1000 billion in 2010.

Labor’s ownership agenda aims to build on this achievement. We want to extend savings and asset accumulation to other parts of the lifecycle: families planning and providing for their children’s future, young adults entering the home ownership market, people meeting the costs of lifelong learning, workers moving in and out of employment.

Financial security is important for all age groups, not just retirees. As a nation, we need new incentives and new programs to help young people save for the future.

For all the talk about an ageing society, it is the next generation that faces the greatest economic challenge.

Last month NATSEM reported that in coming decades, the proportion of household wealth held by 25-44 year olds in Australia will more fall from 23 percent in 2000 to 10.2 percent in 2030. This is a huge shift in the nation’s asset base up the age ladder.

A child born today will enter a relatively asset-free generation. In large part, this is due to declining rates of home ownership among younger Australians. NATSEM has forecast that over the next 20 years, the proportion of 30-34 year olds with a mortgage will fall from 40 percent to just 15.

Unless something is done, our legacy to our children will be the lowest rate of home ownership and relative wealth in the nation’s history.

Most families, of course, know the problem. They want to put money aside for the next generation but, under the current system, they receive no incentive or encouragement to do so.

For all its rhetoric about families, the Howard Government has done nothing to help families save for their children.

Nest-Egg Accounts

A major gap in Australia’s economic system could be addressed by Nest Egg accounts - a long-term savings plan for families. When a child is born, the government would open a Nest-Egg Account and make a deposit of say $500.

The accounts would operate as sub-accounts of the existing superannuation system. They would also be means-tested, along the lines of family payments.

After the initial endowment, government would top up the accounts, say at ages 5, 10 and 15. It would also offer tax incentives, encouraging families to contribute to the nest-eggs and further invest in their children.

With the benefit of compound interest and managed investment strategies, the initial investment would grow over an 18-year period. I envisage a system that delivers nest-eggs in the order of $10,000.

An important part of the program is to provide financial education for account-holders, building a culture of savings and responsibility among young people. At age 18, the holder could access the account only for sound financial purposes - such as home ownership, HECS payments, rollover investments, plus training and employment.

This is an initiative that takes young people seriously, providing adult resources as they move into adulthood. It backs the strong desire of parents to pass on assets and ownership to the next generation.

It also follows the principle of mutual responsibility - government provides an endowment for each newborn child but then the families themselves are expected to add to the accounts. This is not a something-for-nothing program.

For our side of politics, Nest-Egg Accounts are an important way of breaking the cycle of wealth inequality. While welfare support for low-income families is absolutely necessary, it cannot overcome the problem of inter-generational poverty.

There can be few things worse in our society than moving into the adult world without assets, without savings, without hope for the future. Yet this is the prospect tens of thousands of young Australians face every year. It is the reason why inequality is so entrenched.

As asset prices continue to grow, people outside the ownership tent are left further behind. This is what the NATSEM research is saying - young Australians who have missed the housing boom will continue to slide down the ownership ladder.

In a market economy, it is not the flow of money that matters most. It is where the money settles.

The rich, of course, always want the money to settle with them, at the expense of the poor and the children of the poor. The challenge for Labor is to break this pattern of wealth distribution. This is why Nest-Egg Accounts are so significant. They help the outsiders to own assets; low income families to pass on something better to the next generation and the children of the poor to be owners rather than Centrelink customers.

Social justice relies on giving all Australians an ownership stake. Not just in the retirement years, but through all parts of the lifecycle. A nation of asset owners is an egalitarian nation.

Conclusion

Labor is more than just a political party. We’re a movement - a movement that always needs to energise its base and create new causes and new constituencies.

Paul Keating said it was like pedalling a bicycle. Let me extend the analogy - when a bike starts moving it tends to wobble from side to side. The rider then has a choice; to stop the bike or to pedal faster. I’m a great believer in pedalling faster.

In many parts of the world, left-of-centre parties have got the wobbles. With the fall of the Berlin Wall we’ve had trouble redefining ourselves, nourishing our supporters with a sense of energy and movement.

It’s not just a challenge for the ALP. It’s an international dilemma. I believe that the new Labor cause hinges on the dispersal of power, the extension of economic, social and political democracy.

The downside to globalisation is the concentration of power, the entrenchment of an arrogant and self-serving group of insiders. Our job is to break down the power elite and to re-enfranchise the outsiders.

That’s what modern politics is all about: the distribution of power in our economic and cultural institutions. It’s why economic ownership is such an important issue. We want to give all Australians a stake in the new economy - not just the 60 per cent who currently own assets.

Labor believes in universality, a stakeholder society in which assets and ownership are available to all. I grew up in a suburb (a public housing estate) where, by definition, nobody inherited anything.

Today I represent neighbourhoods with unemployment rates of 40 per cent and welfare dependency rates of 80 per cent - places where, almost certainly, nobody will inherit anything. So don’t tell me society is fair. And don’t tell me that Labor has nothing to fight for.

Sixty years ago, the Curtin and Chifley Governments set a great national goal for the attainment of full employment - jobs for all Australians. Thirty years ago, the Whitlam Government committed itself to education for all, the massive expansion of skills and qualifications.

A Crean Labor Government should be no less ambitious. We can create a stakeholder society in which all Australians have a decent chance in life, a chance to be self-reliant and secure through the accumulation of assets. We can achieve ownership for all.