This model tipped the last 2 elections. It’s pointing to a Coalition win

This election will be won by the Coalition and Prime Minister Scott Morrison if the economic models perform as expected – and they usually do.

A model refined in 2000 by then Melbourne University economists Lisa Cameron and Mark Crosby found that most federal election results in records going back to 1901 can be predicted pretty well by just two economic indicators.

And they are not the indicators that might be expected.

The growth in real wages in the year leading up to the election appears to have no effect on the governing party’s chance of being returned to power. (Which is just as well for the Coalition, because the buying power of wages has been shrinking.)

Similarly, GDP (which is shorthand for gross domestic product, the measure meant to encompass almost everything known about the state of the economy) turns out to be “not robustly correlated” with support for the incumbent government in Australia, although it is in the United States.

The only two economic variables that do matter, and they seem to matter a lot, are the rate of inflation and the rate of unemployment, each in a different way.

For inflation, the higher it is, the more the incumbent suffers, as you might expect.

For unemployment, what turns out to matter is not the rate itself. High rates and low rates appear not to be sheeted home to the party in power. What is sheeted home, big time, is the change in the rate.

Voters reward lower unemployment

A government seen to have cut the unemployment rate gets rewarded, while a government seen to have pushed up the rate gets punished.

Cameron and Crosby find a one percentage point increase in the unemployment rate cuts a government’s vote share by 0.58 percentage points.

And they find a wrinkle. In swinging seats, Coalition governments are likely to be punished if unemployment rises, whereas Labor governments are likely to be rewarded. They say their findings are “consistent with voters having the perception that the Labor party is more committed to lowering unemployment”.

In 2005 economists Andrew Leigh (the one who later became a Labor politician) and Justin Wolfers applied a slightly different model to the 2004 election. They found it got the result right, but under-predicted the size of the Coalition victory.

The model usually gets it right

In the latest edition of the Australian Economic Review, University of Queensland economist Hamish Greenop-Roberts applied the Cameron and Crosby model to the past four elections, the one Labor won in 2010 and the ones the Coalition won in 2013, 2016 and 2019. He found it picked the result three times out of four, putting it on a par with the polls and betting odds, which also got the result right three times out of four.

The crucial difference is the economic model got the results right in each of the past two elections – something the others conspicuously failed to do.

Asked this week what the economic model would predict for the current election, Greenop-Roberts notes that on one hand, unemployment is much lower than it was at start of this government’s term (and far lower than was expected), which the model says should help it get re-elected.

On the other hand, inflation is unusually high, which the model says would hurt.

What matters for predicting the outcome is the size of each move and how much the size of each move has turned out to matter in the past.

And it’s no contest. The effect of the dramatic cut in the unemployment rate (from 5.2% to 4%) is so big it more than outweighs the effect of the 3.5% rate of inflation, “setting the stage for the Coalition to be returned”.

Unemployment trumps inflation

So big is what has happened to unemployment that Greenop-Roberts says an inflation rate of at least 8% to 9% would be required to flip the prediction.

Whatever Australia’s official inflation rate is in the lead-up to polling day (there will be an update next Wednesday) it will very possibly above its present 3.5% but still be way short of 8-9%.

Or perhaps the model will be wrong when it comes to inflation. Greenop-Roberts points out that since the early 1990s, an entire generation of voters has entered adult life without experiencing serious inflation, and might either be alarmed by it or not understand the concept. This election might provide a test.

And it is possible this will be one of the rare elections in which the state of the economy fails to predict the outcome. Opinion polls did badly in the last election, but they might recover and they are suggesting a Labor victory. Betting markets did badly too, and are only just suggesting a Labor victory.

Polls, experts and even the model can be wrong

Experts often get it wrong. Greenop-Roberts points to a poll of 13 experts published two days before the 2019 election.

Twelve predicted a Labor victory. The only expert who didn’t predicted the Coalition would be forced to govern jointly with independents, a prediction some way short of the result, which was a comprehensive Coalition victory.

The reality is that this election will be fought seat by seat, and Greenop-Roberts has identified a new metric that might help predict those outcomes.

His Australian Economic Review paper compares the electorate by electorate results of the 2017 same-sex marriage poll with the electorate by electorate swing to the Coalition in 2019.

He finds the electorates that swung most to the Coalition in 2019 (shown below) were those most opposed to same-sex marriage.

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‘No’ vote in the 2016 same sex marraige poll versus 2019 swing to Coalition

Forecasting Federal Elections: New Data From 2010–2019 and a Discussion of Alternative Methods, Hamish Greenop-Roberts

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The statistically significant link better predicted voting intention than income, education or unemployment.

It might again, or we might not yet have perfected the science of predicting what will happen, which might be just as well. What’ll happen in this election is up to all of us.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Doubts aside, one million more jobs was never a big ask

The biggest myth surrounding the Tony Abbott’s pledge of 1 million jobs in five years is that he reached for the stars.

Welcoming the 1 million mark several months ahead of schedule Malcolm Turnbull said it “seemed pretty ambitious at that time”.

It didn’t, because at the time Abbott made it, in November 2012 a year before the election, it was unexceptional.

