Not Happy John?

Has the electorate’s hip pocket nerve finally gone numb? In today’s Sydney Morning Herald, Peter Hartcher writes, "we are beneficiaries of the most successful macroeconomic management in the developed world, yet we seem ripe for a government that might want to promise to supply our need for non-material happiness."

Last year, in a speech to the Sydney Institute, Julia Gillard said:

Undeniably, Australia has enjoyed high levels of economic growth and record levels of employment.

But interestingly, numerous surveys have confirmed that, beyond a certain point, more and more money can’t buy us happiness.

Indeed, we are becoming an increasingly fragmented, individualised and time poor society, lacking the social structures and networks required to meet our daily needs and the needs which arise in times of crisis.

We have seen growth in incomes, but most of us have little time to enjoy it with our family and friends.

This isn’t a new message. In 2002 Mark Latham wrote that the chief concern of Third Way politics is "the disconnection between GDP growth and human happiness." As leader Latham tried to shift the agenda from economic management to quality of life issues. In his 2003 book From the Suburbs he argued that:

…most people glaze over a the thought of complex macro-politics. Their primary interests are at a neighbourhood level: the things they can touch and influence, such as improving local schools, parks and public safety (p 27).

Back in 2004 Peter Hartcher thought that Latham might win . He quoted former Keating adviser John Edwards who said "The economic debate is somehow irrelevant to the election. The reason is that, with this long run of prosperity, the Government didn’t create it, and Labor’s not going to destroy it." Hartcher wondered whether Howard’s perceived lack of honesty was becoming the decisive issue:

…if voters feel free to choose their government independent of any sense that they might be jeopardising their prosperity, does that open up the option of choosing a government based on more abstract notions – like truthfulness in their political leaders?

Professor Ruut Veenhoven, a psychologist at Erasmus University in Holland, is an authority on the academic study of happiness. He maintains a 90-country database rating and comparing nations and the happiness of their people.

And he thinks so.

"Once you reach a reasonable standard of living, about the level of Mexico today, after that point, the growth in wealth doesn’t add to happiness. Good governance is one of the factors that does. Clear, well-organised, honest, non-corrupt political systems, are important to national happiness."

That was August. By October things had changed. As Hartcher put it. "Howard has said that the election is a referendum on the economy. Latham has said it’s a referendum on Medicare. But in a very real sense, the election has turned into a referendum on Mark Latham." For Latham that was unfortunate.

If Hartcher is right about non-material politics, perhaps Rudd is holding up so well because he’s too dull to have a referendum over. When the candidate is likeable but uninteresting the focus in on other issues. In today’s piece Hartcher writes:

Kevin Rudd seems to be pitching to the happiness agenda. While the Government talks about macroeconomic indicators, Rudd has been talking about kitchen-table indicators. "The statistical averages don’t reflect the day-to-day realities that so many families face," Rudd says.

While the Howard Government boasts of rising wages, Rudd empathises rising grocery prices. The Government brags about falling unemployment; Rudd sympathises with the problems of child care. The Government struts the GDP growth numbers; Rudd talks about a crisis of housing affordability.

Grocery prices and housing affordability are domestic but they are hardly non-material. The idea that Rudd will win on ‘kitchen table’ issues because voters are taking the economy for granted, depends on the economy keeping a low profile. Voters might start paying attention to it if it makes their own home more affordable to first home buyers. In the end, the economy is a kitchen table issue. Falling property values, rising interest rates and unemployment tend to make people unhappy.

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27 Responses to Not Happy John?

  1. Ken Parish says:

    If Hartcher is correct that a win for Labor “would invite a redefinition of the responsibilities of the state … give the happiness agenda a tremendous boost, and give any new government a licence to delve into our innermost sources of happiness”, then he’s just provided one of the few persuasive arguments I’ve seen in favour of re-electing Howard despite everything!

  2. Bannerman says:

    Howard’s ‘perceived’ lack of honesty?!!?????

  3. Brendan Halfweeg says:

    I agree Ken, turning to the state for happiness is truly uninspiring.

