Tax: the best form of defence

The Coalition has today adopted a shock-and-awe tactic to kick-start its election campaign: promised income tax cuts to cost $34 billion over three years, accompanied by aspirational talk of an Australia in which 98 per cent pay a marginal tax rate of 35 per cent or less. I won’t presume to discuss the promise’s target market at this point, but it should be noted that tax cuts at the past two budgets produced largely disappointing returns in the opinion polls (although the more recent round can be credited with a slight narrowing in Labor’s lead in August and September). Nonetheless, the announcement will fill the news bulletins with images of Peter Costello in his element, whereas Kevin Rudd will be forced to discuss those tax scales he couldn’t name a few weeks ago.

Centre-left economist John Quiggin makes the following observation on the troubled history of election tax cut promises:

I can recall (perhaps with error) at least two instances of such cuts being promised and then taken back. One was Paul Keating’s L-A-W tax cuts in 1993, which (as implied) were actually legislated in an attempt to increase their credibility. The other was the “Fistful of Dollars” tax cut of 1977 (so named for the ads which showed precisely that) promised by the Fraser-Lynch team going into the election and then (if my fading memory serves) taken back by Lynch’s newly-appointed replacement. Now what was his name again?

Author: William Bowe

William Bowe is a Perth-based election analyst and occasional teacher of political science. His blog, The Poll Bludger, has existed in one form or another since 2004, and is one of the most heavily trafficked websites on Australian politics.

409 comments on “Tax: the best form of defence”

Comments Page 6 of 9
1 5 6 7 9
  1. ESJ at 241,

    I CPI comes out on the high side, the RBA would be in the bind where to not raise rates would be seen to be playing politics (i.e. favouring the political interests of the coalition in the face of overwhelming evidence to raise rates), and raising rates would be seen to be playing politics.

    So what to do? – what Stevens was always going to do; ignore politics and raise rates if it’s necessary. If you are going to be seen to be playing politics regardless of what you do, you may as well look after the national interests and fulfill your charter in the process.

  2. [Delude yourself about today but JWH clearly will go down fighting.]

    As long as he goes down I’m happy to let him have his choice regarding method.

  3. [ShowsOn, Because the RBA was petrified of appearing to intervene in politics in 2004 (when it was all about interest rates and they felt the ads were very misleading) why would they not wait a month to raise rates.]

    If the coalition win, but they wait until December to increase rates, then people will think they didn’t increase rates during the campaign to help the coalition win.

    If Labor win, and they increase rates in December (but not November) then that could be construed as a political intervention of opposing a new Labor government.

    So either way they are still making a political intervention of sorts that could be seen as favouring one side or the other.

    If they try to avoid this by waiting until next year to raise rates, even though it was required in November or December, then they would face claims of being incompetent for failing to do what they should’ve done in November.

    If the inflation figure next Wednesday shows an increase of say 0.8%, and they raise rates on November 7, then people will just see that as the RBA doing what it’s paid for.

  4. Possum,

    High on the agenda will be a Possum sterilisation program. All those ladies in the outer suburbs having their roses eaten by your friends.

    Could be a big vote puller

  5. As much as it loathes me to do so I have to agree with Edward on interest rates. It would be extraordinary for the Reserve Bank to raise interest rates in November. What is the over-riding issue which would force them to go in November instead of waiting until December? Interest rates are falling all over the world. Waiting until December would be the smart thing to do rather than forever politicising the Reserve Bank’s image. We’re only talking about a 4 week wait.

    Some of you guys really seem to want an interest rate rise. Isn’t a 12 point lead in the polls enough?

  6. The RBA may also want to wait until they get a better idea of what is happening with the US markets before rising rates. I predict no change in November, but if inflation figures are bad they will rise in December.

    I’m fine with Labor winning a minority government even. Just as long as they win. Don’t stuff it up Kevin. Now’s the time to leave Howard in your dust… please!

  7. Kina, I actually think Labor has an excellent retort to Howard’s promise to lower unemployment, and should use it as much as they can. The answer relates to the skills shortage.

