Congestion-busting infrastructure plays catch-up on long-neglected needs


Phillip O’Neill, Western Sydney University

Infrastructure spending is one of the central themes of Treasurer Frydenberg’s budget speech. His headline announcement was the promise to increase the ten-year federal infrastructure spend from the A$75 billion announced last year to a target of $100 billion.

Major projects previously announced – like the Melbourne Airport rail link, Western Sydney’s north-south airport rail link and Queensland’s Bruce Highway upgrade – are affirmed. A fast rail connection from Melbourne to Geelong is added. Also added are nation-wide packages of roadworks targeted at reducing congestion and improving regional freight corridors.

So the announcements continue the infrastructure program detailed in the 2018-19 budget, as promoted regularly in the government’s expensive “Building Our Future” advertising campaign that gives prominence to the government’s ten-year “Infrastructure Pipeline”.




Read more:
Infographic: Budget 2019 at a glance


Lack of transparency is an issue

It needs saying that analysts have found it difficult to verify what last year’s $75 billion promise actually involved. The claim is the subject of a major investigative paper by the Australian Parliamentary Library, with its authors observing:

The Parliamentary Library has been unable to locate any public document which provides a transparent overview of [the federal government’s] total infrastructure commitments.

One suspects that scrutiny over coming weeks of the $100 billion infrastructure spending promises will be thwarted by a repetition of this lack of transparency.

Why are infrastructure needs so great?

The national population growth story is the key framework for assessing the Coalition’s infrastructure plan. Between 1901 and 1948, the nation grew steadily, but modestly, from a population of 3.8 million to 7.7 million. Then the population surged on the back of a post-war baby boom and an expansion of immigration. The population grew by between 2.0 and 2.5 million people each decade from the 1950s through to the 2000s.

But in the last decade, the nation has added nearly 6 million people, with the east coast cities overwhelmingly hosting the increase. Urban infrastructure planning and spending have lagged. Both quality of life and economic productivity have been affected adversely as a consequence.

The infrastructure spending in this budget responds to community concerns about these declines.

We now know we failed to properly plan for and fund the surge in urban growth that has carried congestion on its back. Instead, large federal government surpluses from the 1990s were steered into debt paybacks.

The Future Fund was also created to cover public service pension liabilities. That fund is now custodian of over $150 billion worth of assets.

Dissolving pension liabilities is wise economic management. Australia’s problem is that this resolution took place at the expense of national capital works spending. Around this time, the state-owned utilities that had taken responsibility for the roll-out of post-war infrastructure – with their regular, predictable annual capital works budgets and their vast in-house planning and delivery offices – were on their last legs.

The loss of committed funding and the erosion of the utilities stalled infrastructure delivery at a time in Australian history when it was most needed. The urban infrastructure projects for coping with the acceleration of urban growth are only now coming on stream.

New funding streams have had to be found, led by a new round of state-based asset sell-offs – in New South Wales especially – and new models of private sector delivery, ownership and operation. Pretty much all new urban infrastructure projects in Australia are now some sort of private public partnership.

But, as this budget confirms, private sector involvement in infrastructure spending and delivery needs to be leveraged on the back of public funding and protected from project risk by a raft of government measures. An important risk amelioration measure involves decision-making technologies.

Here, the growing expertise within the federal government’s Infrastructure Australia unit is increasingly important. Established by the Rudd Labor government a decade ago, IA struggled for legitimacy for many years. Now we can see Infrastructure Australia’s priority lists – based on its independent assessments – dominating government budget announcements. Indeed, the government’s ten-year Infrastructure Investment Pipeline is a very close reproduction of Infrastructure Australia’s national priority listing. Which is a good thing.

Why the focus on roads?

The problem, of course, is that rather than infrastructure steering urban growth, as would have been the case had the Howard Coalition government not dramatically lowered the level of national capital works spending, infrastructure spending now chases urban growth.

Not surprisingly, the Morrison government packages a bundle of roads spending as “urban congestion” measures, acknowledging that transport planning has been inadequate.