  4. Jc says:

    “Howard has said that the election is a referendum on the economy. ”

    It could be by default. Financial markets have literaly imploded on themselves in the past two weeks.

  5. Don – Your last paragraph is right. Rudd is engaged in conventional materialist politics, and this will continue to be the area in which politicians and governments act, because that’s what they can deliver on.

    Governments will not be successful if they try to pursue a happiness agenda.

  6. Mark U says:

    Given Harcher got it so wrong last time, I am not sure why you are bothering to quote him now.

  7. cam says:

    Maybe Rudd has been reading Brett’s “moral middle class”. Finance economics vs kitchen table economics has long been a political point of contention. IIRC Joe Lyons was one of those who saw ‘fiduciary’ excess as a failing of the national moral character.

  8. “Rudd empathises rising grocery prices”. The misprint that was a pun?

  9. Property prices are not falling – they’re rising (pdf).

    house-prices.gif

  10. Don Arthur says:

    “Property prices are not falling” and kitchen table issues are still safe.

    Nicholas, you have some expertise on this. How does the government arrange things so that existing home owners make fat capital gains while, at the same time, houses become more affordable to first home buyers? Are we being sold a magic pudding?

  11. Expert? Moi? No – sad to say. But home prices are rising as you can see from the graph.

    There’s a nasty crunch coming and if it is coming into Govt the ALP would be wise not to promise too much on housing affordability. Rental affordability is falling fast and will continue to fall. There has been lots of growth in income and much less growth in rent for a while. Now rent is catching up. Rents rose at double the CPI rate last year (I think accelerating towards the end of the year but I’ve not checked the series). And the property soothsayers say there’s lots to come – something that makes sense given that demand continues to rise from a virorous immigration program and rising wages and employment and supply has fallen back over the last two or three years.

    Here’s the RBA statement on monetary policy.

    The growing shortfall in the construction of new dwellings is clearly evident in the rental market, where the vacancy rate, at 1.4 per cent, remains close to its lowest level for at least 30 years. The dwindling stock of vacant rental properties is contributing to rapid growth in rents. The 1.6 per cent increase in the CPI measure of rents in the June quarter was the largest since the late 1980s and the annual increase in rents, at 5.2 per cent, was well above the rate of underlying infl ation (Graph 36). Data from industry sources point to growth in rents for new tenancies well above the average increase measured by the CPI. This increase in the growth of rents should provide support for dwelling construction activity in the medium term.

    Average nationwide housing prices continued to grow at a firm pace in recent months. . . . (p. 35)

    And rising interest rates. Hmmmm. Like 1974, it might be a good time for the winner of the election to bags opposition.

  12. Don Arthur says:

    Yes, I can see that home prices are rising. It’s hard not to notice when you live in Canberra. I doubt that home owners really want houses to become more affordable.

    In effect, is the RBA is saying that for rents to fall we need more dwellings constructed and that for more dwellings to be constructed we need rents to keep rising?

  13. Daniel says:

    So you sell your big house for a astronomical price. Great. You then have to buy another one and, if it’s comparable, its price is also astronomical. You could of course live in a caravan or move to Broken Hill and pretend to enjoy your capital gain.

    But would you want to?

  14. Seems to be. Not very encouraging is it – given the rise in prices. I expect the Demographia crowd will be unhappy that the RBA are not saying “it’s land release stupid”.

    On the issue of low income housing I’m no expert either, but it seems to me that there’s an unavoidable dilemma that’s very hard to deal with. If you build nice houses for those in low incomes, they come to have a high market value and then you’ve got a bunch of problems about how come it is that some people are enjoying these benefits at way under market costs and others are not.

    So you can either have your low income ghettos in large parts of a city or you have them dotted about in smaller quantities in more places which is more the current fashion. But they’re still ghettos. They’re places where people with a reasonable income wouldn’t want to live.

    If you try to get ‘low income housing’ built along with high income housing, then with the low income housing you need to produce housing that the high incomers don’t want. (Because otherwise it becomes as highly valued as the high income housing.)

  15. Don Arthur says:

    I’m not sure how it’s possible to build low income housing alongside high income housing. Anything built in a decent location is high income housing.