    Rudd could have said that a Labor Government would keep lowering unemployment by training Australians to fill the job vacancies. We don’t have enough plumpers, engineers, teachers, nurses, doctors, accountants…you name it, we don’t have enough. Labor can say: The mining booms has created the jobs – Howard has created the job vacancies!

    Unemployment is not a problem for Australia (or for most of the western world, actually). The problem is skills shortages. It’s forcing up wages, reducing productivity, damaging health and education. The small percentage of Australians still unemployed are in that situation because they’re ill-equipped to fill the vacancies. Howard’s solution is to hire from overseas(cf Dr Haneef). I don’t have a problem with skilled migrants (or refugees, for that matter), but with an economy as strong as ours, no Australian-born person who wants a job should have to be on the dole, because the government won’t fund his/her education and/or re-training.

    That’s why I was disappointed that Rudd just bagged Howard on jobs, without using the opportunity to link it to education and training.

  8. Wow, a lot of ALP supporters here tonight on E!! You know you are supposed to wear your rose coloured glasses on LSD, not E? 🙂

    I saw every news and current affairs program tonight, with the exception of Today Tonight (If I hear one more Telstra story I will do a duodenal reach!). Whilst Howard did appear crotchety and was miffed by Grimshaw’s pop quiz (she is a first rate reporter and should do more), Rudd needs to watch himself:

    1. His non-verbals are getting annoying now. Even to diehards blogging here with their Kevin07 T-shirts. The fingers, the thumb over the shoulder, could be dangerously seen as contrived by Joe Punter.

    2. His sets his own traps and falls into them. Asked by Kochie this morning whether his campaign would contain elements of negative. More rhetoric about his plan and straight into negatives about Howard. Kochie missed an opportunity not to dredge the “22 percent history ad” up, aired on Channel 9 three weeks ago right after Gillard on Sunday is warning of the current “mother of all negative Liberal campaigns”. This just appears ingenuous.

    3. The glass-jaw accusation is gaining traction. Each time there is a gaffe, he publicly admits to “disciplining” or “counselling” nameless “staff”. False Dawn, McClelland and now tonight’s hospitals admission (7:30 report “there have been cases of State mismanagement”) are three clear cases. Apparently, the public sees that the buck stops where the gaffe can be safely disposed of (nameless “staffers” or unnamed Labor governments. Beazley was not known for this as much.

    The problem with Rudd’s “dusk to dawn” airtime is that people could get REALLY sick of him quickly and feel like they’ve seen “all the tricks”.

  9. Unable to respect Australian democratic ‘values’ and not interested in assimilating with mainstream culture.

    Does this mean Kevin Andrews will attempt to deport the Brethren?

  10. So when do we expect the first election period poll to be out? I assume someone like YouGov will want to make a name for themselves by getting the first one in? Or will it be Morgan this Friday?

  11. How much has Howard spent in commitments and promises so far tis election? To my reckoning, it’s up towards the $50 billion mark with the tax announcement. I guess he’s not running on a low spending agenda. Hopefully (candle in the wind time) people will realise that the extra $40 or so in the pay packet won’t save your grandmother from receiving treatment in a hospital store room, won’t reduce the debt kids leave universities with, won’t cure otitus media in one Aboriginal kid and, importantly, won’t make any real difference to their lives.

  12. [ not interested in assimilating with mainstream culture. ]


    I think Kevin Andrews would argue that providing financial support to the Liberal Part is the very best type of assimilation and is worth points on the Citizenship test.

  13. Doesn’t matter whether interest rates rise in November or not. People may still have an expectation that they’re still trending upwards. And $15 in the hand in 2009 won’t compensate for it.

    I agree with Possum that an infrastructure fund is gathering momentum behind the scenes. There’ll certainly be money for ports, and any roads and rail needed to get the iron ore and coal offshore faster. The east coast highway system will get more money (should have happened years ago, though), as will the Melbourne-Brisbane inland rail land, that delivers pork to a string of Nat electorates.

    But don’t hold your breath waiting for more coalition money on health and education. The coalition will just keep bagging the states. It doesn’t seem to recognise health and education (or broadband) as infrastructure, because they don’t run on diesel.

