There’s less water than there used to be, because of global warming, so to make up the shortfall we build desalination plants, which are the most energy intensive way of harvesting water, leading to more greenhouse gases, leading to less water, leading to more desal plants. You can dispute the truth of the initial syllogism, but the Labor Party doesn’t, which is why they are promising to build up to $10 Billion more of desal plants.
I’ll agree with the Greens on this – it doesn’t make any sense.
But then, if the Greens didn’t kick-up a demonstration every time someone proposed a solar desalination plant, aka dam, then we wouldn’t need coal-fired desal at all.
Of course, there’s more. The policy isn’t really to build $10B of plants. It’s to hand out tax deductions or grants to the value of 10%, and to a maximum figure of $1B. So, the opposition figure is inflated. Many of these plants would have gone ahead anyway, so the $1B mostly represents a transfer from one set of tax payers to another with much the same number of plants being constructed. In fact, the policy will have no effect on overall water harvesting – it is hard to think of a commodity where the demand is more inelastic than water! (Go without beer? Yep. Go without water? Not while my tail points to the ground, thank-you very much.) But it might shift it away from more sustainable solutions like dams and domestic water tanks.
That’s of course if it’s actually worth anyone’s while to take-up the subsidy.
Kevin Rudd says that he won’t fund any projects that aren’t “carbon neutral”, meaning that plants will have to buy carbon credits. Putting aside the issue of how real carbon credits are, this will raise the costs of operating these plants substantially. I don’t have the information to do the sums (perhaps a reader does), but I’d be prepared to bet that the increase in running costs, given that energy is the biggest input into desalination (you get the water for free), will eat-up all the subsidy, and then some. This is potentially a very cheap promise for Rudd – no-one will take the money if it ends up making their projects more expensive – so he’ll be able to spend it on something else after the next budget, while getting the benefit from the announcement effect.
There’s another angle to this as well. Note the word “tax credit” and that it precedes “grants”. The expectation of the ALP appears to be that more of these projects will be private rather than public. Water is one of the few areas where most, if not all, provision at this level ought to be via government. If there is profit to be made in water reticulation it should stay in the public domain. The commercial risk is not significant enough to warrant private sector ownership, although commercial management agreements are another matter.
It’s a sign of how shallow the MSM coverage is of the substance of this campaign that the greenhouse issue that they’re all concentrating on this morning is Labor’s policy muddle yesterday about Kyoto, while there’s no analysis of this one at all.
This criticism doesn’t just extend to the opposition’s policies. Both major parties are playing us for mugs on greenhouse issues. They don’t intend to do anything that would make a real difference, because that could cost them the election.
BTW, following on from my comments yesterday, has anyone else noticed that Macolm Turnbull isn’t Malcolm in the middle at all anymore – he seems to have been plucked right out of the Kyoto debate? This morning on Fran Kelly it was Alexander Downer who was arguing the government’s case, yesterday it was John Howard.

It’s hard to believe that in the course of only three years the federal Liberal party could have gone from being some of the best campaigners the country has seen to the butter-fingered, fumbling no-hopers that they appear at the moment.
Interest rates and Kyoto illustrate this well.
The interest rate promise was that rates would always be lower under a coalition government than under Labor. It was never that rates will never rise under a Coalition government. This should have been a no lose promise, because it’s not one you can break. There is no way to compare Labor and the Coalition over the same period of time, so no way you can be wrong.
Yet Howard has been on the back-foot over interest rates since the leaders debate. He had an opportunity to ridicule Rudd over the issue during the debate, and didn’t take it. If the Labor leader seriously thinks that rates don’t of necessity fluctuate, then he’s as serious a risk to the economy as Howard makes out. Even at their current levels, interest rates are lower than they have been since the 60s.
The fact that he didn’t come out on the front foot suggests that either he feels guilty, or more likely, that no-one is doing a good job of anticipating the other side.
On Kyoto the Liberals have refused to ratify the treaty on the basis that it is mere ineffective symbolism. So you would have thought that they would have jumped on an article in the latest edition of Nature which not only agrees, but suggests the correct solution is to get the 20 largest polluters together to make an agreement, and to spend money on research and development – all Coalition initiatives that have been ridiculed by Labor. Yet they didn’t. Sunday’s papers made it clear why – Environment Minister Turnbull isn’t playing a team game and actually wants to ratify Kyoto.
There’s no way I can see the Liberal Party winning from here, and no way they deserve to, judged on their campaign. Climate change is the biggest issue this election for swingers, and interest rates has got to be climbing in the ratings as well. How can they not have their story straight on these issues.
All of which raises the question: If they can’t prosecute a competent campaign for government when they are the government, and have been doing it pretty well for 11 years, what sort of an opposition are they going to make?

