Betting on the bounce

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.

41 thoughts on “Betting on the bounce

  1. 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.


  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. Mugwump,


    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?

  9. 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.

  10. 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.

  11. 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.

  12. 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.

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


  14. 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?

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

    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.

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