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Betting on the bounce

October 16th, 2007

As we dragged through the seemingly endless pre-campaign this year, two legendary beasts were much discussed. One was the Bounce, expected by the government in response to some good news story or other. The most important was the Budget Bounce which, had it materialised would have set the stage for a mid-year election. The other was the Narrowing, assumed to take place once voters realised that the Howard government was actually set to lose office and be replaced by Labor.

Neither of these happened. The Budget disappeared without trace into the background of whatever determines voter choices, and even after most people came to expect a Labor win, there was no significant narrowing in the lead. Looking at the averaged results, there might have been a shift of one or two percentage points.

But the opening of the real campaign revives both possibilities: a Narrowing as the phony war is replaced by a real one and a Bounce as the government runs a strong campaign, including lots of appealing goodies.

The announcement of the government’s biggest policy initiative on the first day of the campaign effectively rolls these two into one. Clearly, Howard and Costello are betting that the combined effect will produce an immediate shift in the polls, at least enough to bring them back into contention – I’d say 47-53 is the minimum needed. If they get it, they are in a competitive race. If they don’t, the effects on morale will be dire.

Of course, there’s a huge element of chance here. Sampling and non-sampling error could produce a set of rogue results either way. But no matter how much this is pointed out, the psychological impact of the first polls is going to be huge.

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  1. BilB
    October 16th, 2007 at 08:46 | #1

    It never ceases to amaze me at the lack of understanding of the public desire to attend to fundamental crucial issues (GW) expressed by Howard and Costello. They are now saying that they have 10 billion dollars a year spare that could be spent on renewable energy infrastructure, which once earning would return the seed money back to the public. Instead they will give 50 dollars a week back to the public and say “you fix the problem, just use less power and she’ll be right (mate)”.

    The Howard way is to hand back $50, along with $100 extra costs for less service provided. What will that be? Less funding for universities meaning rising fees. Less support for childcare. Abandonment of the 9 billion dollars of subsidies for the fossil fuel industry resulting in higher again fuel prices.

    If you get 50 bucks from Howard it is really going to hurt you. And apart from the direct pain the knowledge that some more favoured person will get at least 4 times that will irritate you to distraction.

  2. mugwump
    October 16th, 2007 at 11:07 | #2

    BillB, it was never their money in the first place.

  3. October 16th, 2007 at 11:11 | #3

    The games that this government plays with our money (as if it was theirs) never ceases to disgust me, and Murdoch’s Courier Mail (
    Tax cut vow starts PM’s shock and awe campaign”
    – “Money Back Guarantee” in the hard-copy version) is typically, unsurprisingly, but, nevertheless, shamefully praising this stunt:

    Money Back Guarantee

    JOHN Howard has promised to return $34 billion to taxpayers in one of the boldest starts to an election campaign in Australia’s political history.
    Firing the first shot in what promises to be a Coalition “shock and awe” offensive to destroy Labor’s bid for office before it gets started, the Prime Minister and Treasurer Peter Costello outlined a tax policy that would boost family incomes by up to $50 a week.

    Tax vow is music to mum’s ears

    WORKING mum Kate Wyatt knows exactly how she will spend the extra cash in her pocket from the Coalition’s tax cuts ….

    etc, etc ad nauseum.

    There is no acknowledgement that a lot of the money supposedly being given to us by this Government could be used for worthwhile ends, and that many of us may well be more out of pocket, now, or further down the track as a consequence, for example, of a deteriorating environment, because services that Governments previously provided are not now being provided as BillB has pointed out above.

    At best, they are simply giving us back our own money. At worst, they are using money taken out of the pockets of some in order to but the votes of others.

    If it is such a good idea to ‘give’ us back all this money, then why should they have waited until now to have done it?

    Once again, our fragile democracy is being blatantly manipulated by a Government that puts its own survival ahead of everything else, except, to serve the interests of its wealthy backers, and a sycophantic pro-Government news media.

  4. mugwump
    October 16th, 2007 at 11:15 | #4

    At best, they are simply giving us back our own money. At worst, they are using money taken out of the pockets of some in order to but the votes of others.

    Too right. They take from the rich and give to the poor, the bastards.