The Labor Party has shot so many ads, that now they are running ALP TV. Their latest ad features a scare campaign on Global Warming, and I’ve already seen it a number of times on terrestrial TV.
But where is the Liberal counterattack, on this or any other matter? Since the early blitz on the Labor union link, there’s been virtually nothing. There is a good ad that hit the airwaves on Monday on their copy-cat tax policy but I’ve yet to see it anywhere but the Internet.
The Liberal campaign is virtually relying on big policy announcements, like tax and seniors ones, to carry the full weight of the campaign – that’s just not going to work.
This parallels my experience in the last few Queensland elections. The Coalition campaign starts well-behind with a low expectation that it will win. It then comes out with a bang and some negative ads are thrown around, mixed with a sprinkling of positive ones, and some policy announcements. Then it all dribbles away and you start to hear the stories that the campaign is running low on resources.
The strategy appears to be that you won’t get donations unless donors think you are competitive, but it’s hard to get money if you’re not competitive, so you start with a bang hoping that it will get you within striking distance of the Labor party. It doesn’t and you end up limping into the last weeks of the campaign in an even worse position than you started.
It’s starting to look like the Federal Liberals are in that position too. No wonder they stuck with the ineffective publicly-funded ads as long as they could – they weren’t really suited to their purpose, but obviously judged better than nothing.
In the meantime the ALP uses its huge archive of advertisements as “a handy reminder of just how long Kevin Rudd and Labor have been campaigning on the issues important to Australia’s future…like climate change, education and a fair and balanced IR system.” What it reminds me of is that the Labor Party is the best-funded political party in the country, and advertising dollars buy votes.
It’s the disparity in campaign spend over the last 12 months, starting with the Union campaign, that explains why Howard is so far behind in the polls despite the fact that electors are mostly happy with the job that he’s done.

I think Kevin Rudd won the debate tonight. Apparently the worm, which Channel Nine managed to save from extinction, thought so. But after 2001 when the worm gave the debate to Kim Beazley, but John Howard ended up winning the election, I’ve lost a little faith in its predictive abilities.
Why do I think that Kevin Rudd won? (Am I catching the habit from him of interrogating myself?) Largely it was presentational. And if this election is about anything at the moment it is about presentation, and symbolism. Rudd looked younger and more energetic, and while I felt like wiping that annoyingly superior smirk off his face, at least he didn’t lose his cool.
Howard looked angry and cornered. His eyes at times darted about in a slightly crazed way. It reminded me of footage of him addressing the crowd at the Aboriginal conference on reconciliation early in his term – the one where some of the audience turned their backs.
They both avoided answering questions, and there was more than a little confected outrage, although Howard’s anger looked real enough.
In the end it was similar to Nixon versus Kennedy, although Howard is a joey scout compared to Nixon, and Rudd doesn’t have the turn of phrase of Kennedy. I could analyse the arguments, but that’s not how most voters will recall this encounter. We only retain a fraction of what we hear, compared to what we see. Rudd’s tie (which seemed to follow the jesting advice from Radio National to use every colour from blue, through yellow to pink, which might pitch to females) probably spoke more loudly than anything he said.
There was no knock-out punch, although Howard seemed to cement his position as a loser, and now the election campaign can be put back in the hands of the advertising men and spin doctors. That’s the best result that Howard could hope for, based on tonight’s performance. I had thought that he would do better than Rudd, and that it might be in his interests to have more than one debate, but that’s not going to happen now.
And you’d have to wonder what it is that they might debate anyway, seeing there is so little difference between what either of them is promising. Rudd’s entire strategy appears to be to convince voters that while they’re still working out whether they love him, at least none of them loathe him, and that’s his edge. Bulgaria just passed a law punishing vote-buying with up to three years in jail. That’s all our elections involve these days. They’re an auction in which both parties try to assemble coalitions of interests by giving them a little bit of what they want. The party with the slightly biggest coalition while still managing to keep its budget intact wins. They’re not about policy anymore.