    If the affordability problem was all about McMansions then Paddington would be a cheap suburb. If it was about the ‘niceness’ of a suburb then why are inner city suburbs with no trees and high crime rates so expensive?

  16. Jc says:

    “Theres a nasty crunch coming and if it is coming into Govt the ALP would be wise not to promise too much on housing affordability. ”

    I’ll say and that’s not even 1/2 of it as it could turn out to be the least of our worries.

    Combine that with the rug pulled out from under a slightly more flexible labor market and you could end up with one of the nastiest economic downturns we have ever seen that could make the early 90’s look like an economic Indian summer. This crunch seems to be a far broader based and dangerous thing i have ever seen. Christ the credit spread- the difference between govies and the private market has expanded like I haven’t witnessed. Meanwhile the worlds bankers are refusing to get taken to the cleaners any more. Exhibit A -The Yen carry trade (Euro-Yen) went from 169.50 to 150 in two odd weeks. Aussie Yen went from 106 to 86 in a few weeks too despite our high interest rate levels and “booming” economy.

    The most worrying data I have seen was the US tics data, which is supposed to be showing capital inflow into the US from overseas.

    Released 15 August

    Net recorded inflows to the US in June: $58.8b
    Net official inflows: $58.2b
    Net private inflows: $0.7b

    The so-called world’s “magnate” for global investment (supposed to be the US) managed to attract US$700 million of private investment money from around the world during July- a relatively tranquil month. Other governments provided US$58.2! The US c/a is around $us 60 billion per month.

    So it looks like the worlds bankers- Asia- arent exactly doing their jobs.

    So as far as were concerned one big policy mistake gluing up the labor markets and we’re over a cliff. Leveraged economies like ours can’t big afford policy errors.

    Add to that a central banker gov. who seems to be the hardest moneyman we have had in modern history and we could be in deep do do. The extraordinary thing I saw all of last week was the casual way people treated Stevenss comments. It’s as though they were reciting the Lords Prayer but not understanding the meaning of the words spoken. He just laid out monetary policy for the time he’s at the wheel that ought to scare any soft money guys or government with “vision” out of their clothes.

    This is the guy who just raised rates before an election and will raise again if necessary in the week of an election. I haven’t seen anything like that since the Japanese central bank governor in Japan of the early 90’s. He (Stevens) is hell bent of stamping out cheap money!

    I’ll take a gentlemans bet with you, Nick. That graph won’t look like that in 12 months time if labor market flexibility is tightened up. It will look like the graphical image of a person jumping from a bridge.

  17. Jc says:

    “If the affordability problem was all about McMansions then Paddington would be a cheap suburb. If it was about the niceness of a suburb then why are inner city suburbs with no trees and high crime rates so expensive?”

    The corollar of that of course is send unemployment higher and the question of affordibility won’t get spoken about.

  18. Always happy to take a bet with one of the hysterics of the market JC.

    But let’s get specific. We’ll have the ALP getting into power and then changing the labour market like they say they will. If they ‘tighten’ it less than you think, (and they’ll certainly tighten it less than the hysterics of the media are arguing) that’s your tough luck.

    Now lets say that happens. What’s ‘jumping off a cliff’? Well a 20% fall in prices wouldn’t quite rate as falling off a cliff, but hey I’ll be generous.

    Do we have a bet?

    Let’s make it $1,000 to the charity of the other’s choice.

  19. Jc says:

    “Always happy to take a bet with one of the hysterics of the market JC.”

    Really?

    Last time you made a comment like that and I asked you for the evidence the phones went silent. Want to offer some evidence?

    “Now lets say that happens. Whats jumping off a cliff? ”

    The direction of both “lines” on your chart.

    “Well a 20% fall in prices wouldnt quite rate as falling off a cliff, but hey Ill be generous.”

    A 20% fall in house prices isn’t falling off a cliff? Well what is then?

    Ok. I bet that if labor gets in and implements labor market tightening polices the real reale market will fall and will continue to fall. how much I don’t know. But those lines won’t be pointing up. I’ll say they could fall between 5 and 20%.

