Like a zombie rising from the journalistic grave, one of the most infuriating terms in Australian public discourse is back: the “mum and dad investors”.
COVID-19 policy debates are increasingly framed in terms of their supposed impact on this fabled cohort. Journalists seeking “balance” offer a sympathetic lens on both ordinary workers and consumers, and the supposedly common procreators who own the businesses that laid them off and charge the rents they can no longer afford.
Yet, aside from being descriptively useless (isn’t Twiggy Forrest also a dad, and Gina Rinehart a mum?), the term is largely employed to lump the upper-middle class in with the rest of us by distancing them from the uber-rich.
The invocation of parenthood emphasises the supposed ordinariness and benign motives of B-league capital owners, who thus must be included in our collective concern.
No matter how big their swimming pools, we should not equate investors’ lost returns with the genuine destitution of many Australian workers. And they should thus remain a lower priority in the COVID-19 response.
The interests of investors often run counter to the national interest, especially in a pandemic. As we face our biggest economic crisis since World War II, we should ignore subtle appeals to special treatment, and be prepared to compromise their interests if necessary.
A fair share?
Exhibit A: Bernard Keane recently noted “baby boomer investors demanding that even though the economy has been halted to protect them, they still want banks to pay dividends, no matter how reckless that would be”.
RMIT business academics Andrew Linden and Warren Staples have outlined precisely why it’s a bad idea — many of our major companies have surprisingly little cash on hand because they give too much of their profits back to shareholders, to encourage them to buy even more shares. There is thus little left over to boost wages or reinvest, or to save for a rainy pandemic.
With cash from daily operations razed by social distancing, many companies must now choose between paying their workers and ensuring they stay afloat, or paying out dividends to investors whose bloated returns left them cash-strapped to begin with.
Legally, board members barely have a choice. This is why both Britain and New Zealand have stopped their banks paying dividends, and Australia is reluctantly edging that way.
Nine, however, informs us this would be “a cruel prospect for retirees”, many of whom rely on returns from investments.
I empathise with all those who will lose income due to this nasty virus. But we have an imperfect solution for that problem, which does not threaten our biggest employers with bankruptcy and their workforce with mass layoffs. It’s called the dole.
It’s where those of us who can’t afford stocks go when life isn’t fair.
‘Come mothers and fathers throughout the land‘
The outsized sympathy given to housing investors in the rental debate similarly derails policy discussion. The “two sides” are afforded equal weight on TV shows like The Project, and renters are implored to remember their landlord is also doing it tough.
The implication is to water down new government regulations and pressure renters to negotiation meekly.
Renters should ignore this framing and push hard.
Some landlords may also be impacted by the COVID-19 fallout, but they generally have more options. Australian banks have offered (albeit imperfect) mortgage relief. State governments are releasing funding schemes that help both parties. The investor has a stake in, or full ownership of, a valuable asset they can put to use. And if all else fails, they can line up at Centrelink with those of us who cannot shunt the risks we accepted onto others.
I hold no inherent disdain for investors. If life gives you lemons, sell them and dive the profits into whatever government-abetted Ponzi-scheme you like. If I had enough lemons, I would do it too.
I am simply saying that those who have amassed enough savings to buy an investment property or a large stock portfolio don’t need our sympathy, and they certainly should not be poking holes in the stimulus bucket.
Whether governments continue their decades-long coddling of the upper-middle class or reasonably compromise their generous arrangements to help labour will have intergenerational consequences.
The media will never give us a corny sympathy badge, but the “son and daughter workers” of younger generations will have their working lives disproportionately impacted by this crisis, especially if their current or potential employers go bust or their sharehouse is emptied.
Please, “mums and dads”, think of your children. Consider investing in our future.
I think you’ll find that retirees would be going on the pension, not the dole. I suspect that most share-holders are relatively passive ones, through their superannuation accounts. But, if you run out of super, you go on the pension (if old enough)- them’s the rules. Unless you’re one of the lucky ones on a defined benefits scheme, where you don’t have to give a rat’s about the share market, low interest rates etc
I do agree about the “mum and dad” tag- infantile labelling used by hack journalists across the board, and not only about investment. The gratuitous insertion of parental (or grandparental) status in especially “tragedy” stories surely constitutes some unacceptable “ism”.
I was wrong: you don’t have to run out of super to get the pension. You can get a part-pension while still having a fair amount of loot. Good public policy or not?
Curmudgeon – the holy grail for those on the brink of the pension is not so much the pension money, and other discounts for concession holders, although those are of course always useful. The Gold Prize is the Health Card.
The mores investors popi their heads, the more they come across (to me, at least) as rent-seekers who depend on actual workers to parisitise off. But I’m with you, who can blame them when our tax system is set up accommodate and reward such behaviour? That they are making this crisis worse for a lot of people is incidental their being.