Read more:
View from The Hill: budget tax-upmanship as we head towards polling day


The concentration on roads spending also acknowledges that the millennial growth surge in our cities has been geographically perverse. Greenfields residential projects are rarely aligned to public transport systems. And jobs growth has been a mix of CBD obsession and suburban scatter.

The result is congestion of antiquated CBD-centric public transport systems and suburban journey-to-work patterns that make retrofitting of public transport an impossible task.

No doubt there will be criticism of this budget’s apparent obsession with roads spending. The unfortunate reality is that large sections of our cities are stuck with the roads-based configuration that was instilled into their DNA from the get-go. Roads – not rail – are the thoroughfares that define transport options across our new suburban areas into the future.

Getting used to road spending and having constructive things to say about road use are a major challenge.The Conversation

Phillip O’Neill, Director, Centre for Western Sydney, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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The government’s electricity shortlist rightly features pumped hydro (and wrongly includes coal)


Mark Diesendorf, UNSW

The federal government this week released a shortlist of 12 project proposals for “delivering reliable and affordable power” to be considered for subsidy under its Underwriting New Generation Investments program.

The shortlist features six renewable electricity pumped hydro projects, five gas projects, and one coal upgrade project, supplemented by A$10 million for a two-year feasibility study for electricity generation in Queensland, possibly including a new coal-fired power station.

The study is unnecessary, because the GenCost 2018 study by CSIRO and the Australian Energy Market Operator already provides recent cost data for new power generation in Australia. It shows that new wind and solar farms can provide the lowest-cost electricity, even when two to six hours’ worth of storage is added.

Hence there is no economic case for new coal-fired power in Australia. After a century of coal, it should not be subsidised any longer.




Read more:
It’s clear why coal struggles for finance – and the government can’t change that


State of the states

While Queensland and Victoria have state government policies to drive the rapid growth of large-scale solar and wind, New South Wales does not even have a renewable electricity target. Yet the retirement of large, old coal-fired stations is in the pipeline: Liddell, nominally 1,680 megawatts, in 2022 and Vales Point, nominally 1,320MW, possibly in the late 2020s.

Coal baron Trevor St Baker bought Vales Point from the NSW government for the token sum of A$1 million in 2015. He wants to refurbish it and run it until 2049 – and his plan has made it onto the government’s shortlist.

Given that Vales Point is now arguably a A$730 million asset, St Baker has made a huge windfall profit at the expense of NSW taxpayers, and so a government subsidy to upgrade it would be unjust.

With the price of solar and wind electricity still falling, it will soon be cheaper to replace old operating coal stations that have paid off their capital costs with new renewable electricity, including storage.

Unfortunately, the newly elected NSW Liberal-National Coalition government has no policies of substance to fill the gap left by retiring coal stations with large-scale renewable electricity. It will therefore be up to the federal government after the May election to provide reverse auctions with contracts-for-difference, matching the policies of the ACT, Victorian and Queensland governments. Also, increased funding to ARENA and the Clean Energy Finance Corporation is needed for dispatchable renewables (those that can supply power on demand) and other forms of storage.

Driving the change

The transition to renewable electricity is already well under way, as even the federal energy minister Angus Taylor admits. The low costs of solar and wind power are driving the change. To maintain reliability, dispatchable renewables (as opposed to variable sources such as solar and wind) and other forms of storage are needed in the technology mix.

Batteries excel at responding rapidly to changes in supply and demand, on timescales of tens of milliseconds to a few hours. But they would be very expensive for covering periods of several days, even at half their current price. So there is a temporary role for open-cycle gas turbines (OCGTs) to meet demand peaks of a few hours, and to fill lows of several days in wind and/or solar supply.

Small-scale pumped hydro, in which excess local renewable electricity does the pumping, has huge potential for storage over periods of several days, but takes longer to plan and build, and has higher capital cost per megawatt, compared with OCGTs.

Small-scale pumped hydro should be the top priority for the federal program. In particular, the off-river proposal by SIMEC Zen Energy, which is part of Sanjeev Gupta’s GFG Alliance, will use a depleted iron ore pit and provide cheap, reliable, low-emission electricity for both GFG’s steelworks at Whyalla and other industrial and commercial users.




