I remember the 2001 leader’s debate. On my scoring, and that of the “worm”, Howard lost. Later that week I realised that in a way he had won. The people in the studio audience weren’t those he was talking to. He was broadcasting to the sort of person who voted for One Nation, and they weren’t me, and they weren’t the people with their fingers on the worm. The theme of national security, and Labor’s weakness on it, hit home so strongly with this group that it didnt matter what the rest of us thought.
This debate I was waiting to see if Howard tried to talk directly to the fringe urban aspiring working class voters who used to make up the One Nation constituency, but if he did I couldn’t see it. In fact, there was nothing that I could see to indicate that Howard was talking to any constituency.
Latham’s presentation was poor and under-done for a man who wants to be Prime Minister, but Howard left him alone, never even really touching on the themes he has established so far in his campaign. Opening with a pitch on Medicare and how Australians need to have a strong economy to afford better services was a little bizarre.
Based on our research, Latham gave Howard plenty of opportunities to ram home messages. For example, despite a consensus that no-one should use the Jakarta bombing for political mileage, that was exactly what Latham did in his opening remarks. Surely Howard wasn’t so stunned that he couldn’t have pointed that out and capitalised on it. Then there was Latham’s absurd observation to Laurie Oakes that under Labor we would be out fighting terrorism at the roots, by smashing JI and finding Bin Laden, and he was going to wrap it up in three years. Surely the PM could have raised the dangers of pre-emption, and asked Latham how many of the countries he would need to operate in have given him permission to do that. These two men are running for PM of Australia, not Mayor of Liverpool Council, off-the-cuff exaggerations like this aren’t appropriate.
Voters are concerned that Latham is a flake, that he is inexperienced, that he talks without thinking or knowing, and that he is a closet Liberal. Howard could have implied just in answers to the issues to do with the war on terror that he was all four, but he didn’t. Likewise, Howard didn’t deal with his own negatives when he could have. For example, on whether he would stay another term he sounded evasive.
To deal with the issue of his truthfulness he could have picked Latham up on his exaggerations, and there were plenty of them. Despite that he must know by now that the figure is wrong he continued to assert that 90% (even 100% at one point) of families will be better off under his tax plan, even though we know the real figure is 70%. He tries to fudge the issue by claiming that there is a difference between weekly and annual figures which is such a poor fudge that it deserves to be ridiculed.
Latham was also running the line that he intends to deal in positives, even though most of his speech was directed at negatives. It’s a tactic that Labor uses frequently in Queensland, and it only works if no-one points out the reality.
So, why didn’t the Prime Minister go on the attack or aggressively canvass his positive case? I still don’t have a theory which entirely convinces me, but perhaps he didn’t want to be seen to be trying to monster Latham. Perhaps it is part of playing the statesman. The Liberal Party may be content to let its advertising do the talking, and didn’t want their man getting his hands dirty, in the process reinforcing voters’ opinions that he is overly ruthless and manipulative. The Liberals may also be looking to time the build-up in their campaign so that it peaks much later. We’re a long way from the time when most voters will be paying attention. If you run your best lines in a debate it might help the other side to anticipate what you are planning to say.
Howard’s team may have reasoned that he only needed to avoid a knock-out blow to really win. There may even have been elements of the famous Muhammad Ali “rope a dope” strategy of letting your opponent wear himself out, as well as giving him a false sense of confidence.
Perhaps Howard really isn’t a good debater.
Perhaps. Whatever the reason, I think that last night’s debate was bad for Howard. It has given Latham credibility because he mixed it with the Prime Minister and came off better. It has also given him a personal confidence boost, as evidenced in his ebullience today. In the 1984 election it was Peacock’s performance in a debate that gave him the edge over Hawke. He didn’t win the election, but he won the majority of votes, and that after starting the campaign a long way behind. This debate may be a similar turning point in this campaign, particularly as all the polls suggested that Latham started the campaign even or ahead, not behind.

