I didn’t do much for my reputation as an election tipster with my assessment of the Australian election. But I was just about spot-on in my pre-election prediction, posted at Crooked Timber that,

Whatever the outcome, I expect it will be treated in the international press as something of a referendum on the Iraq war

whereas, in reality, the issue barely came up.

On cue, here’s Glenn Reynolds complaining of inadequate coverage of

an Australian election that was run in no small part as a referendum on the war

Admittedly, Reynolds isn’t “the international press”, and, as he complains, some papers got the story right rather than printing the fantasy he would prefer, though many others have taken the “referendum” line. But his words are so close to my prediction that I feel entitled to a bit of a gloat. Heaven knows, we haven’t got much to gloat about in Australia this week.

More on this from Tim Lambert .

I’ve seen various assertions in the last couple of days claiming that cuts in the top marginal rate of taxation have been blocked in the Senate (so, by implication, can now been introduced). I don’t recall this happening, though there have certainly been occasions when the Senate blocked spending cuts or increases in other taxes that were supposed to finance cuts in the top marginal rate. But my memory on these things is not 100 per cent reliable.

Can anyone advise me whether there has in fact been an occasion where the Senate has voted against a reduction in income tax rates (on its own, not as an element of a package)?

It seems likely though not certain that the government will get exactly half the seats in the Senate, and that the Family First party will get at least one, largely due to preference deals with Labor[1]. As with all new parties, there’s something of a lucky dip quality here. Certainly, it doesn’t appear that FF are the hardline religious rightwingers that they have been represented as. I don’t have any particular knowledge about this group, but I will offer a few thoughts.

First, as I said in relation to Pell and Jensen, the idea that religion and politics ought to be kept separate is in general a silly one. It’s based largely on a misunderstanding of the doctrine of separation of church and state. What this doctrine prohibits is action by the state which favors one religion over others or over those without religious belief. In this context, claims that FF is closely associated with one particular church (Assemblies of God) are troublesome. It seems, however, that even if a lot of its leaders have been associated with AOG, the party is broader than this.

Separation of church and state does not mean that there is anything inherently problematic about people holding, and acting on, political views that are derived directly from their religious beliefs. The problem, where there is one, arises from the content of the beliefs and views. Although I don’t share the belief that we are morally obligated to follow the teachings of Jesus, I am often in agreement with the political views that follow from that belief. On the other hand, I rarely have much sympathy with policy beliefs derived from the Old Testament, for example, those condemning gays.

From what we’ve seen so far, it looks like FF have a mixture of policies, some of which will be appealing to me and most readers of this blog and others not. On the positive side, they are sympathetic torefugees and may help in restoring some much-needed decency in this area of politics. More generally, family values are, in large measure, those of the left. Co-operation rather than self-seeking competition, equal sharing rather than incentives and so on. That hasn’t stopped plenty of poltiicians espousing family values and pursuing anti-family policies, and we will have to wait and see whether FF lives up to its own rhetoric.

The obvious negative is that, for FF, the traditional family is the only option. I imagine the realities of life impinge to the extent that plenty of FF members and supporters have experienced divorce, blended families and so on, but there will obviously be no sympathy for ideas like gay marriage. But this was never going to come up, given that Labor had already opposed it. In general, this is not an area where governments have a lot of direct impact.

Overall, then we shouldn’t despair about FF holding the balance of power in the Senate, though I’m not optimistic they will do much more than blunt the sharpest edge of government policy.

fn1. In addition, there are the Democrats, of whom Andrew Murray is most sympathetic to the Meg Lees view of seeking negotiated improvements to government legislation. This means that, most of the time, the government will be able to get legislation through, perhaps with amendments.