  5. October 16th, 2007 at 11:28 | #5

    mugwump, et al: it’s not your money. it’s theirs. they took it from you, it’s true- but you let them. it’s been going on like this since 1066. unlike the swiss with their “free or dead” motto, the english chose serfdom.

    if you don’t like being treated like serfs, demand democracy, with menaces.

  6. October 16th, 2007 at 11:49 | #6

    I meant to write:

    “At worst, they are using money taken out of the pockets of some in order to buy the votes of others.”

    … and not:

    “At worst, they are using money taken out of the pockets of some in order to but the votes of others.”

    My apologies.

  7. Bingo Bango Boingo
    October 16th, 2007 at 12:08 | #7

    Ha ha. Taxation began in 1066. Brilliant.

    Anyway, it seems that Howard and Costello cannot win. Tax cuts are inflationary. Spending is inflationary. Squirreling the money away in things like the Future Fund is just an accounting con. What to do? As a crackpot supply-sider, I can’t say I feel sorry for them.

    BBB

  8. gerard
    October 16th, 2007 at 12:16 | #8

    Taxes have been around since before Hammurabi and they’re probably going to be around for just as long again.

  9. BilB
    October 16th, 2007 at 13:12 | #9

    The reality is that Howard hasn’t spent a cent. He is just saying that he will give tax cuts. I remember how Howard thanked people who voted for him last election. I heard the interview with Abbot some months after the election where, when put on the spot about the back down on matching Labour’s benfits for over 75′s age group, he (Abbot) said that the scheme would cost 1.5 billion dollars and it was too much so the Coalition was not going to honour the election promise. So if 1.5 billion dollars was a bit pricey for Howard, dishing out 10 billion dollars is really going to …..be…..just too painful so he just might have to not do it…. In the interests of the economy,….you know.

    So if your vote is worth 50 bucks, make sure that you have a legally binding document that you can take to court. There is an interesting comment that came out of a high court challenge in the 1993 election which boiled down to promises made by politicians are not legally binding. The wording was cuter than that something like “there is no requirement for politicians to not lie to the public”. The long and the short of it is that in an election they can say what ever they like and then do what ever they like.

    Beware of the promise made by someone who is grinning while looking you in the eye.

  10. mugwump
    October 16th, 2007 at 14:55 | #10

    if you don’t like being treated like serfs, demand democracy, with menaces.

    Democracy is precisely why the rich pay most of the tax.

    The bottom half in terms of income earn way less than the top half. From memory, in Australia I think the bottom 75% earn as much as the top 25%. So the top 25% can vote for whomever they like: it’s not going to do any damn good because the bottom 75% are going to vote to transfer your money to them.

  11. Anna K
    October 16th, 2007 at 15:25 | #11

    The task is really to identify the optimal taxation rate… I remember seeing some graphs about this at some point in second year… pretty basic stuff really.

    A far-from-expert observation on our current economy is that our interest rate is increasing, a sign of a quickly growing economy that needs a bit of a slow-down, according to the RBA. This compounds the problems that we have housing affordability and credit, among other things. Right?

    It seems to me that giving tax cuts, thus stimulating greater consumption, increasingly rapid short-term growth, and inflation would be a poor idea at this point…

    Is the leadership setting us up for a peak in the boom/bust cycle?
    They seem to be stuck in the mentality of ‘lower tax is always better’… don’t they remember those graphs from second year that tell us that the optimum tax rate is not equal to zero?

  12. Anna K
    October 16th, 2007 at 15:28 | #12

    Lets think long-term economic sustainability here people! Using our current wealth to address climate change would be A Good Thing… if we can’t do it now, when our economy is in such a strong position, when the hell are we going to do it?

    Keep in mind that IPCC says we need our emissions to start decreasing by 2015 at the latest.

  13. gerard
    October 16th, 2007 at 16:11 | #13

    one can always emigrate to a more rich-friendly country hey mugwump

  14. October 16th, 2007 at 16:32 | #14

    As that say about the Stock Market the voters should have factored in tax cuts from both sides ages ago. I wonder whether the Reserve Bank has the guts to do the same. I doubt it just before the election. Please join me at “Labor View from Broome” for a remote perspective.