Now I know what I’m talking about. Between surveys I feel like a complete fraud. Journalists ask me what I think is happening, and I tell them, qualified with the observation that I am only speculating because I am only one vote. Now I know much more about what is happening, because I have asked 945 voters. (If you want the details, click here to download an RTF document with percentages and explanations. If it asks for passwords, click cancel, it will still give you the document.) What they are telling me is that the contest is between a generally distrusted John Howard, and an unknown Mark Latham, and it appears to be being fought out with pitches to three distinct audiences.
Those who are voting Liberal appear to be optimistic about the direction of the country, largely as a result of economic circumstance, for which they give the credit to Howard. Labor voters by contrast are more interested in services and feel that the country is heading in the wrong direction because they see service delivery in the country as having deteriorated. Greens and Democrats voters are much more concerned with abstracts, like social equity, and foreign affairs, as in the FTA and War in Iraq. They feel that Australia has become a meaner and narrower society than it used to be.
Even many Coalition voters believe that John Howard lies, but they are outcome focussed, and are not changing their vote because of it, as they see Howard delivering prosperity. Non-Coalition voters also believe that Howard lies, but appear to be split in terms of whether he is to blame for what they see as the morally diminished state of society. Both leaders also carry baggage in terms of their teams. Many voters are antagonistic to Simon Crean and other Labor frontbenchers, while Peter Costello and Tony Abbott are frequently mentioned as problems for Howard. Interestingly, concern about the Liberal Party succession appears to be highest amongst Coalition, rather than Labor, voters.
Voters are also concerned about Latham for two major reasons. One is that he is too conservative, or really a closet Liberal, the other that he is ideological and will be too radical. Running through it all is concerns about character – that he is not substantial enough, unstable, aggressive and open to manipulation by his minders.
Coalition voters are more tolerant of Latham than non-Coalition voters are of Howard. This works against Howard. Electors vote against, rather than for, people, so as the “least worst” alternative, Latham should have an advantage. However it can cut the other way because the source of the tolerance may well be that voters have yet to form a strong enough impression of Latham. In particular Greens voters are undecided about Latham – about half of our survey. Despite this, 80% of voters appear to have made up their mind, meaning that the campaigns may change very little about the outcome.
In summary, this election appears to be a contest between a man no-one likes, but many respect, and another no-one knows. The question that needs to be answered is whether voters think that things are travelling so well, that they can afford to take the risk, or that badly that they need to take the risk. While we will be trying to answer that question over the next four weeks, three distinct groups of voters will be attempting to answer it themselves in their different ways. In this context it will be interesting to see whether the Jakarta bombing is seen to make things more risky, thus making a change from certainty (Howard) to uncertainty (Latham) unattractive, or whether it is seen as proof that John Howard involving us in Iraq has increased our risk profile, making Latham appear as more of a low risk option.
In summary our research shows:
1. Coalition supporters tend to believe that the country is heading in the right direction. This is because of the economy.
2. Labor supporters tend to believe the country is heading in the wrong direction. This is because of services.
3. Greens and Democrat voters tend to believe the country is heading in the wrong direction. This is because they see it as being less moral than it used to be because of social inequity and involvement in the War in Iraq via the US alliance. They are also concerned about the FTA.
4. Most voters (78% across the sample) appear to have made up their mind.
5. The move from Labor to the Greens observed in earlier elections is maintaining itself with 29% of Greens voters classing themselves as traditional Labor voters.
6. 83% of Liberal voters approve of John Howard, while 57% of them disapprove of Latham with 34% neutral.
7. 70% of Labor voters approve of Latham, while 96% disapprove of Howard.
8. Most important issues in determining votes (using a balanced sample) were the economy (19% overall, but 42% amongst Liberal voters); Truth (10% overall, but 22% amongst Labor voters, and only 6% with Greens); Health (9% overall, but 17% amongst Labor voters, 6% Greens and 4% Liberal); Foreign Affairs (6% overall, but 22% amongst Greens, 8% amongst Labor voters and only 2% with Liberals); Equity (6% overall, but 17% amongst Greens, 8% amongst Labor and 0% Liberal); Education (4% overall, 10% Labor, 6% Greens and 0% Liberal).
9. Largest hesitation about Howard was his succession (10%), but registering most strongly with his supporters (Liberal 20%, National 8% and Other 8%). US alliance was next at a total 5%, but higher than this amongst Greens voters (11%) and Liberal voters (6%).Greens also thought Howard very divisive (11%) even though across the sample only 1% agreed.
10. Latham’s largest hesitation was his lack of experience – 11% across the sample – but a concern shared almost equally by Labor and Liberal respondents – 14% and 13% respectively. 9% were worried about his character, mostly Liberals (12%) and National (17%). 5% of Labor voters were worried about his character, but no Greens. Latham’s aggression was also noted as an issue by 9%, with both Labor and Liberal supporters being higher than this on 9% and 8.5% respectively. 17% of Nationals were concerned about this. A total of 20% combined thought Latham was either too close to the Liberals or too conservative, with 17% of Greens nominating these issues, compared to 20% of Labor voters.
11. Quotable quotes about Howard:
· His distant relationship with the truth as part of a cynical political cunning leaves me feeling very uneasy.
· He puts the private sector and corporate interests ahead of social concerns but denies it.
· His supporting cast: the evil twins Ruddock and Alston (I know Alston is gone, but his influence lingers) the fundamentalist Tony Abbott the smirking Costello and those tough, apparently heartless large women.
· I consider him to be untrustworthy and manipulative.
· Are you for real with this tiny space? It started with Stan Howard and ended with Al Grahib . In short, lies and insincerity, nepotism (see the spam), “mateism”, and, yuk, toadyism. Do I have to spell that out?
12. Quotable quotes about Latham:
· I don’t believe he has changed from his bullying days. He is simply spouting what his his spin doctors and the media of the left tell him.
· From what I have seen he is not the diplomat that a prime minister needs to be – talk now and fix up your mistakes later… Also, he has that union way of always being right.. Remember the payrol tax policy… i’m sorry it is not a new tax it is a new levy….. does not give me much confidence.
· while i admire his control of his so called outbursts i worry that someone who is such a spontaneous personality when kept bottled up and under tight control may go pear shaped and with a bang that will resound for a very long time
· I sense that, like Howard, he is not a very nice person. Whether he is a ruthless and scheming liar like Howard remains unknown. You never know how they drive until they get behind the wheel.
· not sure of his strength of character
· He’s so far to the right that he can often be confused with the Coalition.