I’m surprised no-one else seems to have mentioned the impact of state-level problems on Labor’s vote in the election. Right across the country, state-level issues ran against Labor. This partly reflects the fact that Labor is in office in every state, and in some cases, has been in office too long. But mostly, it was idiosyncratic stuff, that could have gone either way, but happened to go against Labor – even popular Labor governments ran into strife. Here’s my list

* In Queensland, the CEO of Energex committed suicide during the campaign. Although it was a complex story, it was tied to the failure to prepare properly for the blackouts that followed storms in January, which hurt the government

* In NSW, there were a string of hospital crises

* In Victoria, there was the broken promise over tolls on the Scoresby Freeway

* The Tasmanian forests were a state issue that split the general alliance between Labor and Greens

* The Gallop government in WA seems to be unpopular, though I don’t know the details of this

I don’t think these factors were enough to swing the election, but they could easily have added up to a 1 or 2 per cent swing, making the difference between an easy win for Howard and a narrow one.

Some general thoughts on the election outcome.

First, I have to concede immediately that the betting markets got this one right. Unlike polls and pundits, including me, they consistently predicted the return of the government. Before I’m convinced that there’s a real phenomenon here, though, I’d like to see an instance where the betting markets correctly predict a Labor win against the apparent odds[1].

Second, Labor suffered again from holding off too long on key policy issues. The tax policy went OK (but would have done just as well if it had been announced earlier), but the forest policy was clearly a disaster in political terms – the substantive merits are more complex, but precisely for that reason needed more argument and explanation. Instead the whole thing was left until the last few days of the campaign. The Labor planners ought to have been able to work out well in advance whether they could work out a deal which would satisfy the unions while achieving enough protection for the forests to keep the Greens onside. If it couldn’t be done, a political strategy to deal with the consequences needed to be worked out. Instead, they seem to have floated the policy and hoped for the best. This allowed Howard to announce a non-policy in response, without any time for Labor to do anything about it.

Third, and contrary to a lot of post-election claims, the campaign showed that health and education can win elections. The problem for Labor was that Howard was willing to outbid them, putting a heap of money into both bulk billing and state schools, even if it was poorly targeted (in policy rather than electoral terms) and hedged about with all sorts of silliness, like the idea of going through P&Cs. As I said several times during the campaign, Howard’s concessions, on Medicare in particular, mean that he has admitted defeat on the core ideological issue of the size of government.

Fourth, there’s economic management and interest rates. Undoubtedly these were the winning issues for Howard, as he had hoped. Contrary to Ken Parish’s argument, I don’t think you can really separate the two. And it was always going to be hard for Labor to make the case that Howard’s reputation on this score is overblown (I did so here, but I’d hate to try and condense it into a 30-second spot). A big problem here is the continuing memory of Keating, whose exceptional arrogance makes the mistakes of fifteen years ago still powerful electoral ammunition for the government – it’s as if Gough Whitlam had been able to run against the 1961 credit squeeze.

Finally, there’s the prospects for Howard’s next term. It’s clear enough that he will be able to push through the remaining elements of his 1996 program, the full privatisation of Telstra[2] and a final instalment of industrial relations reform. For the rest, his campaign platform was designed to match Labor – he hasn’t got a mandate for anything much in the way of free-market reform. It’s possible that, as on some previous occasions, he’ll repudiate his promises and embark on a new round of radical reforms. But my guess is that this won’t happen. Even the Telstra privatisation will cause a lot of political pain. In any case, there aren’t that many options on the table. Tax reform is unlikely to be affordable, the government is now committed to saving Medicare and bulk billing, and pushing privatisation on to Australia Post seems most unlikely to me.

The big issue is whether we continue to avoid a recession. The imbalances we’ve piled up in terms of household debt, the trade and current account deficits and the inflated price of houses can only be sustained, if at all, with low world interest rates, and those rates depend on the willingness of the Chinese and Japanese central banks to sustain them. As I said on election night, Howard’s reputation as a good manager owes a lot to luck, and luck always runs out in the end. But Howard’s luck has lasted longer than most.

fn1. Does anyone know if there are betting markets for state elections? If so, did the markets predict Bracks over Kennett?

fn2. As Andrew Norton points out, Family First actually opposes privatisation, but the government’s position is strong enough that it will certainly find some way to make a deal.