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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Do facts matter?

New research suggests they matter more than we let on

Imagine an election without facts. What if that’s where we are heading?

Both the ABC and politifact.com.au have set up “fact checking units,” innovations that would have once been welcomed. After all, without facts, how can you work out how to vote? But the new institutions have been met with scorn. The Australian newspaper has run commentary asking whether the units will check facts from a “green-left” or “so-called progressive” point of view. A Coalition senator has pointed to tweets once made by the man who now heads the ABC’s unit and asked how he can check facts when he has attacked the Coalition.

It is as if facts don’t exist independently of views - as if there are green-left facts, pro-market facts, pro-business facts, but not simply facts, able to be dug up by anyone regardless of their political persuasion.

It is true that Labor voters give pollsters a very different account of economic facts to Coalition voters.

The Melbourne Institute has been surveying consumer sentiment for decades. Among the questions it asks is whether economic conditions are improving or getting worse. Every month without exception for six years now Labor voters have been reporting brighter conditions than have Coalition voters.

But if you look back to just a month before Rudd was elected you see something remarkable. For every month under John Howard as far back as the eye can see the Labor voters reported worse conditions than the Coalition voters. The two switched their perception of the economy as soon as their side took (or lost) office.

It can’t be because the economy suddenly changed. The switch is too dramatic. And if the facts had suddenly changed the perceptions of voters on both sides of politics would most probably have moved in the same direction.

We are increasingly self-selecting our ‘news’. Whereas once one single set of news was presented to the nation each night at 7.00pm and just a couple of sets each morning in the newspapers, these days we are tailoring our own news feeds, relying heavily on twitter, web searches and sometimes openly partisan newspapers and radio stations.

Does that give us even less of handle on reality? There are worrying signs that it does.

The US went down the tailored news road early with Fox News, an openly partisan cable news channel completely unlike Sky News in Australia.

The ‘facts’ that its viewers outline to pollsters are far more likely to be false than those who rely on old-style media...

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After the initial phase of the Iraq War in 2003 Americans were asked whether or not US forces had found the much talked about Iraqi weapons of mass destruction.

An astounding 33 per cent of those who relied on Fox News falsely said they had. Among those who relied on the traditional networks the proportion was only 20 per cent. Among those who relied on public broadcasting it was just 11 per cent.

Other findings in the survey suggest that the more an American watches Fox News the more likely she or he is to believe things that are false.

It would be deeply concerning, were it not for the findings of an ingenious new survey released in May.

Researchers from Yale University and the University of California San Diego wondered whether the Americans reporting false beliefs really held them or were just ‘barracking’, having a lend of the surveyors to make a political point.

Their genius was to pay for correct answers.

Without payments, Republicans and Democrats were sharply divided in their responses to factual questions such as whether American deaths in Iraq were increasing and whether or not the world was warming.

But with small payments ($1 for the correct answer and 33 cents for using the option “don’t know”) almost all of the gap disappeared.

The proportion admitting they didn’t know became huge, up to 50 per cent.

When tested with money Americans appear to have a surprisingly good idea about what they don’t know, and when they do take a stab at something they are likely to guess the truth, even when it conflicts with their political positions.

The researchers disparage polling of the kind conducted in Australia saying “just as people enjoy rooting for their favorite sports team and arguing that their team’s players are superior even when they are not, surveys give citizens an opportunity to cheer for their partisan team”.

There’s a chance that deep down we are hardwired to know what is a fact and what is not, even if we don’t let on. There’s a chance we will take seriously the work of the fact checking units even if some of the barrackers say they will not.

In today's Sun Herald 



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Our attitudes to tax are hardening. Only others should pay more

Australia’s high earners are surprisingly magnanimous when it comes to tax. Many think the rich should pay more. They just don’t think that applies to them.

The two apparently contradictory positions spell trouble for Wayne Swan as he attempts to wind back tax breaks in the May budget.

“We are talking about the top 4 or 5 per cent of earners,” says David Hetherington, executive director of the Per Capita think tank. “People earning more than $150,000 are generally well disposed to the proposition that high earners should pay more. Around four in every ten thought that in our latest survey, but when we ask about their own situation the overwhelming majority think hey pay too much.”

“It is as if they don’t realise they are high earners. When the Treasurer cuts back on their tax breaks they will complain because they don’t think they are well off. Their complaints will be amplified in the media, to which they have better access.”