ONE of the issues really making an impact in the United States elections (although the polls might not indicate it) is the “outsourcing” of job in areas such as call centres to overseas countries, notably India.
John Kerry has promised to impose taxation penalties on US companies that outsource jobs overseas. I expect the Bush-Cheney Team will have to address the issue before the first Tuesday in November, even though its record is one of supporting outsourcing, and sustaining tax breaks that actually encourage it.
The level of outsourcing in Australia and the US is high, but clearly nowhere near as bad as it is in the United Kingdom. At least one of the appalling managed, privatised train operators in the UK has its call centre in Mumbai, India.
That means if a “Little Old Lady” living somewhere in Cornwall wants to check on the train timetable to London, or the fares, her call is answered in India!
The practice is mushrooming here in Australia. Everyone will have experienced either a telemarketing call from a very Indian sounding gentleman, or lady, telling them about some new product, or new communications option. But it gets worse when you ring a major Australian company seeking information and your call is answered in a foreign country.
The practice is a major source of annoyance to radio “open line” callers. That begs the question – how much damage do these overseas call centres actually cause businesses that use them as a cost saving measure?
But there is an even more important question – how many Australian jobs have been lost, or not created, as a result of the outsourcing overseas of call centres and similar activities?
In the US the answer to that question, according to the Democrats, is hundreds of thousands…and that’s why the issue has gained traction in the Presidential and Congressional campaigns.
The main outsourcing in the US is to India and the Philippines, but there is also some outsourcing to companies in the West Indies, China, and, apparently, Ireland.
The Bush Administration is on very dangerous ground on this issue. The current Treasury Secretary, John Snow, was previously head of a company that closed a factory, costing 325 jobs, and outsourced the work to India and the Philippines. Only last week, Labour Secretary, Elaine Chao said outsourcing created jobs!
George Bush has planned to appoint a particular businessman to head a new office to help the struggling US manufacturing sector, until it was discovered the company he headed had outsourced manufacturing work to China, and closed down a factory in the US when it did so.
The issue may have greater traction in the US for two reasons. Firstly, the US labour market has basically stalled after two years of significant job loss, making unemployment an election issue. Secondly, the US apparently grants tax breaks to companies that actually outsource jobs overseas.
The Australian system may be different in that I suspect the main incentive to outsourcing is the lower cost, through lower wage rates in particular.
Kerry has promised to end the tax breaks that encourage the shipping of US jobs overseas, and give the savings secured to companies that create employment in the US.
This must not be seen as a racial issue at all, even though some talk back callers do so. It must be about providing incentives for Australian companies not to outsource service such as cal centres, and to close any loopholes that encourage it.
It needs to be managed carefully, because some of the countries benefiting from outsourcing are major trading and investment partners with Australia.
But it is an issue that needs to be addressed. Unemployment may be at historic low levels today, but that might not always be so.
The challenge for the major political parties is to come up with policies that reward businesses that create jobs here rather than resorting to outsourcing. If they want to ignore these incentives and continue to outsource, that’s their call.
But we need even a modest incentive to restore some balance.
What I find particularly unacceptable is when Australian owned or based companies move their call centre and other high labour content operations overseas to take advantage of low wages and inferior work place conditions, while keeping other operations here just to gain taxation and other benefits such as preferences for local supplies not widely used by federal, state and local governments.
The issue is not a simple one…but it ought at the very least be on the agenda in our election campaign.