  15. wilful
    October 16th, 2007 at 17:03 | #15

    Democracy is precisely why the rich pay most of the tax.

    And that’s why even the rich are better off! Because someone is looking out for them too.

    My goodness libertarian anti-tax arguments are tedious. Only on the (government developed) internet.

  16. Paul Walter
    October 16th, 2007 at 17:57 | #16

    “My goodness libertarian anti-tax arguments are tedious…”.
    A big pat on the back for Wilfull- you’ve expressed my feelings in spades.
    The speculative nonsense originating in America that fired up the neocon/neolib right prior to Dubya there and Howard here has collapsed under the weight of its own numerous logical contradictions in the proving, to reveal an unadorned truth: that it was only ever an artificial construct dreamed up by the likes of Huntingdon, to justify arbitrary( abuse of ) power, encouragement of greed, graft and corruption corrosive to the very bases for survival of Free civil society.
    Aenemia, where the body turns in upon itself, describes the trajectory and intent of this pernicious, selfish, worthless, Nietzschean elitist doctrine.

  17. mugwump
    October 16th, 2007 at 19:21 | #17

    one can always emigrate to a more rich-friendly country hey mugwump

    One did. But I wouldn’t characterize the US as “rich friendly”. The tax situation isn’t a whole lot different. But the culture is much more pro-enterprise, individual freedom, and self-reliance.

    Aenemia, where the body turns in upon itself, describes the trajectory and intent of this pernicious, selfish, worthless, Nietzschean elitist doctrine.

    Gee, I thought it was an accurate characterization of the morally bankrupt, politically correct, process-obsessed, victim-oriented, freedom-hating, taxpayer-sponging paternalistic left.

  18. jack strocchi
    October 16th, 2007 at 20:17 | #18

    Pr Q says:

    I’d say 47-53 is the minimum needed.

    I have been predicting an election outcome of LN/P 47 – ALP 53 for the better part of the year.

    I am guessing that the polls have been overestimating the ALP vote. A couple of percent appears “soft”, accoring to Sol Lebovic.

    The post-campaign launch bounce is likely. No doubt this will be a combination of real competition, fistfull of dollars and maybe a rabbit out of the hat.

    But the bounce will not be enough to get the Govt over the line. Work Choices is a right-wing plank to far in Howard’s platform.

  19. Paul Walter
    October 16th, 2007 at 21:29 | #19

    I was just watching Van Onselen parroting the same “self first, then self, then self again” Hobbesian tooth-and-claw- theology to a group of young people on SBS, Mugwump.
    How nice to see, in a twenty-first century world of nearly seven billion often poor people beset by real problems like global warming, this evolving higher consciousnes and sensibility developing that gets people beyond themselves and their plassies and macmansions, and into the real world for five seconds.
    Not!

  20. JB
    October 16th, 2007 at 21:46 | #20

    Dear Prof Q

    What an announcement yesterday by the Bennelong Kid and his offsider the Sweet Dollar Boy, selling us money that is ours! The announcements yesterday of the new tax regime have tried to sell a story that the new tax scales will kick in at $16K -without explaining the impact of the Low Income Tax Offset. The issue of Effective Marginal tax rates (EMTRs) does mean that that people with access to concessional payments will be better off – most taxpayers get NO benefit. However, why didn’t they bite the bullet & actually raise the Tax Free threshold?

    Its been quite a while since it was raised to $6000 (can’t say when, but I remember that when i started working fulltime in 1979 the threshold was $4000). Why didn’t they take the chance to raise the Threshold to $10,000? Even if the tax-free threshold is raised for all Australians, I believe it will have as much impact as increasing employment as ‘Work Choices”, by making it for affordable for the unemployed to earn a few $$ to help them along.

    I was just watching the new ALP advert, where they have targeted the “L Plate” adverts of the Government by responding with a strong (in my view) statement that they are offering a ‘new direction”. We have to look forward, not backwards.

  21. mugwump
    October 16th, 2007 at 22:55 | #21

    Paul Walter, where have I advocated “self first, then self, then self again�?