It was supposed to be Kevin Rudd who would be “playing with the Prime Minister’s mind”, but it seems like the PM is doing some tinkering of his own. Yesterday’s Liberal ad targets Kevin Rudd’s positive attack ad, targetting the Liberals’ negative attack ad, with a school masterly attack on Rudd by the PM which mirrors and mocks Rudd’s own attack ad. (If this is confusing sometimes you just need to watch the real thing, so just click on the link).
To understand what is happening here you should also read my blog post of the 29th January, a quick summary of which is my suspicion that Kevin Rudd was bullied at Marist Brothers Ashgrove to the extent where he moved schools, and that he has still not gotten over it.
I remember being regularly bulied at Villanova – the Brisbane southside equivalent of Marist Brothers Ashgrove – so I can empathise with Kevin. It was hard being one of the smart kids with all the answers who wasn’t much good at football but who played one of the leads in the school musical. However, I haven’t airbrushed the school from my CV. In fact, every now and then I go back to the Old Boys Dinner, because I’ve got some affection for the place. Yet you could be forgiven for believing that Rudd never went to Marist Brothers, from all the mention of it he makes.
My take on the Rudd psychology is that he’s never learnt to deal with whatever it was that happened at Marist Brothers. It looks like someone in the Liberal campaign team agrees with that analysis.
That interpretation is bolstered by the fact that when big sister Julia Gillard was sent in to defend Kevin, she described Howard’s ad as “…something you would expect a primary school student to say in a playground spat.”
Which raises the question as to why Rudd didn’t defend himself. Howard believes that Rudd has a glass jaw, and he’s trying to hit it. Did he succeed?
The choice of Gillard as the defender is also interesting. She’s generally unpopular in the electorate, but if she has a constituency, it is most likely women between 25 and 39, one of the key swing groups, and one that is most likely to react poorly to the little blonde kid being snotted by the school yard bully.
Just as Howard won a last minute swing from Mark Latham’s physical monstering of him via an aggressive handshake in a broadcast studio, Howard runs the risk that this masculine tactic will win Rudd a sympathy vote.
The government’s answer to this risk is presumably that it is a hard world out there, and if you are going to look after Australia’s interests effectively you need to be able to muscle up to some pretty nasty players. Speech night displays of school boy Mandarin to curry favour will only take you so far. You can’t expect big sister to bail you out in real life.
All of which sets up an interesting dynamic for the leaders debate this Sunday. If Howard’s hit the mark, then expect Rudd to extend the shaky start evident in the stiffness of his speech on the announcement of the election. But it’s equally likely that Rudd could throw down the gauntlet to the PM – if you’re so tough, how about a few more debates? It’s not clear to me at this stage who’s the more effective bully.

The latest ALP attack ad is cute – it’s the “wounded innocence” approach. John Howard opened his campaign with some negative advertising hanging L plates around Kevin Rudd’s neck. Rudd responds with an ad which opens with Howard’s ad and then cuts out to show Rudd saying “Mr Howard always resorts to negative scare campaigns…it’s a sign of a government that’s just lost touch. Australia needs fresh ideas. I have a positive plan for our country’s future. An education revolution, for hospitals, for climate change, for water, and for a fair and balanced work place. Keeping our economy strong, or making sure it also delivers for Australian working families.”