This post is a quick summary of the economics and politics of Latham’s tax and family package.

The Economics

According to today’s papers Latham’s tax policy is an $11 B pitch for battlers which will return an average $8 per week. This will be funded by changes to the superannuation system, slugging smokers and people leaving the country, making sure that big business actually pays its tax, slowing the rate of decrease in selected tariffs, and a “participation dividend” through getting 51,000 off welfare and into work.
My take is that in reality it is a $3.6 B package that extends the Costello tax cuts to the people that Costello neglected – those earning under $52,000 – which also tackles the structural taxation disincentives to those on welfare who might want to return to work – another area Costello neglected. At the same time it makes the family benefit even more generous than at present. This is partially funded by changes to superannuation, slugging smokers, and a tax on consumers who buy cars and clothing. My take is also that it is a reasonable economic package with some minor problems.
The tax cuts are to be applauded, as are the measures to ameliorate the welfare trap for those wanting to return to work. I pointed out last election that if Labor could find ways to put more people into work than the government, then there would be a “participation dividend” although I didn’t call it that, so I am not about to criticise that part of the package.
Superannuation is a rort for the higher paid and a necessity for the lower paid, so paring back the benefits is in my view responsible, although the abolition of the co-contribution scheme, at least in so far as it can be used by lower income earners, is probably not a good idea. Superannuation needs a good over-haul, but that is a task for government, not opposition, so I’ll forgive Mark for tinkering around the edges.
Why do I say it is a $3.6 B programme? For consistency. Costing programs on the basis of the money spent over their projected duration is confusing and makes it difficult to compare promises. Better to use an annualised figure. The total project cost also tends to be used to inflate perceptions of the size of the package. The $11 B headline suggests a revolutionary package when in fact it is a modest one.
There appears to be some fudging in the package. Everyone promises to pay for promises by cracking down on corporate tax, but the estimates of what can be gained are rarely met. I suspect that the savings from the superannuation co-contribution scheme are calculated on the basis of the amount of revenue foregone at the moment but probably don’t take into account substitution effects, such as people redirecting that money into negative gearing or tax effective investments. The slowing down of tariff reductions is also bad policy, and represents a tax on all consumers.
It doesn’t represent a threat to interest rates.

The political objectives

Politicall Latham’s package achieves a few things. He can argue that he is more inclusive than the Prime Minister (and my tentative analysis of our qualitative research suggests voters are negative about Howard because they see him as divisive) because those who missed out on tax cuts in the budget get one. It also looks like a massive program, and can be sold as such, in that case contrasting a “worn out” Howard with a young and aggressive Latham brimming with ideas.
It is targetted at the same families that Howard targetted with the budget family benefits, but appears to give seventy percent of them even more, so it could sway crucial marginal seat votes. True, some families will be worse off, but it would appear that they are the poorer ones, so they are more likely to be in safe Labor seats, so no harm done, even if they did change their vote.
The tariff changes are clever South Australian and Victorian politicking. The workers in these industries will gain a benefit – at the cost of the rest of us – but Latham will probably escape adverse scrutiny from the press who will have many other things to concentrate on.