Read more:
Five gifs that explain how pumped hydro actually works


Hydro Tasmania’s proposed “Battery of the Nation” would involve building a new interconnector across the Bass Strait, together with possibly three new pumped hydro plants. It’s very expensive and is already receiving A$57 million in federal funding. Its inclusion in the shortlist is worrying because it could soak up all the program’s unspecified funding for pumped hydro.

Furthermore, the need to greatly increase Tasmania’s wind capacity to deal with droughts appears to be an optional extra, rather than an essential part of the project.

Little information is available for the other shortlisted pumped hydro projects. UPC Renewables is proposing a huge solar farm, together with pumped hydro, in the New England region of NSW. In South Australia, Sunset Power (trading as Delta Electricity, chaired by Trevor St Baker), in association with the Altura Group, is proposing an off-river pumped hydro project near Port Augusta, and Rise Renewables is proposing the Baroota pumped hydro project. BE Power Solutions, which does not have a website, is proposing pumped hydro on the Cressbrook Reservoir at Crows Nest, Queensland.

Pumping for Snowy 2.0 (which is not part of the program) will be done mostly by coal power for many years, until renewables dominate supply in NSW and Victoria. Therefore, I give low priority to this huge and expensive scheme.




Read more:
Snowy hydro scheme will be left high and dry unless we look after the mountains


To sum up, new coal power stations and major upgrades to existing ones are both unnecessary. They are more expensive than wind and solar, even when short-term storage is added – not to mention very polluting.

A few open-cycle gas turbines may be acceptable for temporary peak supply during the transition to 100% renewable electricity. But the priority should be building pumped hydro to back up wind and solar farms. This will keep the grid reliable and stable as we do away with the old and welcome the new.The Conversation

Mark Diesendorf, Honorary Associate Professor, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

What will the Coalition be remembered for on tax? Tinkering, blunders and lost opportunities


Robert Breunig, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Crawford School of Public Policy, Australian National University

This article is part of a series examining the Coalition government’s record on key issues while in power and what Labor is promising if it wins the 2019 federal election.


Politicians often invoke the word “reform” to convey the significance, or gravitas, of a particular policy change they are proposing.

However, the tax policies implemented over the six years of the Abbott-Turnbull-Morrison government should be more aptly described as: no reform, lots of tinkering, two blunders and some lost opportunities.

To be fair to the leaders of the Coalition, both Abbott and Turnbull began their prime ministerships professing a large appetite for tax reform.

In opposition Abbott and his treasury spokesman Joe Hockey had promised a major inquiry. Hockey said it would pick up where Labor’s Henry Tax Review left off:

We thought the Henry Tax Review was going to be a proper process. Now, that has obviously been an abject failure. We’ve said – Tony Abbott announced
in Budget and reply speech – we will have a proper process for proper tax reform, and whatever comes out of that process, which will be a white paper, we will take to a subsequent election, seeking the mandate of the
Australian people – their approval.

Treasury’s Re:think tax discussion paper, which is as far as the tax white paper process got.
Source: Commonwealth Treasury

It got as far as a discussion paper, seeking submissions.

When Turnbull assumed the leadership, the draft white paper, which would have followed the discussion paper, was scuttled, and the process ended.

Tinkering…

Instead what resulted were marginal changes to personal income tax. One of the brackets was expanded and a new low and middle income tax offset was added.

Marginal changes to superannuation tax further added to the complexity of the tax system as a whole. The current superannuation system disproportionately rewards higher income earners because most contributions are taxed at the same low rate (15%) regardless of the taxpayers’ income tax rate.

The Coalition’s response was to apply a 30% tax on contributions for those earning $250,000 or more (down from the previous threshold of $300,000) and to cut the cap on concessional contributions from $30,000 ($35,000 for those aged 49 and over) to $25,000. And it capped at $1.6 million the amount that could be transferred into the “retirement phase” where fund earnings in retirement were exempt from tax.

It made the system much more complex, and it could have been done more simply, perhaps by reimposing tax on super earnings in retirement (at a low rate) or by taxing by contributions at a standard discount to taxpayers at a marginal rate, as recommended by the 2009 Henry Tax Review.