The annual Per Capita survey shows attitudes to tax hardening across the entire population with the proportion of Australians who believe they pay too much tax passing 50 per cent for the first time.

“While there remains a belief that the well off should pay more there is a view that everyone else is paying too much. A lot of it seems to have arisen in the belt-tightening that has followed the global financial crisis.”

“Australians are saving more than they have in years. They expect similar caution from the government, especially because as they see it they are getting less and less from the government."

“Pensions, university fees, school fees, health insurance - these are all things that once the government would have looked after. There’s a growing view that the government is no longer pulling its weight and that people can use their money better themselves.”

Around 85 per cent of those surveyed believe the government should spend more on health, but the proportion has slid from 95 per cent over the past two years...

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Around 40 per cent believe the government should spend more on social security, down from nearly 70 per cent in the past two years. Support for spending on defence has dropped from 40 per cent to 28 per cent, support for overseas aid has slid from 18 to 10 per cent.

Asked specifically whether they would be prepared to pay more tax to support Gonski-style education reforms, 94 per cent of those surveyed said no.

“I am not saying the government shouldn’t fund these things, or that it shouldn’t attack tax breaks on superannuation and the like to find the money,” said Mr Hetherington. “But the survey suggests it will have its work cut out making the case. It’ll be accused of starting a class war and it’ll need to have its response ready.”

In today's Sydney Morning Herald and Age


So ignorant about the carbon tax are Australians that more than half think it has pushed up the price of petrol. Nine months on the tax that specifically excludes motor fuel is believed by 54 per cent of Australians to have pushed up prices at service stations.

Most who made an estimate thought their cost of living had climbed by $20 or more per week. Five per cent thought it had climbed by more than $100 per week.

The government’s modelling came up with $9.90 per week.

Asked about compensation 49 per cent said they received nothing at all. The compensation package introduced with the tax applies to 90 per cent of the population.

“Clearly the advertising campaign hasn’t got through,” said David Hetherington of the Per
Captia think tank, which commissioned the study.

“I was less surprised about ignorance about the technical side of tax than I was about compensation. After all, there is no reason every Australian should know exactly who it applies to and who it does not. But not to know about compensation means not knowing, or not remembering, what goes into their own bank accounts.”

“It looks as people have noticed the tax cuts and the upfront payments at first, and then forgot about them. By the second pay packet they had mentally banked the increase and assigned it to the past, even though it continues in perpetuity.”

“Around one million Australians were taken out of the tax system. It looks as if they noticed that at the time and then forgot.”

In today's Sydney Morning Herald and Age







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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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Labor is wrong. It is the Greens who are mainstream

Gillard was on about this last year. Remember this crap:

“The Greens will never embrace Labor’s delight at sharing the values of everyday Australians, in our cities, suburbs, towns and bush, who day after day do the right thing, leading purposeful and dignified lives, driven by love of family and nation.”

Here's what I wrote at the time:

My sources were the searchable Essential Report and the Greens' own policies.

Never has it been more important to understand the Greens. Never has a prime minister had less of a clue.

From July the Greens will decide which bills become law and which don’t. The prime minister says they "will never embrace Labor’s delight at sharing the values of every day Australians, in our cities, suburbs, towns and bush, who day after day do the right thing, leading purposeful and dignified lives, driven by love of family and nation”. Maybe, but that’s not what they will be called on to do.

They will be asked to vote on tax bills, on corporate regulation and on all manner of measures relating to economic management.

There are clues as to how they will vote, and if we are to believe her, the prime minister has missed every one.

Gillard thinks the Greens don’t get economics. They “wrongly reject the moral imperative to a strong economy,” she told the Whitlam Institute.

Her sidekick Anthony Albanese says they “tend to be a grab-bag of issues, tend not to have a coherent policy that adds up”.

Her resources minister Martin Ferguson says they want to “sit under the tree and weave baskets with no jobs”.

It's a forgivable impression until you examine what their supporters actually think...

...Asked to rate issues in order of importance in an Essential Media poll in January more Greens rated economic management number one than rated protecting the environment number one.The gap was closer amongst Greens voters than other voters, but the point is there was a difference - Greens put the economy number one.

Polled in November about a specific issue - regulation of the banks, Greens voters were on every measure more closer to economic orthodoxy than Labor voters.

Asked if banks should be restricted to lifting rates only in line with Reserve Bank, 87 per cent of Labor voters said yes. Even amongst Coalition voters 82 per cent said yes. But amongst Greens voters the result was 73 per cent, suggesting they are more likely to have studied economics.