Both the Howard ad and the Rudd ad are reasonably predictable (although the Rudd ad is clearly superior). In truth, they’re both negative ads, even though one’s brooding and dark and the other flooded with light. But the Rudd ad says that it is positive, and it looks positive, which makes the negatives even more effective. What this ad says is “Don’t vote for the government because they’re stale and don’t have any fresh ideas to counter climate change, fight the drought, fix our hospitals and educate our kids. Oh, and by the way, don’t forget Work Choices”.
The last phrase is ambiguous, almost as though Rudd is trying to have it both ways. Read one way it contrasts a “strong” economy (that’s what Howard is promising) with one that delivers “for Australian working families” (there’s the Fingerhut phrase again). You have to read it this way because of the preposition “or” stuck in the middle. But for this reading to make sense the sentence should have finished with a question mark, as in “What do you want, strong economy or one that delivers?”. Instead Rudd inflects his voice down – it’s a statement. And a statement that functions as the summary for his dot point fresh ideas. So Rudd’s plan gives us both a strong economy, and one that delivers, at the same time that it says you want an economy that delivers rather than one that is strong. Wouldn’t want to alienate anyone in a focus group.
The “positive policies for change” approach of Rudd first made its appearance to my knowledge in Wayne Goss’s 1989 Queensland state election campaign – one of the most relentlessly, but cheerfully, negative that I had seen at that stage. Like this ad the campaign featured meaningless slogans that more often than not were incapable of being realised as policy outcomes, but there were always five of them, and they slipped easily off the tongue.The Coalition never worked out how to deal with it, and they still haven’t, even though it’s been obvious for some time that this is how Rudd was going to run, given that he and most of his high level advisors cut their teeth in Queensland at this time.
In contrast, Rudd’s worked out how to deal with the Coalition campaigns. In fact, the predictable nature of the Coalition’s advertising underlines the fact that they are in fact stale and in need of “fresh ideas”. They’ve got 5 weeks to come up with some new ideas, or they’re history.

If you pick on someone for being ignorant, it’s a good idea to know what you’re talking about yourself. Wayne Swan broke that rule when he tried to capitalise on John Howard’s gaffe when Howard failed to accurately name the official cash rate. This brought him even with Kevin Rudd, who a few weeks ago couldn’t get the tax thresholds right.
I don’t think these minor factual errors are really that significant. Afterall, the man who knew the answer to every question, Pick-a-box King Barry Jones was a woeful politician.
What I do care about is that politicians understand the principles of how things work, which is where Swan came undone. His response, as quoted on ABC Online was:

“I think a lot of Australian working families with mortgages out there would be shocked to find out that this Prime Minister is simply unaware of their mortgage interest burden,” he said.
“The difference involved here between Mr Howard’s answer and the rate of 6.5 per cent is $600 a year.”

The only problem with that is that whether the cash rate is 6.25% of 6.5% has only a marginal bearing on mortgage rates. What is much more important is competition between lenders both to lend, and for money to lend. In the short-term the collapse in the low-doc loans market in the US is what is primarily dictating mortgage rates.
I’m also wondering how he arrived at his $600 figure. It implies that he is talking about a mortgage of $240,000, but who has that mortgage? Is it the average new mortgage? Is it the average mortgage? Or did he just pull it out of thin air because it sounded good? Perhaps a reader might be able to help out with a link. Note: I’ve managed to track down the average mortgage, and at $239,000 it’s close enough to Swan’s figure, so I’ll retract that part of the post.
I’d be more worried about Swan’s graps of the detail than the PM’s 0.25% gaffe.

The announcement today by the government of lowered direct tax rates stymies any more “Howard lite”pitches by Kevin Rudd. By locking increased revenue into tax cuts the government makes it a clear choice for Labor – you can either back us on tax cuts and give up some of your positions on health, education and infrastructure, or you can admit you’ll need to increased the tax take. Suddenly being a “fiscal conservative” has hooks in it.
This was a reasonably predictable move by the government, but it’s taken Rudd Labor by surprise. I more or less predicted something like this in this blog post when I said:

But it makes you wonder whether some dramatic tax announcements from Howard as he announces the poll couldn’t similarly change the dynamic here. Voters are volatile. It’s still possible (although unlikely) for Howard to do well.””