His full commitment was to create “1 million new jobs within five years, and 2 million new jobs over the next decade”.

The previous five years had been pretty unimpressive. They included the financial crisis. But the five years before that, during the mining boom, had been stellar. Over the entire 10 years employment had climbed 2,106,500.

Which is why Abbott promised 2 million.

Early in his term a Coalition insider told Fairfax Media there had been no modelling or detailed calculations behind the pledge.

Abbott had looked at what Howard had achieved and “assumed they could achieve the same outcome”.

Population growth would help. It would be easier to boost the workforce by 2 million with the larger population we would have in 10 years time than with the smaller population Howard had.

For a while, unusually low jobs growth during Gillard’s last year and Abbott’s first made it look as if the target would be hard to beat. Calculated decisions to deny lifelines to Holden, Ford and Toyota forcing them to close made the target harder.

Labor’s Chris Bowen succumbed to the pessimism, saying at the time that all the evidence was that Abbott would “fall well short”.

 

But an improving international economy and a gift from Julia Gillard turned things around. So big is the National Disability Insurance Scheme that it’ll cost $20 billion per year when fully operational, two thirds as much as defence.

The Productivity Commission believes it will create one in five of all the new jobs in the second half of this decade.

Abbott is odds on to get his second million, whether or not he or his colleagues are around to deliver it.

In The Age and Sydney Morning Herald

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Smothering charities: the plot to keep critics quiet

Can't stand politics?

The good news is that when the election campaign proper begins, they'll ease off on the abuse and put forward policies. They'll have to.

And those policies will be scrutinised by just about every interest group there is. That's the way it works. They'll rate them, produce scorecards according to how they'll affect things such as education, health, defence, foreign aid and the environment, assessing what's being offered.

Unless the Coalition stops them. And it's minded to.

The party room might sign off on anti-lobbying legislation as soon as Monday. It was going to consider it this Monday, before the parliamentary session was postponed.

It'll be dressed up as a move against foreign influence. Every organisation that gets even some of its income from overseas (GetUp gets 3 per cent of its income from overseas) would be prevented from spending more than a certain amount on political advocacy during the lead-up to elections.

It echoes the Transparency in Lobbying, Non-Party Campaigning and Trade Union Administration Act introduced by Britain's Conservative prime minister David Cameron. That act bans spending above a threshold during the 12 months before polling day on activities that could be "perceived as intended to influence how people vote". Registered organisations have to keep records and face audits.

The United Nations Special Rapporteur has described its effect as "chilling", saying many organisations opt for silence.

Few people know exactly what's in Australia's draft bill prepared by Special Minister of State Scott Ryan, although the word is its provisions have been made extensive in the expectation the Senate will cut them back.

Australian charities are already (appropriately) limited in what they can do during elections. They are not allowed to promote or oppose a political party or candidate, but they are allowed to advance public debate, including "promoting or opposing a change in the law". They can put out scorecards, helping us work out how to vote, which is what some in the Coalition don't like.

One minister is said to have been incensed at a mobile billboard that paraded around his electorate comparing his record of voting on the environment to the stance of the candidates that opposed him.

Pew Charitable Trusts is an international philanthropic organisation, but in Australia is a registered charity that promotes Australia's Indigenous Ranger program. The government program creates jobs for locals to protect natural and cultural values of their lands. It's backed by both the government and the opposition. But if Pew was to go public during the next campaign about which side backed it most, it could fall foul of the proposed law.

Or not. David Crosbie whose Community Council for Australia is running the Hands Off Our Charities campaign, says the proposed law's real power would lie in what it made uncertain.

"Our concern isn't so much that it would mean Pew wouldn't be able to do its work, although it would be bizarre to stop people advocating for Aboriginal rangers," he says. "It's that every charity would be asked those questions about what it did, and would be inclined to pull back. That's the chilling impact. If we don't want to be audited and don't want to be asked those questions, during the next 12 months or so we are going to have to shut up about housing or animal welfare or whatever it is we exist for. It would have an impact on all of us."

Which might be the idea. Quietly, with just as little publicity, the government has been moving against 'political' charities on another front.

In April last year, a government-backed inquiry into the register of environmental organisations (there is such a register) recommended that environmental charities be stripped of tax-deductible status unless they spent more than 25 per cent of their income on "environmental remediation work". Organisations like the Australian Conservation Foundation would be allowed tax deductibility only if they cleaned up oil spills or collected rubbish in addition to doing what's most effective: lobbying to prevent the environment being damaged in the first place.

Leading the push for the limit was the Minerals Council of Australia, whose members include coal miners and doesn't mind the odd bit of lobbying itself. If the government wanted to, it could do it now. It doesn't need legislation. And although it hasn't said what it will do, it might have started.

This year, the 600 environmental organisations on the register were asked two new questions when they completed their statistical return. The first was how much of their income was spent outside of the country. The second wanted their spending divided by categories, among them "campaign/advocacy" and "on-ground environmental remediation".

Because many don't keep those sort of records, many didn't answer. But down the track they might be made to, under the threat of having their charitable status stripped from them. That's if the government doesn't back down, which given its political problems it might well do.