Asked if bank fees should be kept to the cost of providing the service, 93 per cent of Labor and also 93 per cent of Coalition voters agreed. Only 90 per cent of Greens voters thought so.

Asked about a cap on bank salaries 88 per cent of Labor voters were for it. Coalition voters were far less keen at 83 per cent. In the middle, less in favour of hobbling the market than Labor voters although more so than Coalition voters, were the Greens at 86 per cent.

The views of Greens supporters are not outside the mainstream, except that they are likely to be more in touch with orthodox economics than the mainstream.

Greens voters are far more likely than either Labor or the Coalition to support higher taxes on mining profits, a view in line with the International Monetary Fund, the Henry Review and the Australian Treasury.

They are less likely than the majors to be fussed about a return to a budget surplus by exactly 2012-13 (as are orthodox economists although interestingly slightly keener than labor voters on spending cuts in the budget to come.

They are more likely than Labor voters to act against self interest. Only 17 per cent of Labor voters would accept a tax on products purchased online form overseas. A higher 19 per cent of Greens voters would.

And they know more.

An astonishing 10 per cent of Labor voters and 12 per cent of Coalition votes are deluded enough to think half our migration intake is boat people. Only 6 per cent of Greens voters think so.

They are accepting of the mainstream scientific position on climate change - that it is happening and caused by human activity; far more accepting than supporters of either Labor or the Coalition.

And they believe market mechanisms rather than regulations are the best way to get emissions down.

Their tax policies echo those of the Henry Tax Review. Tax breaks for high income earners would go, fringe benefits tax concessions that encourage the needless driving of cars would be scrapped and capital gains would no longer be tax-preferred over other returns from saving.

All income received in whatever form would be taxed at the standard rate and the scales would be rejigged to remove the high effective rates faced by Australians trying to get off welfare.

Henry would do this by flattening the scales and making the first $25,000 earned tax-free.

The Greens aren’t so sure about that, but neither are Labor of the Coalition. The point is that on nearly every area where the Greens diverge from Henry, the Coalition and Labor do too.

On most of the areas where then Coalition and Labor are reluctant to embrace Henry the Greens are keen to.

The big parties won’t touch the Private Health Insurance Rebate. The Greens would kill it, as would Henry.

The big parties aren’t attracted to a death duty. The Henry Review is, and the Greens would bring it in with a threshold of $5 million and an exemption for the family home, farm and small business.

The big parties are grudging about making the mammoth superannuation tax concessions more progressive. Henry isn’t, and the Greens would do it, after a “full review”.

This isn’t an argument in favour of the Greens policies, although as it happens I find them attractive. It is an argument that they fit within the economic mainstream. They are coherent, readily available on the web, and far more than a grab-bag from a “party of protest” that sits “under the tree and weave baskets with no jobs”.

If the Greens have got it wrong on economics, then so too have the economics text books they seem to have read and so too has Ken Henry.

Their real position is important because it is their real position that will determine what gets passed into law in the two to three years ahead, not the misleading dumbed-down characterisations of a prime minister and ministers who should know better.

UPDATE: The latest Essential Report does indeed show Greens supporters out of touch with mainstream Australia on something - asylum seekers. But even here Greens supporters are not as much out of touch as might be imagined. 35 per cent believe the Labor has been too tough on asylum seekers, a surprising 30 per cent believe Labor has not been tough enough.


RECOMMENDED READING:

How can parties that supported things such as carbon trading now oppose them? - NewYorker



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We think globally, don't act at all. The OECD on Australians

Considering energy costs when buying houses - Least overall

Believing individual actions can make a difference - Least overall

Using appliances in standby mode - Least overall

Proper disposal of hazardous household waste - Least overall

Use of the car to go shopping - Highest overall

Use of water per person - Highest after Canada

Satisfaction with tap water - Least apart from Mexico and Korea

We're in love with our cars, we leave electric appliances on standby, we don't like drinking our tap water and we can't see that much point in saving the environment.

The latest OECD comparison of the environmental behaviour of housholds in 10member nations puts Australia at or near the bottom on most of the questions asked.

Entitled Greening Household Behaviour the survey excludes the United States and United Kingdom but includes countries similar to Australia such as Canada and France as well as less similar nations such as Mexico and Korea.