  14. Antonio @ 257:
    I also think the issue of under-employment is a real issue. You only have to work one hour in the last fortnight to be employed. If we used the same interpretations of data re unemployment as is used in Germany, the rate would be closer to 9% than it is to 4% here. The Howard gaffe just made lateline (he he). Both the Australian and Geman counts, by the way, meet ILO standards. Maybe its not much of a standard.

  15. The furphy that the public seems to buy: – “But if we don’t keep the budget $700 katrillion dollars in surplus, are we no longer putting downward pressure on interest rates?” will Labor attempt to lay claim that these tax cuts could be inflationary?

    It’s a ridiculous misnomer that the public has bought that somehow fiscal balance is the number one determinant to inflation (has inflation got nothing to do with wage increases in comparison with productivity, supply constraints (cue skills shortage) and a whole host of international factors.) Unfortunately as Oscar Wilde aptly noted “The pure and simple truth is rarely pure and never simple,” and a lot of people always go for the simplistic explanation, and furphies like this are allowed to proliferate.

  16. [ What is the over-riding issue which would force them to go in November instead of waiting until December?]


    According to the RBA’s charter, it must keep inflation between 2 – 3%. This maximises growth, and minimises the chance of unemployment.

    In the last quarter – March to June – inflation was 1.2%. Multiply that by 4 = 4.8% for the year from March this year to March next year, if the quarterly rate remains unchanged.

    The RBA wants to see a sign that inflation is substantially lower than the 1.2% last quarter. Howard and Costello are hoping it is under 0.6%

    The closer it is to 1% the greater the chance of an interest rate rise on November 7th.

  17. The mining boom has created the jobs. Howard has created the job vacancies.

    Under-employment is indeed an issue. The same reason – people who want more work don’t have the skills to do the work that’s available. And there are plenty of people who’d happily do less work, if there was someone waiting to take it from them.

  18. “That’s why I was disappointed that Rudd just bagged Howard on jobs, without using the opportunity to link it to education and training.”

    That will no doubt be the narrative they are working no doubt along with their existing and planned policies.

    I do agree that Rudd needs to avoid over-exposure [and needs some new manerisms]. Gillard, Smith and the Finance shadow all present a good presence and change. Rudd should use them more. But then again maybe he is – I don’t ‘see’ much of the tv or radio.

  19. The RBA runs on a 6-24 month horizon.If its time to pull the trigger, you damn well pull the trigger whether its up or down. Quite frankly, and this is the economist coming out in me, politics can get stuffed.16 years of growth hasnt been delivered by nanny state governments pulling their delusional levers of any persuasion, it’s been delivered by a well functioning, forward looking inflation targeting regime exercised without fear or favour by an independent RBA chairman.

    There’s a reason the RBA goes when it needs to, because inflation is inertial.If they wait one month they politicise their function, so they have to wait 3 months to be seen not to politicise it, but a 3 month wait can be the difference of an inflation rate of 3.2 and an inflation rate of 4.

    A rate of 4 will need higher cash rates to bring down than 3 – so why should mortgage holders (or any debt users) be burdened twice simply because the RBA didnt want to play politics (but ended up doing so anyway)?

  20. [Now’s the time to leave Howard in your dust… please!]

    Are you expecting a knock out blow? I think it is going to be a slow grind of a campaign

  21. [The furphy that the public seems to buy: – “But if we don’t keep the budget $700 katrillion dollars in surplus, are we no longer putting downward pressure on interest rates?”]

    The government CLAIMED you need a massive surplus to keep downward pressure on interest rates, until….

    TODAY! Magically now you only need the surplus to be 1% of GDP. All the rest you can hand out as “non-interest rate presuring tax cutsTM”.

  22. Howard is a stubborn old bugger, he won’t go quietly(and Janette doesn’t want to give up her plum mansion on Sydney Harbour) – this will be a long, hard slow grind for Labor to blast him out.

  23. The high dollar will help the government contain inflation in the current quarter, because of cheap imports. It takes the edge off the record oil prices, and make stuff in the $2 shops even cheaper. In the long run, though, it hurts our manufacturers, our farmers and tourism in a big way. But that impact won’t really start to be felt till after the election….