    Free enterprise, self reliance, and individual freedom does not preclude selfless behaviour. But it does preclude gross state intrusion.

    You should try it sometime. There’s nothing so refreshing as that feeling of freedom when big government butts out of your affairs. Knowing that key decisions are not being made several thousand miles away by faceless, mediocre bureaucrats is enough to turn the most rabid individualist into a model of civic responsibility.

  22. BilB
    October 17th, 2007 at 05:15 | #22

    mugwump, “paternalistic”, do you hate your father.
    I would have thought that would be maternalistic left and paternalistic right.

  23. October 17th, 2007 at 09:11 | #23

    a quick refresher, for those educated in oz: democracy is rule ‘by the people’, not rule of the people by pollies. it is characterized by direct election of ministers, open administration of public affairs, and primacy of citizen initiated referenda.

    none of these things are present in oz, if you would adjust your vocabulary to reality you would find that political events are easier to explain.

    for instance, complaining about what pollies do with ‘your’ money is psychotic, or at least childish. if it were yours, they couldn’t spend it.

    and yes, bbb, for english speakers taxation began in 1066: that’s when the form of current society began. the extraction of land and wealth by the winners has continued from then in a continuous tradition.

  24. mugwump
    October 17th, 2007 at 12:17 | #24

    BillB,

    pa·ter·nal·ism
    n.
    A policy or practice of treating or governing people in a fatherly manner, especially by providing for their needs without giving them rights or responsibilities.

    An almost perfect description of the left.

  25. Neil
    October 17th, 2007 at 13:19 | #25

    Someone needs to challenge the orthodoxy that taxation is taking someone’s money away from them. Of course salary scales and wages are set with taxation in mind: you wouldn’t get paid the same amount if there were no taxes (and that’s leaving aside the question of the infrastructure the taxes pay for).

  26. October 17th, 2007 at 14:30 | #26

    Neil,

    So government comes into being at no expense to anybody? Like Jesus handing out the loaves? Or are you arguing that taxpayers are willing participants?

    I think for now I’ll stick with the orthodox view that taxation is where the government takes money from you against your free will.

    Regards,
    Terje.

  27. Peter Evans
    October 17th, 2007 at 14:57 | #27

    No Terje, Neil is right. And that’s whay tax cuts are an illusory form of wage increase. Without the tax cut, your salary (heaven forbid, but that’s most folks) would tend to increase more over time – that’s the critical factor. With the tax cut, it will increase less, because your “real” salary is after tax, not before it (though I’ll wager you’ll disagree strongly on that!). Tax cuts are only a temporary increase in salary – over time your real salary will come back to where it would have been without the tax cut. And your employer knows it.

  28. mugwump
    October 17th, 2007 at 15:04 | #28

    Of course salary scales and wages are set with taxation in mind: you wouldn’t get paid the same amount if there were no taxes

    Rubbish. The salaries I pay are set by the market. If I can’t afford to pay someone a market salary I can’t hire them.

  29. Neil
    October 17th, 2007 at 15:37 | #29

    Mugwump, your claim – which is true – is compatible with mine. I said that the employee’s salary factors in taxes; you pointed out that employers nevertheless have to pay the whole lot upfront. Go back and look at my comment. See? No contradiction.

  30. Neil
    October 17th, 2007 at 15:38 | #30

    Terje, too, makes a claim that’s irrelevant to the point. Govt might have costs; taxpayers may be coerced into being in the system, and it remains the case that wage levels take taxes into account.

  31. mugwump
    October 17th, 2007 at 16:10 | #31

    Neil, part of my claim is that your claim is rubbish, so they can’t be compatible.

    Market salaries are set by the law of supply and demand, irrespective of taxation.

    In an idealized case, suppose you have a relatively rare set of skills for which I am willing to pay you a salary of $X pa. The reason I am willing to pay you $X is because I know your skills will add at least $X to the value of my business (in fact, the value-add needs to be more like 2X to justify hiring you, but let’s assume that whatever the multiplier is, it is constant across businesses (we’re simplifying)).

    Now suppose there is another business out there to which your skills add $4X. That business will hire you at 4 times the salary I am willing to pay you, and so I won’t be able to hire you.

