The firestorm sparked by Tim Gurner speaks to growing tensions about inequality. Investors are starting to take notice.
Even Commonwealth Bank has helped stoke the debate over generational inequality, using its annual profit announcement last month to highlight the disparities between how older savers and younger borrowers are coping with higher rates. Bank chiefs are now frequently calling out the deep problems with Australia’s housing market, which has become unaffordable for many households.
“If you want to have a healthy society, it is easy to do – all you have to do is move income equality in the right direction. Now, you can do that through taxes, you can do it by having the unions become a little stronger, you can do it many ways,”Grantham is not the only investor thinking about this. Head of Australian equities at Schroders, Martin Conlon, who also appeared at the Live Wire event, believes threats to social stability need to be seen as market risks.
The rent controls and inheritance taxes put on the table this week are clearly part of this. But Conlon sees companies facing more direct attacks. The antitrust case that started in Washington this week against search engine giant Google is also a good example, Conlon says. Tax changes that promote the relocation of wealth might help defray the costs of attacking inequality, but as market strategists such as Bank of America’s Michael Hartnett have argued, it may well force bond yields higher, given already indebted governments would need to keep borrowing to afford social programs.
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