My good friend Henry Thornton was saying similar things.
One of the aspects of the faux campaign that has puzzled me is that the government has not trumpeted its achievements in lowering direct tax. I can remember when the average tradesman who did overtime gave more than half of it back in tax to the Treasury. Now for most it is no more than 30%. That’s a hell of an inducement to do overtime, and it takes a lot of the inflationary pressure out of notionally full employment.
Putting most Australians in reach of a 30% flat rate of tax has been a longterm goal of the government and was an implicit reason for the introduction of the GST. No doubt Labor will be saying this is another back of the envelope, spur of the moment decision, but in fact it’s been 11 years in gestation.
In fact, longer than that. I remember in the early 80s reading the results of the Asprey committee of inquiry into flat taxation. From memory they recommended a scheme where there was negative tax at the lower levels and positive tax at the higher levels, but the nominal rate was set around 30%. That’s now virtually the situation, 30 years later, that we are seeing under Howard. He’s followed it through all this time.
Kevin Rudd says this election is about the future. What’s his vision for where Australia will be in 30 years?
Other criticism has also been fairly predictable. Some of the same market economists who could be virtually relied upon to say that government make no difference to interest rates are now saying that this policy is inflationary and hence will put upward pressure on interest rates. Of course they’re wrong on both counts. It’s excess credit creation that puts pressure on interest rates. Shifting spending from government to private sector won’t necessarily change the balance at all, but individuals will get to choose whether their money gets spent on education, health, infrastructure, rent or food – surely a laudable policy aim.

I’ve just been trawling news sites and The Australian links to this ad, obviously evidence of how positive Kevin Rudd’s campaign is going to be:

So, whose record is better on interest rates?
The graph below of 90 bank bill rates, taken from data on the RBA site puts it in perspective.

You can see the very dramatic peak under Gough Whitlam in 1974, followed by the peak in 1982 under Howard. You can then see two more humps, almost as high, which occurred under Keating. From December 1993 things have been relatively steady.
So why are people convinced that interest rates are always higher under Labor? Principally because the trouble was caused in the first case by Gough Whitlam’s irresponsible economic management, which was amplified by the oil shocks. Fraser spent most of his term wrestling with the aftermath. 1982 can hardly be blamed on Howard, as apart from the Whitlam legacy, he became treasurer about the same time the rates were peaking.
Things should have settled down after 1983, which was the worst recession since the Great Depression, but Keating kept pressing the pedal to the metal, which resulted in over-heating every time. The independence of the Reserve Bank, guaranteed under the Howard Government, makes this behaviour and miscalculation less likely – witness the increases in interest rates over the last period while the government is running into an election.
Should Howard get the credit for current low interest rates? Mostly. To his credit he has let the RBA set rates against his political preference and budgets have been in surplus. Some people think that governments have no effect on interest rates, which they think are entirely set by the market. This would be true if governments weren’t the biggest actors in the economy, but as they are, they influence the market just by their activities and do bear some share of the responsibility when rates go up, and when they come down. They are certainly the only participant who tends to act with a significant intent to influence rates, which is the reason why the RBA sometimes offers advice to governments about fiscal policy!
Will Rudd be bad for interest rates? It all depends. He has some able lieutenants in Tanner and Emmerson who should act to keep spending in check, but the behaviour of state Labor governments gives reason for concern. State governments have tended to bloat budgets, but are limited in their ability to do this because of their limited access to “growth taxes”. The Commonwealth has plenty of taxing powers and growth, so if the same path is followed federally as has been followed in the states, watch out.

Queensland Premier Anna Bligh has scored well in her debut as campaigner-in-chief in the Brisbane Central by-election. The ALP has scored 50.06% of the vote to date, which compares with 50.48% last time. This probably means that there was virtually no swing against the government.
Why? It might be attributable to Bligh’s honeymoon. If it is, then that indicates that the poor government of Queensland has ceased to be an issue for the time-being, which won’t help John Howard retain seats here.
It’s also not encouraging for the Queensland Greens. They should be disappointed with their result. At 33.96% it is almost double their figure at the general election, but as their candidate, small businesswoman Anna Bocabella, would have attracted many Liberal voters, in the absence of a Liberal candidate, it probably indicates no change in their vote, or a small decrease.