The political problems

By spruiking a big headline number, Latham risks fuelling the perception that he is dangerous, which plays into Howard’s hands when Howard plays the interest rate bogey. There is also a dissonance between the apparent size of the package and the small benefit that some of us will get – $8 per week. As a talk-back caller said yesterday, if Howard’s tax cuts were a hamburger and milkshake, this one is the same, but with a side order of fries.
Our research suggests that it is best for politicians to “underpromise” in the current climate. The headline figure risks being an “overpromise” and the problem with that is that electors don’t believe that politicians will deliver on big promises. So, the selling of this policy could give Latham credibility problems.
Latham also could have credibility problems on his actual figures, once they are properly analysed. It was a mistake to try and mislead about the $600 child payment. Recent polls suggest that voters see Latham and Howard as being similarly dishonest, gaffes like this will only reinforce that. Latham says the government’s payments aren’t real – tell that to anyone taking them out of an envelope this morning. You can’t say that a policy that has taken you months to craft will benefit 90% of families and then change your story hours later and say it is 70%.
The 70% of families claim is also another rhetorical technique. Say it to yourself and don’t listen too hard. It sounds like 70% of us will be better off, but I don’t think that the definition of family used is that universal. The fact that some people will actually be worse off also gives Latham political problems and undermines his potential argument that Howard is more divisive than him.
There were benefits to Howard in having a longer election campaign. One of those benefits was that Latham would have to introduce his tax policy further away from election day than he would in a shorter campaign. That gives Howard more time to pull the policy down. To date Howard has done a good job on keeping the focus on Labor, without a lot to shoot at. Now that Latham has a policy out, it is going to become the focus of the election campaign for some time.
We will be talking to electors tonight in a focus group about this policy, amongst other things, so it will be interesting to see what they say. My hunch is that it will give Latham a short-term rise so that on balance they will be more positive than negative about it. If that rise were to occur two weeks out from election day, Howard would be in trouble. Four and a half weeks out, he has plenty of time to pull it back. The policy may even end up being a negative for Labor.

I was getting tired, not to mention angry, at all those economists who said that governments don’t make any difference to interest rate levels, so it was a relief to hear Frank Gelber from BIS Shrapnel on ABC Radio news today.
There is no reference to it on the ABC website, so I can’t link and I have to rely on my memory, so forgive me if I’m not 100 percent accurate. What he said was that both parties were promising to spend such large amounts of money that they would fuel unsustainable growth in the economy. This would result in wage push inflation, housing interest rates would hit 10% in 2006, and we would see the housing crash we thought we were having now.
I’m not an uncritical fan of BIS Shrapnel, as I seem to remember them forecasting five of the last three recessions, but on this forecast they are more likely right than not. Low tariffs and floating exchange rates mean wage push inflation is much less likely than in the 70s and 80s, but excess spending always has a reckoning.
The thing is, both sides of politics at the highest levels (although not necessarily that much further down the hierarchy), know that the government spending inherent in the present fiscal settings (and supercharged by the campaign promises of both sides with more to come), will have adverse repercussions, but there is a conspiracy of silence on the issue.
Robert Manne, writing in The Age analyses the ethics of lying. While he concedes that at times it may be O.K. he concludes “There are …no situations in which politicians are entitled to tell blatant lies simply to be re-elected.” In this he fails to understand the real imperatives underlying most political lies. Most politicians lie either because electors expect them to, or because they know that if they do not their opponent will lie about the same issue, and as a result of their truthfulness they will lose to an untruthful opponent.
The issue of interest rates is a good example of this. Most of us know that governments cannot spend ever increasing amounts of money without it having an impact on interest rates amongst other things, but it is a truth we deny to ourselves. We would not thank a politician with our vote, except in times of national crisis, such as 1975, for telling us the truth. So politicians lie to us about economic policies.
Then, having both made that lie, they are bound even more deeply in because, in a version of the prisoner’s dilemma, they know that if they suddenly have an epiphany of truth and recant, their opponent will win. In this situation politicians end up balancing on the one hand their truthfulness against, on the other hand, the awful possibilities of what their opponent being in power might mean for the country. Who is in power may itself have a moral dimension, and lying to attain that end might not only be justifiable to a politician, but in a sense, demanded by the electorate.