But it's instructive to look at what some of its members would like to do if they could. They would like to narrow the number of voices out there at election time, to make it harder for us to choose.

In The Age and Sydney Morning Herald

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Win the election, buy some wheels. Seriously

Before the election that swept Tony Abbott to power in 2013, his incoming treasurer, Joe Hockey, forecast an explosion of spending as consumers opened up their wallets in celebration of a Coalition win.

As unlikely as it sounded, that's exactly what happened for some voters, even though the official figures didn't show it at the time.

The Reserve Bank has gone back and examined spending by postcode and used it to calculate what happened to spending by the supporters of each side of politics.

In the years after the 2013 election, Coalition supporters bought far more cars than did Labor supporters. Yet in the years after Labor took office in 2007, it was Labor voters that spent big on cars, an effect economists Christian Gillitzer and Nalini Prasad describe as far from trivial.

"Going from a hypothetical postcode with only Liberal/National voters to another postcode with only Labor voters is estimated to have increased per capita motor vehicle purchases by around 30 per cent four years after the 2007 election," they say in a research discussion paper released on Monday.

The purpose of the study was to try to find out whether the answers to questions in consumer confidence surveys reflect actual buying intentions. Those surveys invariably show that after each change of government, supporters of the party that won suddenly become more rather than less confident than supporters of the other side. If the surveys reflected actual buying intentions their purchases would shoot up relative to those of the other side, even though overall purchases hadn't changed.

That is what the study found: "evidence that self-reported spending intentions are indicative of actual consumption behaviour". And it has told us something else: we take politics seriously enough to vote with our wallets.

In The Age and Sydney Morning Herald

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'Mediscare' worked because we were already scared

Scare campaigns only work when they reinforce or add to what is already known. 

Within weeks of its election in 2013 the Coalition entertained a proposal from a former advisor to Tony Abbott as health minister to end free visits to the doctor by requiring a mandatory co-payment of $6. Anyone who didn't like it would be invited to take out private health gap insurance.

Its Commission of Audit recommended a co-payment of $15 per visit and $5 per concession card holder, and then its first budget announced that "previously bulk-billed patients can expect to contribute $7 towards to cost of standard consultations." Medicare Rebates would be cut by $5 and bulk billing incentives would "only be paid to providers when they collect the $7 patient contribution". It encouraged public hospitals to charge public patients who walked in off the street in order to stem the leakage from doctors.

Seven months later Abbott dumped the $7 co-payment and replaced it with a $5 co-payment, all of which was to come from doctors, also abandoning that a few months later. Then he announced plans to slash the Medicare Rebate for short visits from $37.05 to $16.95, also abandoning that a few weeks later.

In his second budget he extended an existing one-year freeze on the Medicare Rebates by a further five years to 2020. By then doctors incomes would have fallen 15 per cent relative to other incomes unless they abandoned bulk billing.

And he booked a budget saving of $57 billion over 10 years by lifting grants to states for running hospitals by much less than the cost of running them, a good deal of which is still baked in to the Turnbull government's budget numbers.

Within a year of taking office he called for expressions of interest from the private sector in running the $29 billion Medicare and Pharmaceutical Benefits Scheme claims system. Among the Australian firms that are believed to have responded are Eftpos, Australia Post and Telstra offshoot Stellar. Among the foreign companies are British services giant Serco, which provides immigration detention centre services, Japanese-US technology giant Fuji-Xerox, German software house SAP and US professional services firm Accenture.

Malcolm Turnbull went into the election campaign continuing to defend the outsourcing option, only to abandon it on Q&A after it came to be conflated with privatisation.

The scare campaign worked because Medicare's supporters were already scared.

In The Age and Sydney Morning Herald

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Crowned. Neither Napthine nor Andrews wants to govern

Daniel Andrews and Denis Napthine are competing for glory without power. Neither really wants to govern.

Napthine signed away his right to make laws that tackled gambling and smoking in an extraordinary deal waved through Parliament days before the election campaign. The law not only restricts the actions of the Napthine government should it get back, but the actions of every future Victorian government for the next 36 years.

Should a future government decide to impose a $1 betting limit on poker machines (as recommended by the Productivity Commission); should it decide to enforce the use of precommitment technology on poker machines; or should it require automatic teller machines to be further away from poker machines, it'll be up for a $200 million payment to Crown. The size of the penalty will climb with inflation. By the time the provision expires in 2050 the penalty will be $480 million.

In the (entirely likely) event that community attitudes to smoking harden in the decades ahead, the government will be unable to remove the exemption permitting smoking inside Crown's VIP rooms no matter how necessary it thinks it is. The legislation says the only way through would be to pay Crown millions for "loss and damage", the exact amount to be determined by a panel of "experts" appointed from independent, internationally recognised chartered accounting firms or investment banks.

It's a right not normally available to firms hurt by government decisions. The government was able to ban smoking inside pubs and restaurants without compensating those firms for "loss and damage". It was able to ban drink driving without compensating alcohol retailers, it was able to ban ATMs within 50 metres of poker machines without compensating either the owners of the machines or the banks. Governments are normally allowed to govern. If most of us suffer "loss and damage" when they put up taxes or hurt our businesses we just have to bear it, or vote them out at the next election...

