I cringed when I saw the Prime Minister reportedly portrayed the Leader of the Opposition yesterday as a silvertail living in one of Sydney’s wealthiest regions. “It is only those who are cosseted on Sydney’s north shore”, she told Parliament, “that could fail to realise working families need relief.”
Changes in the connection between geography, demography and voting behaviour mean this sort of charge is harder to make nowadays than it was a few decades ago. The PM should take a look at the value of properties in some of the inner suburban seats Labor holds or aspires to hold. And she should take note of the high level of variation in socio-economic status within suburbs with high average income and property values.
But I cringed even more when I read this story on the front page of The Australian yesterday. Reporters Mitchell Nadin and Imre Salusinszky reckon Mr Abbott is bit like his local footy team, the Manly Sea Eagles, who’ve long been perceived “to be wealthier than they actually are”. They say it’s “a concept the Opposition Leader is acutely familiar with”. Mr Abbott,
is no stranger to a thumping home loan and a bit of financial pressure. When he lost his job as a Howard government minister after the 2007 election defeat, losing about $90,000 in salary, he took a new $710,000 mortgage on his house in Forestville to cover his costs of living and the private school fees for two of his three daughters.
I doubt Aussie battlers perceive Mr Abbott as being wealthier than he really is. He’s on an annual salary ($342,250) well north of average earnings and can afford to borrow $710,000 against his house to meet “costs of living”.
The real surprise for me is that Mr Abbott hasn’t borrowed to finance a secure and wealth-building asset but rather, according to the paper, to finance ongoing expenditure. This is not a “thumping home loan”, it’s a thumping “live it up” loan.
My financial advisers have always insisted borrowing large sums to finance day-to-day expenditure is very unwise – it runs down your capital. They’re adamant living costs should always be financed from current income, like salary, dividends and interest.
So there seems to an inconsistency here. The Opposition Leader’s claims to the throne rest to a large extent on promoting his strong sense of fiscal responsibility. Yet he hasn’t borrowed such a large sum in order to buy an asset like a home, but rather to finance day-to-day living expenses. And if The Australian has got its facts right, Mr Abbott has borrowed so much relative to his straitened financial circumstances that he’s feeling “a bit of financial pressure”.
I guess an argument could be made that his daughters’ school fees are an investment in an asset – human capital – but borrowing to meet “costs of living” is harder to rationalise. Then again, I can’t discount entirely the possibility The Australian simply got the facts wrong.