When it comes to concern we are up the most worried. Between 40 and 50 per cent of Australians are "very concerned" about a range of issues from waste generation to air pollution to climate change. By contrast in the least concerned nations, Netherlands and Norway, the ratings are between 20 and 30 per cent.

But we are relatively unprepared to believe we can do anything about it. Almost 5 per cent of us think there's no point in taking action as individuals or households, more than in any nation surveyed, and twice the 2.5 per cent in Canada and 2 per cent in Mexico.

In our homes we use more water than anyone apart from Canadians. When we buy our homes we are the least likely to take into account their energy costs... Only 20 per cent of us make the calculation compared to 30 per cent of Italians and 50 per cent of Czechs.

We are the most likely to leave our appliances on in standby mode and one of the least likely to turn down the heat. On the plus side we are the most likely to recognise an energy efficiency label although only middle of the range when it comes to actually installing energy efficient products products.

Our recycling services are among the world's best, but we are the least likely of the nations surveyed to recycle household plastic, paper and glass and the second least likely to recycle metal. When it comes to hazardous waste we are the least likely to dispose of batteries properly and the second least likely to dispose of medicines properly.

The Organisation for Economic Co-operation and Development finds us one of the least satisfied with our with tap water of the 10 nations surveyed (only Mexico and Korea think less of their water) but also one of the least ready to reach for the bottle. An extraordinary 88 per cent of Canadians drink bottled water compared to 30 per cent of Australians.

And we adore our cars. With 2.6 per family we are beaten only by Italy, which has 2.7. Some 85 per cent of us use our cars to get to shops, more than anyone else.

Published in today's SMH and Age


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The Reserve is ready to hike. It might.

The Reserve Bank is gearing up to publicly sell a 0.25 point rate rise, scheduling both a major economic statement and an appearance before a parliamentary committee within weeks of today's Melbourne Cup Day board meeting.

A move today would be followed by near-instant responses from the big banks with Westpac and the ANZ having signaled plans for outsized increases to recoup what they say are increased funding costs.

Each bank will face a public relations problem doing so, the ANZ having announced a 53 per cent jump in profit to $5 billion last Thursday and Westpac due to announce its profit Wednesday.

The National Australia Bank has set itself apart from the pack by declining to add on a series of extra increases, opening up a 27 point gap with Westpac offering a standard variable rate of 7.24 per cent compared to 7.51 per cent...

Further restraining banks will be a Senate inquiry due to report in March and the attention ANZ chief Mike Smith attracted when he compared Coalition Treasury spokesman Joe Hockey to the communist president of Venezuela.

An Essential poll released yesterday shows overwhelming support for Mr Hockey in his campaign to restrain outsized rate rises with 82 per cent of Coalition voters believing banks should be forced to keep rate moves in line with Reserve Bank moves, and 87 per cent of Labor voters agreeing.

An even higher 93 per cent on both sides want laws to ensure bank fees are no higher than the actual cost of the service, and 88 per cent of Labor voters and 83 per cent of Coalition voters want legislation to cap bank cheif's salaries.

Asked whether the government should set up a bank of its own to compete with the private banks 68 per cent of Labor voters said yes as did 60 per cent of Coalition voters and 72 per cent of Green voters.

Treasury executive Jim Murphy revealed at a Senate hearing last month the department was amassing information for the Treasurer to use to hold to account any bank that increased rates by more than the Reserve Bank.

Although opinion at the past two Reserve Bank board was finely balanced on the question of when to increase rates, there was agreement rates would have to rise "at some point".

Benign inflation figures saw futures trading cut the implied probability of Melbourne Cup Day hike from 49 to 14 per cent, but it has since edged up to 21 per cent on the realisation Reserve Governor Glenn Stevens has set up a round of opportunities to sell a rate hike beginning this Friday.

His previously-scheduled quarterly statement will be followed on November 26 by an appearance before a parliamentary committee penciled in on Friday.

House price figures released yesterday provided little support for a move with the national index climbing just 0.1 per cent in the September quarter. The Performance of Manufacturing Index rose 2.1 points to 49.4 but is remained below the 50 point level at which plans to expand balance plans to contract.

Published in today's SMH and Age


What Essential discovered:

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Labor (voters) highly confident

Monday's poll results are literally incredible.

The ANU's Andrew Leigh calculates they imply that Labor's chance of winning is higher than 999,999 in 1,000,000.

In The Age Tim Colebatch calculates that

THE new opposition would be left with barely enough MPs to field a footy team if the ACNielsen/Age poll figures were repeated on election day.

