Australia’s squeezed middle on a sticky wicket

Published on Incomes and Inequality

Australians continue to lick their wounds over their Ashes’ loss. But looking beyond this recent sporting catastrophe, Australia is fairing well. The economy is strong, unemployment is around 5 % and the post GFC (Global Financial Crisis) is relatively tiny. Whilst economic prospects are currently far better than in the UK, Australia still provides a useful comparator. In political terms, the battle for the ‘squeezed middle’, however it is defined, is going on in earnest in this particular corner of the globe and has been for decades.

Whilst the term ‘squeezed middle’ is not used, there is persistent political interest in wooing working people who fight hard to get by. John Howard became prime minister in 1996 by winning over many traditional Labour voters, who became known as ‘Howard’s battlers’. It was the battlers’ realisation that whoever managed the economy best would help them the most, which shook left wing politics to the core of its union bedrock. In 2007, Kevin Rudd took back power for Labour vowing to ease the pressures on ‘working families’ and by promising to show more fiscal restraint than the incumbent Tories. The battlers have proved themselves to be true swinging voters, throwing their allegiance behind whoever they think can look after their ‘hip-pocket’ the best. As a consequence, the plight of low-to-middle earners has often been central to Australian political discourse.

Recent analysis (collating polling from Australia, UK, Canada, USA and Western Europe since the 1960s) shows that people tend to trust parties on the right with economic management but if you ask who is better at managing the economy for ‘ordinary people like you’ or ‘managing the economy for working families’ and the advantage switches to the party to the left. However, as during Howard’s era, recent polling here in Australia shows that the Labour government has given up this natural advantage and lags behind the liberals (conservatives) in many key ‘kitchen table’ issues.

Many of the policy challenges of the battlers are those of the ‘squeezed middle’ – cost of living pressures, access to homeownership, progression and security in work. Australia’s Fair Work Act (2009), which overturned the conservative’s laissez faire ‘Work Choices’, contains a raft of measures to improve the lot of workers. The health of the Australian economy has also allowed a significant increase to the national minimum wage this year, after a freeze last year. However, it is also clear that good economic health has not resolved many of the challenges of low-to-middle earners. Australia has experienced a strong trend towards casualisation of its workforce meaning many low-to-median earners face personal and financial insecurity. Homeownership is increasingly out of reach for younger generations and frequent interest rate rises has put many existing homeowners under significant mortgage stress. Recent rises to cost of living basics such as food and fuel have also hit hard.

For very different reasons to the UK, the plight of many low-to-middle earners is likely to worsen in the coming year. It is not cuts to public spending or wage restraints that will hurt, as in the UK. It will be the impact of the mining boom leading to inflation and higher interest rates that will threaten the well-being of the Aussie battler.