Wednesday, November 14, 2007

SPIN DOCTOR: The Chupa Chup campaign

What does John Howard have in common with the manufacturers of Chupa Chups, Olay cosmetics and Kentucky Fried Chicken?

Each manufacturer had its logo inserted into Channel Ten’s recent broadcast of the ARIA music awards for just one 25th of a second – a subliminal technique used to dishonestly create an impression in a viewers subconscious mind, bypassing conscious thought.

John Howard’s Coalition has used a few subliminal techniques of its own in a graph available on its website entitled “The Facts: Home loan interest rates are lower under the Coalition”.

The Prime Minister is fond of it. He used an enlarged version as prop during last week’s press conference on the Reserve Bank’s decision to push up interest rates...

One of the subliminal techniques involves the use of arrows. The arrow headed “average rates under the Coalition” points forwards. For no particularly obvious reason the arrow headed “average rates under Labor” points backwards.

And arrows can hide things. Only 3 of the 6 successive rate hikes since the last election are visible under an unnaturally thick horizontal arrow pointing steadily forwards.

And there’s the question of scale. It looks for all the world on the graph as if mortgage rates are tiny right now –only about one quarter as high as they were in the dark days of 1989. But the current standard variable mortgage rate of 8.57 per cent is actually more than half the Labor peak.

How have the Coalition’s artists done it? In just about the crudest way possible. The bottom section of the graph is cut off. Instead of the vertical axis climbing up from zero it starts at 5 per cent; the statistical equivalent of a head start in a race. It makes it look on the graph as if Australia’s banks charged hardly any interest on mortgages during 2002.

A half a century ago in the best selling guide to statistical deception of all-time the American author Darrell Huff christened the technique “The Gee-Whiz Graph”. His book was called “How to Lie with Statistics”.

Other things are wrong with the graph as well. It makes it seem as if the very steep slide in mortgage rates that began in 1996 was the work of the Coalition. But economic policy works with a lag. The rates began sliding steeply well before the Peter Costello’s first budget. They were likely to have begun sliding in reaction to policy settings in place at that time rather than in the future.

It was much the same when Paul Keating took office as Labor’s Treasurer in 1983. It is true that mortgage rates slid as the graph shows, but they had been sliding for some time under the previous Treasurer John Howard. They peaked at 13.5 per cent under Howard (the maximum rate permissible under the ceiling in force at the time), were at 12.5 per cent when he handed over to Keating and kept falling to 11.5 per cent.

None of this is evident in the graph prepared by John Howard’s party. For some reason it omits his 1977 – 1983 stint as Australia’s Treasurer.

Had it been included it would been apparent that in 1983 Howard left the country with higher mortgage rates than he inherited and that in 1996 Keating as Treasurer left the country with lower rates than he inherited, as has Peter Costello so far.

Actually none of this means a lot without looking at what was happening in other countries at those times. Money is freely traded and rates have been falling worldwide. For a Treasurer to talk about his own success in lowering rates when they have been falling all about him is a bit like a football coach keeping track of his own team’s scores and not those of the opposition’s.

And when the current differential between Australian professional rates and those in the in the US is compared to the differential back when Labor left office in the early 1980’s the result is spooky.

In both cases Australian rates were exactly 2.25 per cent above US rates. We are no better off relative to the nation we compare ourselves with than we were a decade ago, a subliminal cue missing from the Coalition’s graph.

HT: wonderful commentators.