Of 87 seats now held by the Coalition parties, 68 would switch to Labor, assuming a uniform swing in all seats. The Liberals would lose every seat in Melbourne, with Treasurer Peter Costello among the casualties.

In NSW, the Coalition would be left with six seats, with Prime Minister John Howard, Deputy Mark Vaile, Environment Minister Malcolm Turnbull and Health Minister Tony Abbott among those dumped.

Labor would have 128 of the 150 seats, the Liberals 16, and the Nationals and independents three each.

In today's Canberra Times I write about strange evidence from the same weekend that the poll was taken that seems to indicate that something real is happening.

Read on...

Consumer confidence has surged in the last month, but only among Labor voters.

The Westpac-Melbourne Institute survey of sentiment conducted on the weekend shows that consumer confidence climbed 9 per cent among Labor voters but remained broadly unchanged among Coalition supporters.

The survey was conducted in the same weekend as the Herald AC Nielsen poll that showed Labor would easily win an election conducted on that weekend.

Consumer confidence has surged in the last month, but only among Labor voters.

The Westpac-Melbourne Institute survey of sentiment conducted on the weekend shows that consumer confidence climbed 9 per cent among Labor voters but remained broadly unchanged among Coalition supporters.

The survey was conducted in the same weekend as the Herald AC Nielsen poll that showed Labor would easily win an election conducted on that weekend.

Confidence among Labor-voters is now higher than for any year since before the Coalition was elected in 1996.

But with confidence at 111.5 index points, Labor voters remain less financially confident than Coalition voters at 128.8. Labor voters have not been more confident than Coalition voters than since before the Howard government came to power.

Westpac’s chief economist Bill Evans yesterday described the surge in confidence among Labor voters as “unusual”, all the more so because it preceded Monday’s publication of the AC Nielsen poll that showed Labor clearly ahead. But he said earlier polls appear to have encouraged Labor voters to believe that there was a real chance of a change in government.

The proportion of Australians expecting good economic times in the five years ahead jumped by 8 per cent in the month of March. The proportion believing that now was a good time to buy a major household item jumped by 5 per cent.

Mr Evans described the overall level of consumer confidence as “heady”. He said the economy was likely to pick up further throughout the year.

“The evidence on housing is definitely turning, consumer sentiment will go with the housing numbers, there is no doubt we will start to see the benefits from strong investment coming through on the export front, at this stage it is without any threatening inflation numbers, and all our lead indicators are pointing to a very tight labour market so the employment story will hang on in there and it will really only be the supply of workers that will contain things,” Mr Evans said.

Australia’s unemployment rate is currently 4.5 per cent, the lowest for three decades. Economists expect that rate to remain little changed when the labor force figures for February are released this morning.

The ANZ’s measure of nationwide job advertisements jumped 3.4 per cent in February. The number of new jobs advertised each week now exceeds 216,000.

More than 800 new jobs are now advertised weekly in the ACT, up 11 per cent in the past year - the biggest increase of any state or territory other than Western Australia.

The recruitment agency Manpower reported on Tuesday that 31 per cent of bosses say they want to hire more staff, compared with 20 per cent a year ago.

The Bureau of Statistics yesterday reported a jump in both personal and business borrowing. Personal loans increased by a seasonally-adjusted 7 per cent in the month of January and business loans by 12 per cent.

Read more >>

Tuesday Column: An election without tax cuts

Who would have thought it? We are about to have an election about things that really matter.

The last one wasn’t. Although the theme of the Prime Minister’s campaign was “keeping interest rates low” what he promised was a tax package directed to families and high-income earners. By contrast Mark Latham promised a tax package directed to families and middle income earners. We were given a choice: a tax package from Tweedledee versus a tax package from Tweedledum.

The ACT’s Chief Minister has a better handle on the things that really do matter. On the weekend he nominated ensuring that his electors did not run out of water. As he put it: “There’s no more fundamentally important issue that I could face.”

Fundamentally important issues have been missing from Australian election campaigns. The voters themselves are in little doubt about what they think is important and what they would like the opportunity to vote for.

Last May the polling company AC Nielsen put this question to Australian voters: “The Federal Treasurer recently announced a large budget surplus. Which of the following should be the highest priority for the government - reducing taxes and charges or increasing spending on services and infrastructure?”...

An astonishing 68 per cent opted for increased spending on services and infrastructure. Only 29 per cent wanted a tax cut.