Yeh, they’re the incidental have your cake(and someone else’s ) & eat it too .Who could blame them ? The murderous impulses of innocence..
It’s hard to blame anyone for operating within the what’s both legal and encouraged. It’s been the modus operandi for the past few decades for finance gurus (I’ve read a number of those books, unfortunately) and politicians to encourage investment in property as a path to financial security. Investors are doing what they’ve done for a long time without serious recrimination.
As a society we collectively didn’t mind when housing became unaffordable for a generation, or that rent became so high that it stretched (and in some cases) broke the most vulnerable members of our society, and skewed our spending so that rent and mortgages take a good chunk of our income. At no time has there been a serious push to limit this, nor invest in more social housing, or keep rent and purchasing prices in check. We (collectively) are fine with how things are.
Very well said Kel.
So true.
Counter-point: Investors provide the capital that companies need to be able to function. In return for providing that capital, they should be able to receive a fair return on that investment. Not an excessive return, but a return that represents the risk the investor took an the opportunity cost of that investment.
For ‘mum and dad investors’ read ‘battlers’, or ‘working families’, even ‘quiet Australians’. It’s really a political euphemism for those supposedly and essentially honest and modest Aussie folk just trying to ‘get ahead’; they’re so quintessentially decent, in a genuine ‘Aussie’ sense, that their entitlements, and sense of same, dwarf those of all other lesser, poorer, possibly marginalised groups.
For ‘investors’, too, read speculators, for that is what most of them are, caught up in the government-sponsored property mania where ‘everybody else is doing it’ and ‘you’re a mug if you don’t’, because property values go up for ever. And if they don’t… well, what’s the government for, after all?
This article is at level of the poster on our bus stop this morning. Attributing COVID to Bill Gates’ plans for world domination.
I will admit to directly owning a portfolio of shares and using these, being semi-retired, to live. It is called Compulsory Superannuation. In effect, everyone owns shares. The difference; I, like many, many others, found the large hands of the, then compulsory, super funds, rendered the whole savings thing pointless. Not having that clipping away made a lot more sense. I totally reject the inference this is an act of greed. You cannot atttribute, like a Wuhan conspiracy theorist, the actions of the few to the motivations of the majority.
Most self funded retirees are neither the CEOs or slum landlords of legend you portray. We muddle along, minimizing the rapacious assault of the financial sector on our savings. Balancing what help we can give our children in navigating their increasing difficult world and staying out of their future taxpayer pockets.
I, like any parent, do not want to leave an economic, social and environmental wasteland for my children and their compatriots. That far outweighs any aspiration of personnal wealth. It is what guides us all. I utterly resent your simple bundling of motivation that implies otherwise.
As long as you think you should be able to hang on to the capital in your super account and live off the money it generates, like most ‘self funded’ retirees, which you would not be.
80% of retirees receive some Age Pension. So if you are a self-funded retiree, you are by definition richer than 80% of your fellow retirees. But this 20% of relatively wealthy retirees are responsible for 99% of the whingeing we hear (witness the franking credits debate during the last federal election campaign). Very annoying.
90% of statistics are made up. My point is only that bunging people into categories and generalising motivations simply increases the divide. You kill any attempt to sell enough people on a vote against the wastelands we are leaving for our children. This article and the comments are just wrong about many of those you ascribe to ‘wealth’ and whinging.
Franking credits and negative gearing are obviously wrong for the next generation and the near miss of the last election was a serious setback. I made no vote for that.
Not ‘hanging on to the capital’. The aim is to hit zero on the last day, and do the best for my children on the way. That is much more ‘most self funded retirees’ in my experience.
Maybe if you paid tax your children would not be living in a wasteland but a civilisation paid for taxation.
I’m helping my kids too, but why should your and my kids have opportunities denied to other people’s kids?
And this only part of the sheep’s clothing worn by neoliberal thieves and gluttons. If you preach Capitalism and free markets, then you must cop the consequences of imprudent investment. But Australia is awash in ‘moral hazard’.
I have no sympathy for the retired living off unsustainable dividends or the complete illogicality of negative gearing. If you have sufficient assets to be able to live off dividends, then you can alter your asset mix to redress that. If the investment does not work without massive rent seeking from other taxpayers, it is a sh*t investment. Do something else and those, particularly, but not exclusively, the young may be able to afford a house.
Awash in moral hazard, beautifully put BA. You’re dead right of course. The privileged reserving the right to make investments that bring tax benefits And capital gains, and want a taxpayer bailout when stupid investments go sour.
And the franking credits rebate might not be a problem for a few years. Sucks to be wealthy and dumb.