Life on the West Island - Land of the Great Divide

The vast gulf between rich and poor in the West Island is continuing to expand at a frightening pace; creating what is becoming an unbridgeable Great Divide. Recently, this has been illustrated from an unexpected quarter.

Multi award-winning West Island playwright David Williamson has come out of retirement to write a new play about the housing crisis and the increasing chasm between the haves and have-nots in our nation. He says neoliberal ideology, which has been embraced by both major parties, has made the wealthy ever richer and seen many citizens lose hope of ever affording their own home.

Interviewed by Philip Adams on ABC Radio, Williamson claimed that in 1962, we were recognised as the second most egalitarian nation on earth, trailing only Sweden on the distribution of wealth among our population. On the most recent ranking, the West Island rated the third worst on this equality measure, behind only the US and UK. Williamson cited OECD figures showing that in 1962, chief executives of companies earned salaries around five times those of workers in their organisations. But with the embrace of “greed is good” neoliberal capitalism, CEOs now receive at least 400 times as much as their staff – and in many cases executive bonuses and golden parachute retirements account for millions of dollars more income.

These disparities have manifested themselves most in the housing market, where dwellings have become a major form of investment income and tax avoidance, largely due to the tax and housing policy changes made by the Howard government, designed to undermine superannuation and shift wealth from the poor to the rich. These anti-egalitarian policies have probably succeeded beyond Howard’s wildest dreams, but have resulted in growing poverty and the locking out of lower/middle income earners and young people from the housing market.

Probably the most blatant policy change was to remove capital gains tax from profits made by selling family homes and to halve it on other capital gains, such as on shares and investment properties. The major effect of this was that wage income earners paid full income tax on their earnings, while those who sat at home and watched the profits roll in paid tax at half the rate. So, a low-income manual worker with a risky job paid double the rate of tax levied on a non-working investor.

The other significant factor in widening the wealth gap was the provision of “negative gearing” on all rental properties, so that all expenses - such as maintenance, rates and mortgage interest – could be claimed as deductions against rental income. It was claimed at the time that this would result in many more affordable rental homes being available. In fact, the opposite has occurred, with landlords pocketing much higher rents and few affordable properties being built. In fact, most negative gearing benefits have been claimed on existing properties, and housing commencements have fallen.

A further complication has arisen with the boom in short-term rentals (such as Airbnb) taking much of the previous rental stock off the market. This was greatly facilitated by the Morrison government’s cash handouts for home renovations, which enabled many homeowners to add on short-term rental flats and extensions.

Former Head of Treasury Ken Henry outlined the problems on ABC Radio, where he encouraged political leaders to undertake a major tax overhaul. He said that governments are letting down the next generation by refusing to do more than tinker with the tax system, which is increasingly reliant on income tax, leaving young people carrying the burden. He added that the economy was heading towards an intergenerational tragedy, breaking the golden rule that future generations have the opportunity to be better off. Young people look at the distribution of wealth in Australia and they’re asking themselves, ‘how is it possible for me now to buy a house?’ Well it’s not.”

Meanwhile, social justice lawyer and advocate for struggling renters Jordan van den Berg was more radical in a recent television interview, as reported by journalist Rachel Withers:

He is asking people to submit the addresses of vacant properties, suggesting those in need of a home might squat in them – that has really annoyed his critics. But it was last night’s interview on The Project, in which van den Berg calmly pushed back on criticism that has drawn widespread reactions. Asked by co-host Sarah Harris whether he really thought “encouraging people to squat on private property” was the right way to address the housing crisis, he countered with a question of his own: “Do you think it’s right that we have thousands of vacant, abandoned homes while we have people living on the street?”

This week, David Crosbie of the Community Council for Australia joined the debate:

Many Australians have access to quality housing, health care, education and employment options. Many of us can afford to spend discretionary income on entertainment, travel, exercise, food and even art. But that is not the complete story of Australia. Nowhere in our constitution does it say all Australians are equal. The word egalitarianism is not mentioned. There is no Australian Bill of Rights empowering us all to equally claim our freedoms.

When we talk about Australia being the place of the fair go, an egalitarian place where we all have a chance to succeed, we downplay both the advantages of wealth and the disadvantages of poverty. Australia is a wealthy nation, but our wealth is not distributed fairly. The Australian tax system favours those who invest over those who work for a living. In practice this means our capacity to make money depends heavily on whether we already have access to money. Australia is an amazing country, but we have a lot of work to do if our claims to be an egalitarian society are to be justified.

Meanwhile, the West Island’s Great Divide, as identified by David Williamson, continues to expand at a rapid pace.