AC Nielsen has been getting the same sort of result in each of the last three years that it has asked that sort of question, as have Newspoll, Roy Morgan and the survey conducted in the lead up to each election by the Australian National University.

Party hacks on both sides of politics counsel their leaders to pay no attention to these polls. They say that whatever Australians tell pollsters; in the privacy of the voting booth they opt for tax cuts. Besides, actually fixing water or schools or hospitals is a largely untested strategy. Tax cuts are safer. Because both sides usually offer them they are seen to work.

The hacks even have a pseudo-scientific word to describe the reason why we can’t be believed when we say we want real problems fixed rather than money in our pockets. They call it the “halo” effect - we are inclined to give pollsters the answers that make us look virtuous rather than tell the truth.

The halo effect exists. When ACT residents are asked whether they be prepared to pay more for electricity that comes from renewable sources, 23 per cent say yes. But when it comes to actually ticking the GreenChoice box on the ACTEW form and paying the money, only 5 per cent do.

But the halo effect can’t explain away the answers about tax cuts. Here’s why: The ANU and other pollsters have been asking essentially the same question for 30 years. For most of that time there can’t have been much of a halo effect. As recently as 1990 Australians who wanted tax cuts outnumbered Australians who wanted more spending on services eight to one.

From around the mid-1990’s our attitude changed. We lost interest in tax cuts and became increasingly keen about fixing up national problems. Australians who want more spending on services now outnumber Australians who want tax cuts two to one. In fact 70 per cent of us say we would actually be prepared to pay more tax if we knew the money would to health.

The Centre for Independent Studies, like many of its sister think tanks, is a big supporter of tax cuts. But it is prepared to acknowledge that attitudes are moving in the other direction. In a paper entitled Will you still vote for me in the morning? one of its most thoughtful researchers Andrew Norton observes that “too many surveys from too many polling organisations say similar things to doubt the general trend. Tax is less unpopular than in the past.”

What is it about the last decade or so that has made us lose our enthusiasm for tax cuts and yearn instead for more government spending to solve pressing problems? I believe it is prosperity.

We have now had 15 years of rising incomes - the longest period of sustained economic growth since settlement. On a personal level most of us have more or less what we want. What we don’t have is a guaranteed water supply, hospital systems about which we can feel confident, schools at which we feel happy to leave our children and an ACT bus service that runs more than once an hour in the middle of the day.

The problems that remain are those that we need governments and their billions of dollars to solve. For most people private money can’t buy a guaranteed water supply and it can’t buy fully equipped hospitals to ensure that we are looked after wherever we fall ill. (It can buy education, which may be why more and more of us are switching to private schools in frustration at what state and territory governments are offering, and it can buy private transport which may be why fewer and fewer of us are waiting to catch infrequent buses.)

Our current desire to have the government use our money to solve pressing national problems rather than give it back to us is not without precedent. We last had it during the 1960’s, another time of rapidly increasing prosperity in which we felt our personal needs were being met.

In is early days in the 2007 campaign but so far I have heard no talk from either side about tax cuts. What I have heard instead is talk about from Labor about education and talk from the Coalition about water.

This could be because we are yet to be offered our (largely unrequested) traditional dose of tax cuts or it could be because Australia’s political party hacks have at last caught up with the reality of the shift in voters’ Australian views.

Or it could be something else: that the problem of Australia’s dwindling water supplies is now so urgent that the government feels compelled to throw billions at it and to turn it into an election issue in a way in which it wouldn’t have before. And it could be that the Opposition Leader Kevin Rudd, who ran the state Cabinet Office in Queensland recognises the extreme importance (and potential economic benefits) of getting education right in a way that his party’s hacks do not.

And it could be because of the Reserve Bank. It pushed up interest rates four times in a row last year largely in an attempt to control the surges in spending that the last few tax cuts brought on. This election it will be easy to argue that a promise of further tax cuts is a promise of a further rate hikes.

Whatever giveaways each side does promise us in the year ahead are likely to be dressed up as nation-building – investments to secure our water supplies, to fix up our schools and to equip us to fight global warming. Which is as it should be. It is what we want.

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A healthy appetite for higher tax

At last, a budget that gives the people what they want, eh? Well, if the Treasurer had really listened to what we want last night, he wouldn't have given us tax cuts at all. When asked, an astonishing 70 per cent of us now say we would rather have extra money spent on health and education than given back to us in tax cuts.