The restrictions on what future Victorian governments can do are set down in excruciating detail in schedule 11 of the legislation. The only exceptions apply in cases where all of Australia's state and territory governments act together, a get-out clause that further underlines the impotence of the Victorian government we are about to elect.

In return for binding future governments this one gets an upfront payment of $250 million. (The government is spinning it as a payment of $910 million, but it's nothing like that much.  It gets the first $250 million immediately. It gets another cheque for $250 million in July 2033, but assuming a discount rate of 4 per cent, that is only worth a payment which is worth $115 million in today's terms. It also gets plus the right to contingent payments if Crown's gambling revenue exceeds certain targets.)

Put starkly Crown gets the right to impose fines of $200 million per government any time a new government comes in and changes the law to Crown's disadvantage, for the next 36 years.  in return for the government gets an immediate payment of $250 million plus a few lesser payments later.

It's an extraordinary deal for Crown. In addition to "regulatory certainty" denied other businesses it gets an extension of its licence from 2033 to 2050, the right to install another 40 gaming tables, the right to buy another 128 poker machines and the right to continue using the site for the peppercorn rent of $1 per year.

And Labor under Andrews? It voted for it. Andrews was silent during the debate. His treasury spokesman Tim Pallas spoke of the importance of "certainty" for Crown, apparently forgetting its status as a specialist in gambling. Crown employs 8800 people.

Aware that he was voting for a "regulatory time bomb" he said Victoria's hotels and clubs would demand similar assurances in the future. He failed to acknowledge that all sorts of Victorian businesses will demand similar assurances and that Victoria has set a precedent for businesses in other states to demand those assurances similar deals.

The Commonwealth government refuses to allow its hands to be tied. Told that its plain packaging legislation would infringe on the rights of Philip Morris under the terms of an obscure Australia Hong Kong investment treaty it took on Philip Morris in an international arbitration tribunal.

Where it can, it refuses to include so-called investor-state dispute settlement procedures in international agreements.

Overseas they are used to winding back the ability of sovereign governments to legislate in ways that hurt pharmaceutical companies, pesticide manufacturers and mining companies.

Labor rejected them outright. John Howard's government was the only one in the world to successfully resist having them  in its free trade agreement with the United States. This The Abbott government assesses them on a case-by-case basis, including them in its agreement with them with Korea but excluding them from its agreement with Japan.  

Over the weekend ministers from 12 pacific nations have been meeting in Sydney to thrash out the details of the proposed Trans-Pacific Partnership. The US is holding out for investor-state dispute settlement clauses. If the other 11 succumb and sign up Australia's biggest investors and customers will be granted the right to sue our governments in international tribunals for attempting to do what they are elected to do.

Perhaps unwittingly, Napthine (and Andrews) have made it clear that they really don't mind. Elections matter because we are able to elect decision makers to take decisions on our behalf. If we can't, there's no point.

In The Age and Sydney Morning Herald

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Tony Abbott: the most radical prime minister since Whitlam

I and many others got the Abbott government wrong. It’s turning out to be more like Whitlam’s than Howard’s, perhaps the most radical in Australia’s history.

My first mistake was to think his first budget would be a typical first budget, full of cutbacks to be followed later by generosity nearer the next election.

It’s been the other way around. The immediate impact of his first budget is close to nil. That’s not how Abbott sells it and it’s not how Shorten sells it, but it’s how the governor of the Reserve Bank sees it. Here’s what he said at the Economic Society conference in Hobart last week: “Over the next couple of years the estimated impact of the budget is not very different from what we had previously been assuming”.

The cutbacks are “actually not particularly large” in the governor’s words.

But that’s just in the here and now. In the longer term the changes will be profound if the newly-installed Senate approves them. The only prime minister in living memory to have put forward such a far-sighted a program is Labor’s Gough Whitlam. And just as many of Whitlam’s measures became part of the social fabric and almost impossible to undo, Abbott’s changes will stick.

If you doubt that he is governing for the long-term rather than the electoral cycle, consider the timing. Almost all of his measures build up slowly, beginning to have an effect at or just beyond the next election.

Pensions. Whitlam announced that pensions would climb until they hit 25 per cent of average male earnings. Abbott has announced that they will fall relative to male earnings without limit, being indexed only by the consumer price index from 2017.

Whether or not you think that’s a good idea (I do, I can’t see why pensions should have had first call on the proceeds of economic growth) you would have to agree that it’s farsighted. It’ll change society in long term rather right now. It’s also far reaching. It’s difficult to imagine a new government rolling it back. A new government would face its own budget pressures and would have other priorities. CPI adjustment would become the norm.

The Commission of Audit recommends much the same thing for minimum wages. They would increase by CPI minus 1 per cent for the next ten years after which they would settle at a new permanently lower level relative to other wages.

