August 10th 2002

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Articles from this issue:

COVER STORY: The future of the Australian Democrats

Latham steals limelight from lacklustre ALP

New Zealand Labour forced into new coalition

STRAWS IN THE WIND: Rob the Builder / Mayhem in Lilliput / Fear of wages

ECONOMY: New agenda needed to address social breakdown

WA Liberals' new policy positions

Could India help in Afghanistan? (letter)

Clerical scandals: another view (letter)

Families now a luxury (letter)

COMMENT: Stalin's heirs live on ... in Australia

BIOETHICS: American stem cell expert to visit

UNITED STATES: Why Bush ended funding for UN population control agency

LAW: International Criminal Court decision to dog government

BOOKS: Our Posthuman Future, by Francis Fukuyama

BOOKS: The Price of Motherhood, by Ann Crittenden

SOUTH AUSTRALIA: Shirley Nolan: a case for euthanasia?

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Latham steals limelight from lacklustre ALP

by News Weekly

News Weekly, August 10, 2002
Most of Labor's new frontbench has been in a mysterious hibernation for much of this year despite the fact that Simon Crean thought so highly of his hand-picked team that he over-ruled the factional heads of the ALP to promote them.

The same could not be said for Mark Latham who has gathered a degree of notoriety for his colourful language and brutal parliamentary style.

But the outer Sydney MP has also been genuinely active in policy development and last month produced his second major paper on ownership - a bid to widen equity ownership in the community.

Latham has already committed the ALP to wholeheartedly backing employee share ownership in Australia - an area that the Howard Government has let slide in recent times - despite its claims to be the champion of small business.

But Latham has now moved into a much more controversial area - trying to build up equity for the poor.

Ironically, Latham's speech to the Financial Planning Association of Australia on July 22 was made as the greatest bull market in history appeared to be in its death throes.

Latham is the first Federal MP from any political party to be given specific responsibility for "economic ownership". It is an entirely new concept and policy area, but the thinking behind the portfolio has occurred within the framework of a period of extraordinary asset growth both in Australian and around the world.

Assets, particularly property and shares, have experienced phenomenal growth over the past decade, fuelled by the telco and booms, low interest rates and a benign economic climate.

However the new wealth, as Latham rightly points, out has not been shared by everyone in Australia.

About 60 per cent of Australians own or are paying off their own home, and most city-folk at least would have done well out of the boom in housing, but the other 40 per cent have little or nothing to their name.

Latham has pointed to a major shift in thinking about the way a future Labor Government will think about the disadvantaged.

"The distribution of wealth is a far bigger problem than the distribution of income," he said.

Latham points out that while 20 per cent of Australian households earn 38 per cent of the nation's income, the bottom 20 per cent earn 8 per cent. The distribution of assets, however, is twice as bad.

The top 20 per cent of households own 65 per cent of Australia's wealth, while the bottom 20 per cent owns nothing at all.

"Asset inequality has a huge impact on people's life chances," Latham told the association. "Ownership gives people a stronger sense of self-esteem and belonging.

"It provides the economic security from which people can take risks and accumulate further wealth.

"Internationally, research studies have linked asset effects to stronger health outcomes, education levels and community participation.

"Without a sense of ownership and self-esteem, poor families lose direction and hope in the future, thereby entrenching the poverty cycle."

Few would argue with these points, but the key difference is that Labor now no longer intends to rectify these inqualities by the old-fashioned method of trying to increase the wages of low income workers or by taxing the better off to give to the poor via the tax/transfer system.

Instead Latham's plan involves trying to reduce the underlying causes and extent of inequality - the distribution of assets.

Latham's first proposal is the creation of "Nest-Egg Accounts" - a long-term savings plan which aims to provide assets which can be used for higher education, home ownership and small business start-ups when they become young adults.

The Nest-Egg Accounts would be kicked along with seed funding from the Government after the child is born, topped up with regular contributions from family members through strong tax incentives.

The second idea is one borrowed from the United States - "Matched Savings Accounts".

This is a new way of encouraging poor people to save for home ownership and their children's education.

"In the past, governments have under-estimated the capacity of disadvantaged people to save," Latham says. "Programs overseas, however, have shown that the poor can save and invest, once they receive the right support and incentives."

The US program involves parallel savings accounts. In the first account, low-income families aim to reach a savings target over several years. Matching contributions are paid into a second account, funded by governments, community groups and the private sector.

In the US the average matching ratio is 2:1 (two dollars for every dollar of family savings). Families don't get access to the second account until their initial savings target is met.

Latham's ideas deserve serious consideration, but they will be controversial and unlikely to receive a warm reception in the Treasury. They contain many loose ends and Latham has sent them off to the ALP's Chifley Research Centre for detailed policy work.

Deflating superannuation accounts may also produce some long-term cynicism in the electorate about government-designed savings.

The Coalition is unlikely to emulate Latham's ideas, preferring instead to help Australia's poor with a hand-up rather than a hand-out through traditional means of finding them a jobs and through income support. On the other hand, by the time the next election comes around, after decades of useless welfarism, Australians may be ready to embrace some serious new proposals at tackling long-term poverty in Australia.

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