Labor frontbencher Mark Latham has proposed an ownership revolution with a plan to widen the employee share ownership scheme and a subsidy scheme for first-share buyers. Mr Latham who is assistant treasury spokesman said he wanted to draw on the ideals the compulsory superannuation scheme that was launched in the period of the Hawke-Keating Governments. That scheme had spread the wealth-generation of superannuation from just the well-to-do to the whole community. His leader, Simon Crean, said that many people were now gaining wealth not just through personal exertion and income but through assets. “”We want to spread that asset class to the whole population.
Mr Latham warned that Labor had to modernise or perish. It had to be relevant to a new class of aspirational voters. “”We must meet the legitimate aspirations of working Australians for asset accumulation. It is possible to achieve ownership for all.”
It is an interesting – if different view – of the Labor legacy. Mr Latham sees it as part of the creation of social mobility begun by then Prime Minister Gough Whitlam giving working-class families access to tertiary education and extended by then Treasurer and Prime Minister Paul Keating who gave working people access to an open, dynamic and competitive economy. Mr Latham’s third stage is to give working people easier access to share ownership.
He runs the danger of converting the remnant of the shrinking working class into part of the supposedly Coalition-voting capitalist class. Alternatively, if successful, he might turn the Australian Labor Party into a party for the aspirational, capital owning and wealth accumulating classes and not the working class – the people who get their primary wherewithal for living from daily work. The other danger in the scheme is that working people might not thank the Labor Party for encouraging and subsidising their purchase of shares, only to find that the value of the shares falls. A good example is the second tranche of Telstra which floated for more $7 a share and is now at less than $5. This is the critical difference between the Whitlam scheme to educate the working class and the Keating scheme to give them superannuation. Education and superannuation carry no risk. They are automatic wealth generators or at worse neutral. Share-owning, however, is an inherently risky business. It is no good looking at the ever-upward march of the All Ordinaries Index and assuming that all one has to do is put money in to make a profit. Some shares lose value. Some companies go broke and take the share value to zero. These include blue chip companies recommended by the best financial advisers.
In any event, many working Australians have taken up share ownership, without any government inducement. In the past decade, the share-owning portion of the population has gone from 10 per cent to 54 per cent. True, many of those coming into the market have very small holdings and came into the market through no choice because they were part-owners of mutual organisations that were corporatised – like the NRMA or they put in for privatisations of iconic public corporations. But they stayed in the market by choice.
Mr Latham is on stronger ground when he seeks to widen the existing employee shareholders scheme. At present employees can use pre-taxed income to buy shares, with conditions on re-selling. There is still some risk, but employees have knowledge and a stake in the company they are investing in – it would be less of a gamble.