States. Whitlam took responsibilities from the states. Howard took more. Abbott is shoving them back. If they want to maintain their hospitals and schools in the future they will have to do it themselves. He will lift grants to hospitals only in line the consumer price index and population even though medical costs are rising rapidly. All he will offer them is the ‘opportunity’ to lift the GST. White papers on both the federation and the tax system are due before the election. If they take the opportunity to lift the GST schools and hospitals will become their problem from then on, not the Commonwealth’s.

Medicare. Whitlam made it easy for doctors and medical providers to pro vide services without charge. His successor Fraser undid Medibank and his successor Hawke reinstated it as Medicare. With one brief exception the option of free medical care been sacrosanct ever since, until now. Once fees are in and the reward for waiving them is removed it’ll be hard to go back...

Universities. For as far back as anyone can remember bright students have been able to get into university for free. The method used to be the Commonwealth scholarship, then it was free education under Whitlam and after that a loans scheme under Hawke where the debt didn’t accumulate in real terms if you were unable to pay it off. Abbott’s proposals allow universities to charge what they like (up to an international ceiling) and require students to repay loans at a rate well above the rate of inflation. For students who move quickly into good jobs that won’t be a problem. For those that do not the debt will build and build toward a crippling burden making university an attractive financial option for people with poor financial prospects. Future governments will be unable to reverse the decision to charge a real interest rate because fees will be by then so expensive the cost will be prohibitive.

Financial advice. Independent advisers want to ban  kickbacks and the misery they have caused. That’s what the previous government did and what would have come into force on July 1 had not the Coalition sneaked through regulations that will continue to allow kickbacks for “general advice” so long as the kickback is not solely for that purpose and so long as the adviser is affiliated with institution handing over the money. It’ll allow “general advisers” to set up in competition with genuinely independent personal advisers stifling the best chance the industry ever had of turning professional. And the general advisers will win. The kickbacks will make their conflicted service cheaper.

Regulation. The Australian Securities and Investments Commission is about to lose 12 per cent of its budget. It’ll have to adopt a lower-cost model of catching corporate crooks notwithstanding a damning Senate report about how little it was able to do with the budget it had. Neither corporations nor charities are universally honest. Labor’s Charities and Not-for-profits Commission was the best chance Australia ever had of subjecting non-profit organisations to the same sort of scrutiny as companies. And the good ones loved it. It was a one-stop shop. If it is abolished as Abbott intends it’ll be hard to restore.

Energy. We are in the middle of a life or death struggle between coal and gas fueled electricity generation and renewable energy led by wind. Only one side will win. The Renewable Energy Target has tipped the scales in favor of wind. If it stays coal-fired power station are likely to close. If it goes we’re likely to have seen our last big new wind farm. Abbott is siding with his coal. If the Senate lets him remove the target we will wear the consequences a long time.

It’s said that when you change the government, you change the country. That wasn’t true of Howard and it wasn’t true of Rudd or Gillard. It’s only true of governments with plans. We live with them for decades.

In The Age and Sydney Morning Herald


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Switching sides. Suddenly Coalition supporters feel good (fun graph)

Suddenly it’s Coalition voters who feel good.

After six years of trailing, they are now on track to overtake Labor voters as the most optimistic of Australians and to remain that way for the entire life of the new government.

A graph compiled by Fairfax Media from 17 years of monthly surveys shows Labor voters remained more optimistic about the economy than Coalition voters for the entire six years of the Rudd and Gillard governments. Before that Coalition voters felt better than Labor voters for the entire eleven years of the Howard government. And before that through the Hawke and Keating years it was the Labor voters who felt best.

The latest survey, conducted in the days either side of the vote shows confidence amongst Coalition voters surged from a reading of 92 on a scale where 100 means optimists balance pessimists to a clearly-positive 110. Confidence among labor voters dived from 127 to 114.

Asked how it could be that Coalition voters suddenly switched from being negative to positive while Labor voters went the other way Westpac’s Bill Evans not all of the switch might be real.

Westpac Melbourne Institute survey asks five questions. Two concern family finances, two concern the economy, and the other one asks whether it’s a good time to buy a major household item.

The questions about the economy were the ones in confidence surged...

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Optimism about the economy one year ahead jumped 9 per cent, optimism about the economy five years ahead jumped 7 per cent.

But when asked about family finances, views were little changed. The proportion of Australians believing family finances had improved fell 2 per cent, the proportion believing family finances would improve climbed 2 per cent.

“While consumers say they are confident the incoming government will manage the economy better, they are not so confident as to believe their own situation will much improve,” he said.

“It’s the same with business. The NAB survey shows business conditions unchanged, but business confidence building. The two can’t coexist for long. Confidence can only be sustained if consumers spend and that can only happen if they feel good about their own finances and not just some amorphic view about the economy.”

Mr Evans concedes Coalition voting businesses and voters are likely to feel better about the economy for a long time. He is less certain they will back that apparent view with investment, employment and spending.

In The Sydney Morning Herald and The Age






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It's September 7. This morning's front page

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Bringing Australia together. Rudd's new Accord?

Thirty years ago Labor switched leaders just before an election. Bob Hawke abandoned the rhetoric of class warfare and spoke instead of “bringing Australia together”. He romped home in a landslide.

