Last federal election was all about those Australians who had started voting One Nation in the 1998 election. It appears this federal election is all about voters who live in Western Sydney, or at least that is my tentative conclusion from last night’s budget.
There is a predictable rhythm to national economic management. The first budget in a government’s term takes the hard decisions and sets the course. This is adjusted in the second budget, and all being well, the government reaps the benefits in its third budget and spends some of the fiscal capital that it has built up hoping to turn it into political capital.
This budget appears to have been put together by Treasury in conjunction with the pollsters and demographers as the government strategically spends its capital to court a demographic that appears to me to be at their highest concentration in Western Sydney. That is: families with children where the major breadwinner earns $52,000 plus per year and the minor breadwinner is working part-time. These voters get not only a tax cut, but more childcare and out-of-school-hours care places, and a massively enhanced family tax benefit. They must be the ones that Tom Burton in the SMH calculates will receive an additional $117 per week.
In that sense this is a defensive budget, because it is targeting the very same demographic that Mark Latham has identified as being the ones that he wants to appeal to. Latham even gave them a name – “Aspirational Voters”.
Is this a wise decision for the government, or are they just following fashion?
Last election Howard built an electoral coalition around the middle to upper demographics to which he bolted on most of those who had been voting One Nation. These latter voters tend to be older and less-well educated than most; in small business, blue-collar or small cropping employment; and often earning less than they could on welfare. They are patriotic and xenophobic; are more likely to hunt or fish than the average; and are more likely than most of us to be military (particular Vietnam War) veterans, or divorced or separated fathers. The logic appeared to be that the first group is Liberal Party home territory and could be more or less taken for granted, while immigration and terror issues could be used to gain the loyalty of the second group.
Latham appears to have made the judgement that he can’t get the One Nation voters, but he can eat into Howard’s middle class support via the “Aspirationals”. Howard and Costello appear to agree with him because there is absolutely nothing in this budget for the typical ex-One Nation voter.
Not only haven’t they received a tax cut, but their “sandwich and milkshake” tax cut of last budget has been taken away from them by inflation and used to bribe other demographics. On my calculations, someone without children and earning up to $50,980 p.a. is anywhere up to $229 per year worse off in real terms.
There was some non-monetary, subliminal recognition of these voters early in the Treasurer’s speech when he said:

“Over the last eight years so many countries — countries much bigger than us — have gone into recession. We have been challenged by financial collapse in our region, by plagues like SARS, by terrorism and war, by an aching drought that still lingers. We have had many difficult challenges and we have come through.”

So many of the themes are there that these voters react to. We are a small vulnerable country. There are threats (even including SARS for Gods sake, when was that a problem in Australia!?) which might get us. We’re parked at the wrong end of Asia. The bush (where so many of them live) is in trouble. But none of the sort of recognition that proves a treasurer really cares for you – cash. These people are expected to stay in the fold because of psychology.
They are not the only group to be ignored. Younger voters have been too. The government seems to be gambling here on the propensity of the young to be optimistic. This morning on ABC radio Costello essentially said that these voters would be looking forward to the time when they would have families and would be earning $50,000 plus per year incomes and wouldn’t worry about being neglected now. He may well be right. Some of them will also be beneficiaries of the government’s decision to increase the threshold when HECS repayments start.
This is a good budget if you are the member for Paramatta, or Lindsay or Macarthur, and it is western Sydney seats like these that the government must feel are most vulnerable. They are not the only marginal seats for the government. I am not so sure how the budget will be read in less affluent parts of the country. Take Longman held by the Defence Minister, Mal Brough. At a state level this seat is solidly Labor and the Liberals depend heavily for their federal majority on One Nation type voters. Presumably the assumption is that enough of these voters are “breeders” that they will be too busy spending the $600 they will receive per child this year and then again next to be jealous of tax breaks for stock brokers. Longman has a young demographic, so this may well be the case.
Will this hold true in another urban marginal like Townsville? I am not so sure. The demographic there is older. What about Wide Bay or Hinkler, both sugar seats? Again the demographic is older. The sugar package may hold them in, or it might be that they will be attracted to the additional spending on infrastructure, such as the $3.1B Auslink promise (some of this was obviously targeted at Richmond, a rural northern NSW marginal where some of it will straighten the rail line).
There has been debate recently about whether taxpayers want tax cuts or better services. The Treasurer’s speech suggests that one government is theme is that we can have both. This is undoubtedly one of the biggest spending budgets in Australia’s history at $200 Billion. It is difficult to work out how big from the budget papers because while they track budget expenditure as a percentage of GDP, they ignore the GST receipts, making comparisons with years before 2000 difficult. Where this money is going can be partially gauged from the Treasurer’s boast that health spending has doubled from $17 billion to $35 billion since 1996.
What will Latham’s response be? One possible line of attack would be to point out the most favoured demographic and assert that we have a Prime Minister who runs the country from Sydney who now seems to think that he should run the country for Sydney, and play on the lack of tax cuts for lower income earners. There are plenty of votes in regionalism in Australia.
Another is to suggest that what the Prime Minister gives with one hand he will just as promptly take with the other once an election is out of the way, look at the “milk and sandwich” tax cuts, eaten and drunk by inflation.
Latham could also point out that the failure to raise the tax-free threshold means that the poverty trap has been exacerbated (again by inflation) for those trying to get off welfare.
Latham will be constrained to some extent because the government has spent the surplus and he cannot reallocate spending priorities without taking some of the promised benefits away. This isn’t necessarily a problem. Latham doesn’t need to make specific counter promises at this stage. His strong suit is that people are unhappy with the level of social services, particularly health and education. While the government may have upped spending in these areas, that doesn’t mean that voters perceive a benefit. Latham doesn’t have to get into the details, he can merely ask the questions. “This government says it has doubled health expenditure in the last 8 years, but can anyone tell me where they can see the benefits? Why is it that hospital queues are longer than ever?” etc.
Despite the large headline figures the budget is really just business as usual for the government. Another possible line of attack therefore is to paint it as the final gasp of a party that has run out of ideas for the future, delivered by Peter Costello, a man who is more interested in getting into the Lodge than delivering budgets.
We will be doing some focus groups next week to see how the parties have fared. By then we will know what Latham will say, so it will be over to the voters to make their own judgements, and our’s to report them.