Alongside these marginal changes, there was also a failed attempt to cut the company tax rate (only the tax rates for small companies were cut) and a muddled discussion about the progressivity of the income tax system.

All in all, many a tinker, but no reform.

Blunders…

Human-induced climate change is compromising the sustainability of our planet. The only way to solve it is by changing incentives using the economic toolkit at our disposal. The Carbon Tax was a good tax. It shifted the costs of pollution onto those who created it, instead of subsidising processes that damaged the environment.

No solution to climate change is possible without corrective taxes.

At some point we’ll have to climb that mountain again, assuming the mountain is not underwater before politicians come to their senses.

The repeal of the Minerals Resource Rent Tax was also a step backwards. By taxing rents (excess profits) instead of profits, it avoided the disincentives created by traditional company taxes. And, it was a good example of the kind of taxes that could eventually replace or supplement company tax.

…and lost opportunities

Changing the GST could have ensured at least one significant contribution to overall tax reform. At 10%, the rate is relatively low by international standards and applies to a shrinking share of spending, as more and more of our money is spent in places or on goods that aren’t taxed.


Value-added (GST) tax rates in OECD and selected Asian countries.
Re:think, Treasury tax discussion paper, March 2015

These factors, combined with the fact that GST is difficult to evade and less costly to administer, suggest that broadening the base is low hanging fruit on the tax reform tree, ripe for picking.

Instead, it may as well be forbidden fruit from the Garden of Eden. We’ve gone in the wrong direction by adding even more exemptions and cutting short talk of increasing the rate.

The failed debate on company tax cuts was another missed opportunity.

What remains is a system that applies different rates to different company sizes, one of few remaining dividend imputation systems in the world, and no discussion about the sustainability of corporate income tax revenue in the future.

All up, the government’s approach over the past six years has largely been piecemeal. It also managed to dismantle two of the most significant tax reforms that could have contributed to a more sustainable tax base in the long run.

Would Labor be better?

It remains to be seen whether a Labor government will be able to achieve more. Some of the party’s proposed changes, such as the treatment of capital gains, head in the right direction, but what it is offering falls short of comprehensive reform.

At the same time, many of its proposed changes will add additional complexity, fail to account for interactions within the entire tax system and use tax exemptions to reach goals that could be better achieved with payments.

Many an international tax reform was engendered by crisis, so there’s hope, of a sort. The opportunity still remains to get in early before weaknesses inherent in the current system become grossly apparent.

What we’ve got is unfair and its complexity rewards those with the resources to pay to understand and exploit it. It is overly reliant on income and company tax in place of indirect taxes, like consumption tax, and it tries to achieve too many disparate objectives, without consideration for the workings of the family and social security payments system.

There is much scope to improve things. What we need most are fearless leaders, from all sides of the political spectrum, who treat comprehensive tax reform as important and can work together to achieve it.




Read more:
What will the Turnbull-Morrison government be remembered for?


The Conversation


Robert Breunig, Professor of Economics and Director, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University and Kristen Sobeck, Senior Research Officer, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Infographic: Budget 2019 at a glance


Emil Jeyaratnam, The Conversation and Wes Mountain, The Conversation

The budget bottom line will surge to a surplus next financial year on the back of higher than expected revenues from commodities, strong corporate profits and low unemployment.

The estimated surplus of A$7.1 billion for 2019-20 will be the first time the budget has entered positive territory since 2007-08.





Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


How will the government spend this unexpected windfall of revenues?

Simplifying the tax system will cost the government $158 billion over the next ten years. The measures include:

  • doubling the low and middle income tax offset from $530 to up to $1,080 for people earning up to $126,000, starting from the current 2018-19 financial year

  • changing the 32.5% threshold to be $45,001 to $120,000 from 2022-23, with the 19% bracket covering incomes from the tax-free threshold up to $45,000

  • reducing the 32.5% tax rate to 30% from 2024-25 onwards, and changing the income thresholds so that the 30% rate applies to all earners from $45,000 to $200,000

  • removal of the 37% rate altogether from 2024-25.




Read more:
View from The Hill: budget tax-upmanship as we head towards polling day



Other major cuts and spending items are listed below.