    That’s what it means to have your salary set by the market. Nowhere does the amount of tax taken out of your salary enter into what you get paid: it’s your value to the business and the relative supply of people with your skills that determines your salary.

  32. Neil
    October 17th, 2007 at 16:18 | #32

    Obviously there is no point in arguing with someone who cannot see that these claims are compatible. So I won’t. Just notice that what the market sets is sensitive to (among other things) how much take home pay people actually need (that sets a lower limit to what they will accept, with lower limit varying according to how people with different social expectations feel they need). Take taxation away and that lower limit will be much lower.

  33. BilB
    October 17th, 2007 at 16:44 | #33

    Mugwump,

    maternalism

    noun
    1. the quality of having or showing the tenderness and warmth and affection of or befitting a mother;

    I think that the left shares more of the features of caring, sheltering, providing for, and educating, but in the modern sense of maternalism.

    The right I perceive as being more into macho, risky, learn by accident sort of paternalistic traits in the modern sense. Homer Simpson style paternalism, don’t you think?

  34. BilB
    October 17th, 2007 at 16:51 | #34

    Neil,

    That is exactly what happens. The system of tendering would see prices rising steadily rather than falling if that were not the case. The only exception is in executive salaries, which is a situation were there is a leap frog “worth” evaluation process going on.

  35. mugwump
    October 17th, 2007 at 16:51 | #35

    Ok Neil, I agree that at the bottom taxation can potentially have an impact. But in Australia (and in the US), families on minimum wage pay no tax (in fact large negative tax), so even then it is not a significant factor.

  36. mugwump
    October 17th, 2007 at 16:55 | #36

    BillB, paternalism is the perfect description of the left. Sure you look to provide for everyone’s needs, but with absolute authority (no individual rights) and with zero responsibility expected of the recipient.

    Providing for people’s needs isn’t what’s wrong with the left, It’s the Rights and Responsibilities stuff that you guys are missing.

  37. Paul Walter
    October 17th, 2007 at 17:28 | #37

    Well, what do you propose Mugwump? Every rat for herself and the eventual collapse of a civil society preyed upon by a feral middle class?
    At least BilB’s scenario represents an attempt at a better consciousness than the slavery of Hobbesianist survivalism and the freedom and sense of accomplishment that is yeilded of cooperation against the counterproductive law of the jungle of rightists.

  38. mugwump
    October 17th, 2007 at 20:12 | #38

    Sure, Paul Walter, massive state interference in citizens’ lives is the only thing standing between us and Lord of the Flies.

    /sarcasm

  39. Jill Rush
    October 17th, 2007 at 23:55 | #39

    The trouble for the Government is that most people can add up and can work out that it is yet another hamburger and milkshake amount which is well into the future.

    On the other hand when they are required to sign away wages and conditions in an AWA as a result of the Workchoices legislation they are likely to reject the government overtures. There are examples such as the Lobethal meatworkers who have lost up to $88 a week. This real life example of the Workchoices system working is frightening in comparison to an ephemeral tax cut.

    How much better to change an unfair industrial system by getting rid of the Liberals and get decent wages rather than hope for $20-$30 if the government doesn’t change this into a non core promise in the meantime. The question is how many of the few who can be bribed are real swinging voters?

  40. jack strocchi
    October 20th, 2007 at 09:46 | #40

    Jack Strocchi October 16th, 2007 at 8:17 pm
    says
    :

    I have been predicting an election outcome of LN/P 47 – ALP 53 for the better part of the year.

    The Age report Nielsen and Galaxy show that the LN/P have closed the gap to – around LN/P 47 – ALP 53.

    These could be rogue polls. And the polls could get back to its default position of LN/P 43 – ALP 57, perhaps if Rudd indulges in some tax-cutting me-tooism.

    But I am betting that this election will be a convincing, not landslide, win for the ALP. Something like 1983, rather than 1996.

    I correctly predicted the 2001 and 2004 elections, beating mumble who sets the gold standard on psephological prediction. Stay tuned for me exercising the mother of all bragging rights.

  41. BilB
    October 26th, 2007 at 16:58 | #41

    All we need is a small bunch of people to predict the other options, and one of you will prophet.

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