I think I’m going to run a series of these. I first applied this phrase to Jenny Macklin in a post over the weekend where she was criticising the government for not implementing a budget promise when in fact they couldn’t because Labor has held the legislation up in the Senate.
Now I’m sure that Howard et al will do their bit to keep the series running, but at the moment it’s Labor that’s making all the fancy moves. Today it was Wayne Swan, criticising the government for it’s second round $600 payment to families with children. According to Swan, some families would get no benefit from it because it would just go to meet their Centrelink debt, (which apparently average $700 per family). Well, that would be because they have already effectively had the benefit wouldn’t it? Apparently Wayne would like them to have the debt, but no payment, but wants to get an extra benefit for himself by criticising both the debt and the payment.

The Liberal Party as the champion of Medicare? It sounds unlikely given decades of opposition to national health since Bill Hayden introduced Medibank, but it is not as unlikely as it looks if you understand the relationship between the medical profession and the Liberal Party.
Today Howard effectively trumped Mark Latham’s announcement of a $179 Million injection into Medicare to boost bulk-billing rates. Well, at least I think he did. Howard’s package is worth $1.8 Billion, but then that’s over 4 years, while I assume that Latham’s is for just one year, but then Latham claims he has a total package worth $3.4 Billion, but I have no idea how many years that runs for. It’s as complicated and mystifying as trying to compare rival telephone company charge schedules, and it’s meant to be – in the end you just have to put your trust with one or the other and go with them.
Where I think Howard wins is that his policy covers 100% of the cost of a doctor’s visit (in the unlikely event your doctor charges the scheduled fee that is), and this sounds like a better headline promise than Latham’s vaguer aspiration to take bulk-billing cover back to 85% (which it only briefly hit for only a short moment in its entire history, and that was under Hawke and Keating).
The Liberal Policy effectively marks a complete reversal in policy which has taken about 30 years.
This demonstrates a few things. First, there is a good reason why medicos are about the only professionals who as a group overwhelmingly and reflexively support the Coalition – their’s is the only union that is unconditionally supported by the Liberal Party.
Doctors have come to appreciate the steady cashflow of nationalised medicine and the lack of competitive pressure in how it is doled out. Original Liberal Party opposition to the then Medibank was driven as much by the doctors’ lobby as voters. Now the lobby has changed its mind, the party has been able to align its position with the majority of voters who have always liked Medicare.
Second it shows that in these post-ideological times, elections have become auctions where the prices bid for votes by both sets of bidders tend to converge. Elections are no longer about persuasion but purchase. Howard has analysts like his pollster Mark Textor who are better than Labor’s when it comes to negotiating the purchase price of votes. They analyse exactly who the key demographics are that they need and how much they have to pay them for their vote. That’s why Howard’s in with a good chance this election when after eight years he should be on the verge of being traded-in. As a measure of that skill, the second lot of $600 payments per child is going out to families at the moment.
Not that the country wins under either of the parties’ scenarios. Four Corners carried a story of variable quality on medical fraud. (Fullerton and her producers really need to take a short course on statistics because they obviously don’t understand the implications of medians and means). It suggested that perhaps 10% of Australia’s $20 B health budget disappears in “inappropriate practice” and fraud (not sure what the real difference is between the two but it seems to have something to do with dosage). This doesn’t include the large percentage who over-service because it is safer to do that than risked being sued when things go wrong for not having ordered every possible test. Or the doctors who, for example, prescribe anti-biotics to treat colds even though they will do no good, just because the patient pressures them.
Whether or not that is the correct figure, it certainly demonstrates that doctors are human and that some will exaggerate claims to increase their income.
The best curb on over-charging is through customers who have an interest in not being over-serviced because they are paying at least some of the bill. With their open-ended attitude to health, both Labor and the Coalition are encouraging higher health costs. Worse still, with an aging population it is likely they are institutionalising them. Sooner or later that will have an effect on the economy, including, yes, interest rates. But neither Howard nor Latham cares, as long as they get into the Lodge.
While governments and oppositions will take on some lobbies fairly easily doctors aren’t one. The doctor’s lobby may not always tell the exact truth, but when it comes to public opinion polls, they are one of the professions in which electors have a high degree of trust. What they are prescribing may not be in our collective interests, but as Howard would tell you, when it’s a question of the truth, who would you trust?