  24. An observation from a simple person.

    JWH looks agitated, impatient and testy. In fact his final reactions to Grimshaw & O’Brien were contemptuous and angry.

    Rudd looks relaxed, confident and almost smarmy. I thought he was about to lash out into a jig.

    What does that tell you? Forget the public polls and consider the private party polling.

    Finally why has the tax shot been fired from the election locker on the first day, even before the writ has been issued?

    I’d like to see $34 billion over 3 years spent on securing Australia’s water supply rather than a paltry $10 billion over 10 years.


  25. Goodnes gracious me! You are all in fine form tonight. Had to see a man about a dog after watching Four Corners. Made the flesh creep.

    ESJ: If you are an historian, I trust that you pay due regard to facts. History is not written by BMW drivers, real history is written by people. And so to bed.

  26. [JWH looks agitated, impatient and testy. In fact his final reactions to Grimshaw & O’Brien were contemptuous and angry.]

    Yeah, he couldn’t get away from the ACA set fast enough! His minders need to tell him “at the end of interviews, smile, and count to 5 before getting up to go”.

    [Finally why has the tax shot been fired from the election locker on the first day, even before the writ has been issued?]

    The fact it was so early will make some people think “yeah, yeah, sure, sure… must be election time!”

  27. Gaynor, did you enjoy your Sunday roast? I’m still eating the left-overs from my Saturday night roast.

    I agree that the tax policy was released now because it’s the coalition’s main policy, and they need something to get voters changing their minds ASAP.

    And I reckon we’ll hear plenty about water from both parties. A real plan to secure water for both regional Australia and capital cities could win the election on its own.

  28. All that matters about the current Tax Cut event is how it gets presented to its audience and how they view it.

    It is designed to create a jolt, a big headline a significant event to shake lose some tentative Labor supporters. It is not only the money but the image of a ‘successful’ PM being a good PM.

    Its impact has to come today’s TV and tomorrow morning’s TV before the news cycle moves on – and to a lesser exten the papers.

    It should work I imagine to some extent – if it doesn’t well – they are well and truly ****ed. AND if does work will it stick?

  29. Possum, you are right. The car and car parts industries and food processing are good examples. And tourism gets the double whammy…fewer tourists coming here cos it’s getting too expensive, and more Australians holidyaing overseas instead of at home.

  30. What’s the odds of Morgan conducting a poll over the next couple of days to test the response to the Howard/Costello announcement?

  31. Interesting conversation Philip is having with Chalmers Johnson, author of ‘Nemesis The Last Days of the American Republic’, about the overreach militarily of the USA and his analysis of how this may result in the total loss off democracy in the USA.

    ‘Hubris and Nemesis
    Managers tend to make their biggest mistakes in things they’ve previously done best. In business, as elsewhere, hubris is the unforgivable sin of acting cocky when things are going well. As the Greeks tiresomely told us, Hubris is followed inexorably and inevitably by Nemesis’.
    Robert Townsend
    Up the Organization

  32. Hhahahahah they replayed Howard’s interest rate gaffe on Lateline.

    No wonder he only wants one debate, he is hopeless without a brief.

  33. Also. Is it possible that Howard will retire hurt sometime soon and chuck the show to Costello? Another major humble, under the full glare of the cameras. Retains some dignity, gives the libs a slim chance. This is good advice. It is also in-depthing probing, as opposed to shallow in-depthings probinsg bloody keyboard has gone wonky.

  34. ESJ says ” I am a believer in the great man school of history”

    ESJ, that’s a bit shallow isn’t it?
    can you name me ten of these great men?

  35. [For those who missed it, 4 Corners full item on the EB and extended interviews with participants can be found here. ]

    It was a brilliant report. It sickens me that Liberal party hacks from Howard down accuse the ABC of bias, yet the ABC frequently puts together journalism of this quality.

    When’s the last time a commercial network filed a story anywhere near approaching this quality?

    9 did some great work on the tsunami’s. But that was a long time ago.

Comments are closed.

Comments Page 6 of 9
1 5 6 7 9