Kevin Rudd has connected himself to Bob Hawke in an unbroken line. He told the press club Thursday it was Hawke and Keating that transitioned Australia from “the old closed post-war economy to the new internationalised economy that sets us up for the future.” It was Rudd that “did it again”, transitioning Australia through what Paul Keating recently and eloquently described as the valley of death of the 2008-09 great global recession”.

The line was unbroken in the press club speech because there was scarcely a mention of Howard or Gillard, or of the opposition leader Tony Abbott except to observe that he had turned down Rudd’s invitation to appear with him at the press club and to link him to the “slash and burn” policies of Campbell Newman in Queensland and David Cameron in the United Kingdom.

But whereas Hawke was vague about what he wanted achieve by bringing Australia together, Rudd was specific. He wants a pact with business and unions to lift productivity by 2 per cent per year, well above the long-term growth rate of 1.5 per cent per year.

Calculations by PricewaterhouseCoopers suggest a 2 per cent growth rate would boost gross domestic product by $48 billion by the end of the decade, lifting Commonwealth tax revenue by $12 billion and state revenue by $6 billion.

He was specific too about how he would do it, pinching Coalition policies for streamlined industrial agreements for greenfields sites and simplified environmental approvals for major projects...

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Some of his less clearly articulated proposals were winks and nods to business. He wants “the future availability of competitively priced domestic gas supplies high on the agenda”. It looks like an endorsement of a plea by the Australian Industry Group for a proportion of newly-discovered east coast natural gas to be reserved for Australian customers rather than sold overseas. Cabinet will “continue to work through a range of policy matters” including moving earlier to a floating rather than fixed carbon price as also demanded by business.

There might also be something for Newstart recipients barely surviving on $35 per day as asked for by business, unions and the unemployed themselves.

Boosting productivity will require much more than this, and productivity is a hard thing to measure. But its a start, and not a bad goal around which to bring Australia together.


In The Sydney Morning Herald and The Age


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It's wrong to hire Treasury people?

1970s Treasury, National Archives. Creative Commons

But Hockey himself has hired Treasury people

Shadow Treasurer Joe Hockey has accused Kevin Rudd of politicising the Treasury, describing the Prime Minister’s recruitment of a senior official as “a joke” and “wrong on so many fronts”.

On Wednesday, Mr Rudd announced that Treasury deputy secretary Jim Murphy, would be his new chief of staff.

Mr Murphy is head of the Treasury’s markets group and is well regarded in business circles.

Mr Hockey, also claimed the head of the Treasury, Martin Parkinson, had called him to complain about Labor appointing “so many” public servants as political staffers.

It is understood this conversation happened some time ago.

“At one stage the Secretary of the Treasury rang me up and expressed… disappointment that he was in a position where he had so many Treasury public servants in political offices,” Mr Hockey said on Thursday morning.

“He was doing the right thing in letting me know”.

A spokesman for Mr Hockey confirmed the shadow treasurer was referring to Dr Parkinson, but he would not reveal when the call was made or any further details of the phone conversation.

Fairfax Media has contacted Dr Parkinson’s office for comment.

Mr Hockey told journalists that “it politicises the Treasury” when politicians such as Mr Rudd and former treasurer Wayne Swan, recruit Treasury public servants into their political offices.

“This is a joke,” Mr Hockey said...

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“Jim Murphy is meant to run the markets division of the Treasury… He has been plucked out to go and run Kevin Rudd’s political office as the most senior official in that office. It’s just wrong.”

Mr Hockey’s complaints ignore a long history of movements between the Treasury and politicians’ offices on both sides of politics.

Arthur Sinodinos moved from Treasury to the office of Coalition leader John Howard in 1987, returning to the Treasury in 1989 when Mr Howard lost the post. He rejoined Mr Howard’s office when Mr Howard was reappointed opposition leader in 1995, staying with him as prime minister and becoming his chief of staff. Mr Sinodinos is now a Coalition Senator.

Treasury assistant secretary Peter Boxhall and colleague Peter Hendy joined Coalition leader Andrew Peacock’s office when he replaced Howard in 1987. Mr Boxhall later worked in the office of Coalition leader John Hewson and Treasurer Peter Costello before being appointed head of the Department of Finance. Senior Treasury official Phil Gaetjens was seconded to Mr Costello’s office to replace Mr Boxall. He returned to Treasury when the Howard government lost office in 2007 and is now head of the NSW Treasury.

Treasury assistant secretary Don Russell joined the office of Labor Treasurer Paul Keating in 1985, later becoming his chief of staff as Treasurer and Prime Minister and being appointed Ambassador to Washington and head of the Department of Innovation.

Ken Henry was seconded from Treasury to Mr Keating’s office in 1986. He returned in 1991 and worked closely with the Howard government on the implementation of the goods and services tax before being appointed head of the Treasury by Peter Costello in 2001.

Dr Parkinson himself worked in the offices of Labor Treasurers John Kerin and John Dawkins from 1991 before returning to the Treasury and being asked by John Howard to run the prime minister's emissions trading task group in 2006.