    You need to specify exactly what the bet is.

    I raise that bet to $10,000 that the rate of unemployment will be higher too under those polcies. Let’s make it a real bet then. We do what we like with the money. Even money.

  20. Sorry JC,

    I meant it all with a smile. I do think you’re being a bit hyperbolic, but evidence – well it would be a long conversation wouldn’t it? We have different views which is OK.

    Happy with the 10K, but what you’ve specified is far too vague.

    Labour gets in, house prices fall by 10% within 12 months of the election. Nice and clean. Then we just agree on an the series we’ll rely on and Bob’s your uncle.

    And giving the money away will keep it friendlier. And I’m a friendly kind of fellow.

    I’ll nominate Medicines Sans Frontiers though perhaps we’d probably both prefer a charity which decides on projects according to the principles of economic do-goodery rather than medical do-goodery (which can waste a lot of money patching up people to get shot at again in war zones). Perhaps some charity for those in the third world that is recommended by aid sceptic Bill Easterly.

  21. Jc says:

    I meant it all with a smile.

    I thought that last time. Now I not that sure. Perhaps I said something that offended you since our pleasant summer phone conversation about getting together for lunch or coffee? I’m a little perplexed but if I did say something since then, I apologise as I think you’re a nice person who I wouldn’t want to offend.
    —————-

    “I do think youre being a bit hyperbolic, but evidence – well it would be a long conversation wouldnt it? We have different views which is OK.”

    I’d be happy if you linked to it Nick.

    ——————-

    “Happy with the 10K, but what youve specified is far too vague.”

    You proposed the home prices bet, so I think you ought to suggest the terms.

    I suggested a 10K bet on the unemployment rate. My bet is that the uneployment rate will be higher 12 months if and after labor gets in at even money We use the next month’s labor stats after the election and compare 12 months later.

    10k at even money.

    ——————-

    Your bet.

    At 10% fall, you have to offer odds otherwise that is a bad bet on my part.I woud have to be an idiot to give 10% you way at even money. I’m not the smartest guy in the world but I don’t make silly bets with odds unnecessarily stacked agaisnt me. Sorry , but even money isn’t existing for me. I am sure confident house prices would fall but would place a bet if the odds aren’t favorable. Sorry.

    For even money I bet the the two lines begin to start pointing downwards if and after they are elected. $1,000 buck is fine with me. If you want to up the bet, let’s do 1k on home prices and 10k on the unemployment rate.

    You can choose to do what you like with your money. i won’t be specifying what if I win.

  22. Jc says:

    Ummmmmm……….
    Sorry , but even money isnt EXCITING for me. I am confident house prices would fall but WOULDN’T place a bet if the odds arent favorable. Sorry.

  23. JC – we don’t have a bet – which is fine.

    But we do have lunch if you like. I thought you were gonna contact me but it’s probably my fault.

    One problem is that I’m about to have a knee operation (Collingwood want me out of retirement and back on the half forward flank where I belong). So in a few weeks I hope I’m up to it. My number’s 03 9646 0553.

  24. Daniel says:

    Jesus, we have the prospect of Big Brother about to enter at stage left…sorry right (oh, oh, perhaps he’s already here) and some of us are seriously discussing large bets on housing market fluctuations.

    Hear, hear for capitalism, the opiate of some people!

  25. Jc says:

    Love to Nick. anytime.

    I thought you were going to contact me but as usual I could have screwed it up. If I did, i’m really sorry.

    good luck with the operation.

    Daniel

    That’s not capitalism, it’s just guys do what they have always done.

  26. Jc says:

    I said:

    Meanwhile the worlds bankers are refusing to get taken to the cleaners any more.

    I meant to add

    Meanwhile the world’s bankers- ASIA – are refusing………

  27. matthew says:

    Hi,

    A new site that will focus on the upcoming federal election has launched – federalelection.com.au. It’s in its first incarnation (more features coming). There is a blog that’s up and running and a link to your blog is embedded to our site. Please check out the site if you’d like to.

    Cheers,

    Matthew

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