But we haven't always thought that way. As recently as the late 1980s it was the other way around: 70 per cent of us wanted a tax cut, fewer than 30 per cent wanted more government spending. What's changed?.

Andrew Norton, of the Centre for Independent Studies, notes that until recently our views about government spending responded to actual spending itself. So that when spending was low under Menzies and his successors we wanted more of it and then when it shot up under Whitlam and continued climbing until the mid-'80s we wanted less.

But that relationship shattered around 1993... From then on as government spending climbed, more and more of us have wanted more of it. This Government is the highest-taxing in our history (although low by international standards), yet our willingness to pay tax is the highest it has been for decades.

It could be that we don't realise just how highly taxed we are these days. Much of this Government's tax is invisible to many of us. We don't see the GST. It could be as well that we don't realise how much the Government is already spending on health and education - on some measures more per person than ever before. Yet at least on health this Government has been subtly implying that the public system is run down, offering us subsidies to take out private insurance.

Or it could be because of something more fundamental - a phenomenon known to just about every student who has ever enrolled in a first-year economics course.

Australia is enjoying its longest period of sustained economic growth in modern history. We are much richer than we used to be. And as people get richer their tastes change.

As Irish incomes increased in the 19th century the consumption of potatoes actually went down. Potatoes were what is known as an "inferior good". In Australia at the start of the 21st century health is what is known as a "superior good". The richer we become the more of it we want, much more so than goods such as food or entertainment.

And the basic health infrastructure we want can really only be provided by government, whatever the privately purchased add-ons. When Kerry Packer suffered a massive heart attack while playing polo at Warwick Farm in 1990 he was taken first to the State Government's Liverpool Hospital.

It is concern about health, more than anything else, which is driving our apparent new willingness to forgo tax cuts. An Australian National University survey suggests that 70 per cent of us would actually be prepared to pay more tax if we knew it would go to health, 63 per cent would pay more if it would go schools and only 34 per cent would pay more tax to see it spent on welfare.

And the Australians most prepared to pay more tax for health are those on the highest incomes. Only 23 per cent of Australians earning more than $78,000 say they would prefer a tax cut to spending on health and education, compared with 32 per cent of Australians earning $31,000 to $36,000.

So why do our national leaders act as if these polls aren't right and offer tax cuts regardless? In large measure it might be because of our peculiarly Australian division of state and federal responsibilities.

In Australia, the state governments run the hospitals and schools, while the Federal Government raises most of the tax. It is possible for voters to kid themselves that they can get the best of both worlds, voting for hospitals and schools at the state level while voting for tax cuts at national elections.

The Labor Party has won nearly every state election in Australia in the past decade. Right now it governs in every Australian state. It has traditionally been the party keenest to spend on schools and hospitals. State Liberal leaders such as Kerry Chikarovski, Jeff Kennett and John Olsen learnt this to their cost.

At the federal level the Coalition has done much better. Voters have occasionally been swayed by the promise (if not always the delivery) of lower taxes, believing hospitals to be a separate issue.

It is a fools' paradise that might be about to change. The state and federal health ministers have before them a proposal to remove hospitals from state control and place them instead in a national body funded directly by the Commonwealth.

Federal decisions about tax would suddenly have consequences. As the economist John Quiggin puts it: "Voters would be faced with a clear choice: they could vote for lower personal taxes and do without improved health care, or forgo tax cuts, and perhaps accept some tax increases, in return for high-quality, publicly funded health care."

And there's no reason to stop at health. The states could be given the full responsibility for funding and running schools. Each state election could then become a mini-referendum about the need for spending on schools and the level of state taxes, including the national GST, needed to raise the money.

It would improve the workings of Australian democracy and provide Australians who say they would prefer education or health spending to tax cuts with the opportunity to actually vote that way.

Quiggin would go further still. He would index the personal tax scales so that the Government's take no longer automatically increased. Then the overwhelming majority of voters who say they want more spending on health would find that the only way they could get it would be to vote for higher taxes and to accept them in federal budgets.

There's a good chance that they would.

See: Tuesday Column: An election without tax cuts January 30, 2007

See: After the tax revolt: Why Medicare matters more to middle Australia than lower taxes Trevor Breusch, Shaun Wilson; Australian Journal of Social Issues, Vol. 39, 2004

See: Money in your pocket, or money spent where it's needed? SBS Television 7.30pm Tuesday 4 May, 2004

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