Despite the boost in revenue the government expects to reach its long-term target of surplus being 1% of gross domestic product later than estimated in the December budget update.

The government now expects surplus to exceed 1% of GDP in 2026-27.



This budget, like many before it, predicts wages to increase over the next four years. The government expects the wage price index to increase from its current 2.1 to 3.5 by 2022-23.



Net debt as a share of the economy is expected to peak in 2018-19 (19.2% of GDP), and will then commence a downward trend until fully eliminated in 2029-30.




Read more:
Frydenberg’s budget looks toward zero net debt, but should this be our aim?



Government receipts are expected to climb from 24.2% of GDP in 2017-18 to 25% by 2022-23. Payments are expected to be 24.5% of GDP in 2022-23.The Conversation



Emil Jeyaratnam, Data + Interactives Editor, The Conversation and Wes Mountain, Multimedia Editor, The Conversation

This article is republished from The Conversation under a Creative Commons license. Read the original article.

View from The Hill: budget tax-upmanship as we head towards polling day


Michelle Grattan, University of Canberra

For the government this “election budget” is an exercise in juggling. On the one hand, it is throwing out voter bait. On the other, it is running hard on the theme of economic responsibility.

For the second budget in a row, there are highly generous tax cuts, amounting to A$158 billion over a decade. This is on top of the earlier $144 billion.

The government wants this election to be all about tax.

The tax cuts you will get, now and later. The “higher taxes” that Bill Shorten would impose – by cracking down on negative gearing and cash refunds for franking credits. And by claiming that Labor’s climate policy is a “carbon tax”.

A theme in Treasurer Josh Frydenberg’s speech was that the government was taking its initiatives “all without increasing taxes”.

Under the budget’s tax cuts, low- and middle-income earners would pocket up to $1,080 within weeks of the election – for families with a dual income, this amounts to $2,160.




Read more:
Tax giveaways in Frydenberg’s ‘back in the black’ budget


The government points out that its tax cuts are the most generous since John Howard’s time. But two things might be noted about this comparison. The 2007 tax package has since been much criticised for being irresponsible – and Howard did not win the election of that year.

Despite earlier speculation, the Coalition won’t try to rush any of the tax package – which includes a reduction in the 32.5% rate to 30% from July 2024 – through parliament this week.

The government wants to set up as much of a contrast between itself and Labor on tax as possible. Frydenberg told a news conference the tax bills were “a package” covering the immediate tax relief and the rate change. The government was asking the public “who do you trust?” to deliver lower taxes.

Finance Minister Mathias Cormann said: “We are just not prepared to haggle with the Senate in the next 24 hours.” It was up to the Australian people to back the government in, he said.

But in a game of bluff and counter-bluff on tax, Labor could simply match the immediate relief – which it did instantly.

This neutralises part of the tax argument, although the government can still highlight the contrast between its longer-term tax regime and Labor’s “higher taxing” agenda.

On economic responsibility, the budget’s boast is for a $7.1 billion surplus next financial year – the first surplus in 12 years. “The budget is back in the black and Australia is back on track,” Frydenberg told parliament, as he outlined the growth of surpluses to a total of $45 billion over four years.




Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


We can be sure that in the election campaign Labor will match or even better the budget’s surplus figures.

Shadow treasurer Chris Bowen has learnt from the experience of the last election, when the Labor program came in with a slightly worse fiscal bottom line over the forward estimates than the government’s. The difference wasn’t huge but it was enough to be a political handicap.

The budget’s economic projections seem credible enough, although there is the perennial question over its forecast for wages growth – 2.75% in 2019-20 and 3.25% in 2020-21.

The fact that early in the imminent election campaign the departments of Treasury and Finance produce a detailed economic outlook imposes a discipline on the pre-election budget. A government that tried to fiddle the forecasts would quickly get caught out.




Read more:
Frydenberg’s budget looks toward zero net debt, but should this be our aim?


Frydenberg’s speech was notably sombre about the outlook for the economy, despite saying the fundamentals were sound.

“There are genuine and clear risks emerging both at home and abroad,” he warned, highlighting the cooling of the residential housing market and global trade tensions.