With Jonathan Swan, in The National Times


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A win for Nate. A win for reality.

@jsmooth995

And boy has there been an assault on reality.

In his Andrew Olle lecture Friday night ABC broadcaster Mark Colvin described what's been happening this way:


"I'm talking about the way people can create their own reality stream.

It's particularly far advanced in America, because a quarter of a century ago they abandoned the fairness doctrine, a federal regulation which mandated a degree of balance on the airwaves.

So now you can run a creationist channel that rigorously excludes Darwinists from the airwaves - you can say again and again that Barack Obama was born in Kenya, and refuse even to look at the documentary evidence, and so on.

In 2004, the writer Ron Suskind wrote a famous piece in which he quoted a Bush aide - reliably believed to be Karl Rove - as follows:

"The aide said", wrote Suskind, "that guys like me were "in what we call the reality-based community," which he defined as people who "believe that solutions emerge from your judicious study of discernible reality." ... "That's not the way the world really works anymore," he continued. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality judiciously, as you will we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors;and you, all of you, will be left to just study what we do."

I imagine most of us here tonight would categorise ourselves as the reality based community, but we too are beleaguered."


New York Times data geek Nate Silver was feeling beleaguered.

A few days back Paul Krugman took up his story:


"For those new to this, Nate is a sports statistician turned political statistician, who has been maintaining a model that takes lots and lots of polling data — most of it at the state level, which is where the presidency gets decided — and converts it into election odds. Like others doing similar exercises Nate’s model continued to show an Obama edge even after Denver, and has shown that edge widening over the past couple of weeks.

This could be wrong, obviously. And we’ll find out on Election Day. But the methodology has been very clear, and all the election modelers have been faithful to their models, letting the numbers fall where they may.

Yet the right — and we’re not talking about the fringe here, we’re talking about mainstream commentators and publications — has been screaming “bias”! They know, just know, that Nate must be cooking the books. How do they know this? Well, his results look good for Obama, so it must be a cheat. Never mind the fact that Nate tells us all exactly how he does it, and that he hasn’t changed the formula at all.

This is, of course, reminiscent of the attack on the Bureau of Labor Statistics — not to mention the attacks on climate science and much more. On the right, apparently, there is no such thing as an objective calculation. Everything must have a political motive.

This is really scary. It means that if these people triumph, science — or any kind of scholarship — will become impossible. Everything must pass a political test; if it isn’t what the right wants to hear, the messenger is subjected to a smear campaign."

Nate - for the most part - failed to strike back, or back away from his assessment (one arrived at by calculations rather than judgments by the way, like in Moneyball).

The end result? Darn near exactly what he predicted:

Reality (specifically, data) triumphed over people who preferred to choose their reality.

As Jon Stewart said last night: "This was the historic election between arithmetic, and belief. And belief wasn’t going down without a fight."

Watch the full eight minutes. It's worth it.

Essential reading:

. The war on Nate Silver, the after-action report - Brad DeLong


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The Coalition's cheat sheet. What to say, topic by topic

"This should not be circulated in raw form" - via Crikey

Coalition Speakers Notes 1 July 2012




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Why not rush to the polls? Two theories on best for labor

Strategy 1:

Labor will get slaughtered whatever happens. The Coalition is likely to win control of the Senate as well. The best way to stop this is to call a House of Representatives election as soon as possible this year (after changing labor leaders) so the Reps election is not held with the Senate election.

The Coalition will win in the Reps, begin implementing its program, become unpopular, and then probably not win control of the Senate when the half Senate election is held as scheduled next year.

Labor will be better off than if it had waited.

For this to work Labor would need to deny Tony Abbott the opportunity to call a double dissolution by ensuring none of his bills were blocked, which would mean voting in favour of bills to repeal the carbon tax and the mining tax (because “the people had spoken”).


Strategy 2:

Applying Strategy 1 will mean the carbon tax will scarcely operate. It’ll be abolished just after it begins and the public discover that it is not so bad after all. It will forever go down in history as a bad idea.

If instead Labor waits out its full term until late next year the public will have had a year to evaluate the carbon tax and might just find Tony Abbott was scaremongering when he said it would destroy Whyalla, kill the mining “stone dead” and so on. Few people would want to bother removing it (just as one year on few people wanted to bother removing the GST).

Furthermore, although half the Senate would be elected with the Reps in late 2013, the new Senators would not take office until July 2014 -- two years into the carbon tax, and more importantly only one year away from 2015 when it is legislated to be replaced with an emissions trading system (which will probably have a lower carbon price).

Relief will be at hand. Anger over the carbon tax will be old hat. Abbott might even have second thoughts about resubmitting to the Senate bills to abolish it.

In any event the history books will record that it was a good reform, killed by a zealot, rather than a bad one killed by the people.


Mmmm...

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Antony Green is on to something. Why we are voting more thoughtfully

Labor would be left with not a single seat in Queensland if the state voted federally the way it did Saturday night.

ABC election analyst Antony Green says the numbers point to a federal wipeout for Labor in Queensland, with no seats remaining - not even those of the deputy prime minister Wayne Swan, the trade minister Craig Emerson or the former leader Kevin Rudd.

