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