Nine hits are falling into place

Federal budget attacks on middle and upper income Australia have taken effect on the economy and will make it increasingly difficult for Julia Gillard to win the next election.

The federal government’s attack on the Australian middle class is now falling into place. So much so, that in his KGB interview Stockland chief executive Matthew Quinn says that after decades where the income disparity in Australia was widening and middle-to-upper income earnings were increasing faster than those at the bottom of the pile, the gap is narrowing.

So much so that Quinn’s Stockland strategy has been adapted to try to take advantage of the change. And so his shopping centres partly aim at lower-income communities and he has adapted Stockland’s residential developments to cater for those wanting low priced houses. Much of this income gap narrowing is a result of government action.

The redistribution of income will cause a lot of suffering and heartaches in middle income Australia. The vigour of the attack on middle Australia was first displayed in the 2011 federal budget and I isolated nine fronts where the government was firing all canons (BUDGET 2011: Nine hits make a lethal combination, May 10). And so, middle and upper income Australia had to pay the flood levy – lower incomes were exempted. Middle and upper income pay the full carbon tax – lower incomes are compensated. Middle and upper incomes will pay substantially more in medical benefits – lower incomes are exempted.

Middle and upper income earners were attacked on family allowances, FBT and family trusts while those contracting in the building industry are to be presented with a mountain of paperwork. The industrial relations legislation has lifted payments to many lower income workers. Middle income Australia has, for the most part, not received those rises and now faces much greater job uncertainty.

On Monday the Gonski report on education funding will be released. There is a fair chance that it will follow the pattern of other government actions and lower the amount of money available to independent schools, where a large segment of middle income Australians send their children. Middle and upper income Australia bought more expensive houses and apartments and in many areas it is these dwellings that have suffered most in the recent real estate downturn. Moreover, they have often borne the brunt of the power, water and rate rises and are often very highly leveraged, so the failure to reduce interest rates by more than half a per cent is hurting.

I suspect that only the more sophisticated ministers in the federal Cabinet understand the breadth and power of the attack they have launched against middle and upper-middle income Australia. As middle and upper-income Australia begin to buckle it will make it increasingly difficult for Julia Gillard or whoever takes her place to win the next election.