But he says there’s no reason to believe Queenslanders will vote the same way.

“You only need to look at 2001 and 2004. In 2004 Labor got smashed in Queensland federally when Mark Latham was leader, absolutely smashed. Yet earlier that year Peter Beattie won the state election for Labor with a massive landslide.”

“The same people who were giving John Howard huge majorities federally were voting for Bob Carr in NSW and Peter Beattie in Queensland.”

Green believes Australians increasingly treat state and federal elections differently, with the federal voting intentions much more stable...

“People still vote on habit, but more and more that’s only evident at federal elections. At state polls you see massive swings.”

“I suspect that’s because state government is about managing things - making sure the trains run on time and roads are built. State governments are rewarded or punished for performance, whereas at the federal level it’s along more ideological lines.”

Macquarie University election specialist Murray Goot agrees but says the importance of the Queensland vote is that it shows Labor is not gaining any votes.

“If one or two Independents lose their seats at the next election Labor will need to gain seats n order to survive. It is now extraordinarily difficult to see that happening,” he says.

Antony Green says if the swing against Labor in Queensland was to be repeated at the federal election Labor would have much more to worry about that Queensland.

“In 2010 labor had a swing against it in NSW that didn’t cost it any seats, it had a swing to it in Victoria. If it did lose another 7 or 8 per cent in Queensland at the next federal election it would lose its remaining eight seats, but it would get slaughtered in NSW where many more are held by thin margins.”

“People keep saying the next election could be lost in Queensland. My view is that if it is lost in Queensland it is not going to be lost in Queensland alone. There’s no point in moving campaigning to Queensland.”

In today's Canberra Times, Sydney Morning Herald


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Hockey. Woolly on tax and costings

Here's the shadow treasurer at a press conference Monday for which he did not issue the usual transcript.

"If you look at payments as a percentage of GDP then the goal you would like to have is to get back to the last year of the Howard government, and the same with revenue."

As a goal this would mean cutting government payments as proportion of GDP from 24.5% to 23.2% and increasing government revenue as a proportion of GDP from 23.2% to 25%.

Here's the table, from Budget Paper 1:

Bookmark it for reference.

Another point he made at Monday's press conference was close to meaningless:

He said:

"The government is very fond of throwing Treasury's pre-budget analysis at us. The number the Treasury did look at was the amount of money we allocated to direct action [on climate change]. They didn't dispute that, there was no hole in that number."


Tim Colebatch takes up the challenge:


PRIME Minister Julia Gillard says never mind the carbon tax: if you get the Coalition's direct action plan for tackling climate change, you'll end up paying $720 a year per household to finance it.

Rubbish, says shadow treasurer Joe Hockey: Treasury has costed our policy and endorsed its estimates of both the cost and the planned outcome to cut Australia's emissions by 2020 to 5 per cent below 2000 levels.

Who is right? Neither. In fact, the Coalition never submitted its direct action plan for costing by Treasury. It was one of the hundreds of policies it refused to have costed, arguing it could not trust Treasury because it works for the government.

In the immediate aftermath of the campaign, at the request of the three independents, Treasury costed the policies of both sides (the famous costing that estimated the Coalition had overstated its savings by $10 billion over four years). But that costing did not even mention the direct action plan.

There was no need to. It's pretty obvious that a plan to spend $3.2 billion over four years would cost $3.2 billion over four years. Treasury did not endorse the Coalition's claim that this would be enough to cut Australia's per capita emissions in 2020 by a third from their present trajectory which the 5 per cent target implies.

Quite the reverse. An undated Treasury note released in April under freedom of information laws warned that the Coalition plan as proposed presents a "significant budget risk relative to a carbon price". For the Coalition to achieve its target of cutting emissions to 5 per cent below 2000 levels, the note maker wrote, it would need to be "scaled up . . . [and would be] likely to have major fiscal costs".

But how much? When Labor talks of $720 per household, it is making it up. Like the Coalition, it makes assumptions that suit it about how much these projects would cost, how much carbon abatement they would deliver, and how much the Coalition would then have to spend to buy international permits to meet the target.

The reality is that it's impossible to say how much the Coalition's scheme would cost. Few observers believe it will deliver anything like a cut of 33 per cent in per capita emissions by 2020. They say Tony Abbott would then have to choose between spending far more than planned or scrapping the target.

If you think he would choose to honour the target, then you can make your own guess as to what he might make you pay. But I think he would scrap the target.


Okay?


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NSW sees the light, two (arguably three) elections too late

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What is it with the Coalition and figures on billboard? (photos)

Here's the latest, in NSW:

A $500 carbon tax on families?

Gee, Labor's government debt was going to reach $315 billion:




What ever happened to that prediction?

* Hint: It's now projected to peak at around one third of that figure.



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As we reflect on the year gone by... here's “Kill Kevin”

Pamela Williams won a Walkley for it.

Read it here.

The Financial Review has ungated it.

But don't expect to be able to copy and paste it.

You'll be amazed at what happens if you try!


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