National Party leader David Littleproud accused the Labor government of “pitting one Australian against the other” and fomenting “class warfare” over its Stage 3 tax cut changes. But the truth is that both the Coalition and Labor have been waging a war on the working class for a very long time.
It has been bipartisan policy, for decades, to make wage earners bear the burden of every economic crisis of the capitalist system, and that is still the case today.
Both the Coalition and Labor support the policy of the “independent” Reserve Bank of Australia to force real wages to fall — supposedly to fight inflation — while allowing big companies to exploit worsening inflation by raising their margins to make super profits.
While Labor has directed the Australian Competition and Consumer Commission to investigate pricing and competition in the supermarket sector, its recommendations will not be made until 2025, by which time wages will have fallen even further behind the cost of living.
According to the Australian Bureau of Statistics (ABS), real wages started rising over the past two quarters, after falling since 2020.
But Peter Martin, economics editor of The Conversation, explained in his January 23 article that wages are still falling behind the rising cost of living.
“Treasurer Jim Chalmers has been pointing out that in the June quarter and the September [2023] quarter (the three months to June and to September) real wages grew for the first time in years,” Martin wrote.
“By that he means that the wages index compiled by the Bureau of Statistics began growing faster than the consumer price index.
“It’s better than growing more slowly, but it tells us next to nothing about what’s happening to buying power.”
Until September 1988, Martin wrote, “The consumer price index (CPI) used to actually reflect the cost of living. It included all of the big costs incurred by households, including — importantly — mortgage interest payments. At the time, mortgages accounted for an average of $5 of every $100 each wage earner spent.”
But then, “in response to representations from the Reserve Bank and the Treasury, the bureau changed the way it calculated the index. It excluded mortgage and other interest payments, in a decision it acknowledged would make the index worse at measuring living costs.”
Buried in the fine print, the ABS carries a warning that the CPI is “not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households”.
But that is not how the public understands that measurement.
As house prices have soared — in no small part because the tax system and bipartisan government policy encourages speculation in housing — working-class families who managed to buy their home are shouldering huge mortgages and the repayments to match.
The ABS has a separate living cost measurement that includes mortgage interest charges and, on November 1, its media release on this measure was headlined “Living costs rising fastest for employee households”.
It reported working-class households were “most impacted by rising mortgage interest charges, which are a larger part of their spending than for other household types”.
“Mortgage interest charges rose 9.3% following a 9.8% rise in the June 2023 quarter. While the Reserve Bank of Australia has not increased the cash rate since July 2023, previous interest rate increases and the rollover of some expired fixed-rate to higher-rate variable mortgages resulted in another strong rise this quarter,” the ABS said.
Rising interest rates have contributed to annual living cost rises ranging from 5.3% to 9% for different household types. Employee households recorded the largest annual rise in living costs of all household types, with a 9% rise, down from a peak of 9.6% in the June 2023 quarter.
The ABS living cost report also revealed that most households recorded higher rises than the 5.4% annual increase in the CPI, with higher automotive fuel prices and insurance premiums contributing significantly.
After employee households, households dependent on welfare payments, such as JobSeeker and unemployment benefits, recorded the second largest annual rise in living costs, through to September 2023.
This was because “rents make up a higher proportion of spending for these households compared to other household types” and rents have increased significantly over the past year.
According to the latest PropTrack Rental Report, median rents in Australian capital cities jumped by 33% in the two years to December 2023. It also predicted that rents will continue to rise.
Even though working-class households have been forced to sacrifice “for the economy” for years, capitalist economists continue to demand more sacrifice.
The International Monetary Fund executive added its voice to this class war on January 18. While it acknowledged that the rising costs are weighing on households, it warned that the official pick up in real wages “could delay disinflation”.
The IMF also called for a shift from direct to indirect taxes, such as the goods and services tax. This would also hit low-income households the most.