His words are a reminder of how quickly things can change – including the prospect of strong surpluses projected into the future. Good economic times suddenly turned bleak in the early days of the Rudd government, as a result of the global financial crisis.

The budget provided a nice reality check on the beat-up the government indulged in over the medevac bill. Remember all the hyperbole Scott Morrison sprouted, when he said he was going to have to spend more than $1 billion reopening Christmas Island?

The budget includes just $178.9 million to manage the transfer of people from Nauru and Papua New Guinea for medical treatment, $3.2 million to increase the police presence there and $3 million to reinforce the campaign to discourage people getting on boats.

The government says that if it is re-elected it will repeal the medevac bill and close the Christmas Island facility by July 1 – returning any people who have been transferred back offshore.

Questions to the office of Home Affairs Minister Peter Dutton this week about whether anybody had been transferred under the new legislation received the response that no comment was being made.

Morrison told his party room on Tuesday, before the budget, that three dates were available for the May election – May 11, 18 or 25. The general expectation is that he will announce the poll quickly. The budget might look benign, but the government does not want an extended period of Senate estimates next week which would facilitate picking it apart.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Frydenberg’s budget looks toward zero net debt, but should this be our aim?



File 20190402 177196 o4rspu.png?ixlib=rb 1.1
It’s a bit of a mystery how the government has made net debt disappear, but there are clues.
Wes Mountain/The Conversation, CC BY-NC

Richard Holden, UNSW

In his budget speech tonight Treasurer Josh Frydenberg announced that under a Coalition government we will see a decade of surpluses that will “continue to build toward 1% of GDP within a decade”.

He went on: “we climb the mountain and reach our goal of eliminating Commonwealth net debt by 2030 or sooner.”

But a funny thing happened on the way to paying off the debt.

As the budget papers point out, net debt as a proportion of Gross Domestic Product (GDP) is predicted in the budget to peak at 19.2%.

You might ask, then, how do we get from 19% to 0% debt/GDP in ten years if we’re generating a surplus of 1% per annum?



A small part of the answer is that with the economy forecast to grow at 3% a year, GDP is a fair bit bigger 10 years from now. And a 1% surplus of a bigger GDP number is a bigger dollar surplus. This has a larger impact on net debt.

That’s part of the story, but not much of it. If we make the most generous assumptions in favour of the treasurer and his surpluses (even if you believe them), they’re only paying down about two-thirds of the debt.

The case of the vanishing debt

So how does the treasurer get the rest of the debt to disappear?

The budget documents, voluminous though they are, don’t have the answers. But there are only a handful of logical possibilities.

First, let’s unpack what net debt is. Net debt is basically the gross debt issued by the government (for example, by issuing government bonds) minus the assets the government holds.

The surpluses Frydenberg announced help reduce gross debt. So, the debt-disappearing act has to involve some assets getting bigger.

The leading possibility concerns the Future Fund (Australia’s sovereign wealth fund). Simply put, if the Future Fund earns, say, 8% per annum, then those assets are going to be growing a lot faster than GDP. This reduces debt to GDP quite apart from anything else.

Another way to think about it is that the Australian government is running a big hedge fund with a lucrative profit opportunity. If it can earn 8% per annum while the government is funding this with debt that costs less than 2% (as is the case currently, given yields on 10-year Australian government bonds), then that’s a great deal.

Don’t get me wrong, I’m fine with that. But to the extent that debt reduction is coming from the Future Fund, it has nothing to do with fiscal rectitude.




Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


An even more obscure possibility is that asset values are being hypothetically affected by assumptions about the interest rate the government will pay on its debt. Currently, it is about 1.72%, but the budget documents suggest a return to long-run historical levels of around 5

First, that seems very unlikely to happen in a post-GFC world. Second, it’s unclear that it’s of a sufficient magnitude to explain away the vanishing debt. And third, it’s an accounting artefact, not a matter of economic substance. Again, whatever it is, it’s not fiscal rectitude.

The only other possibilities are even more remote. A massive increase in the value of the essentially defective National Broadband Network? A colossal spike in student loan repayments while future students pay their own way? Nope and nope.

Should we be aiming for zero net debt?

Another question altogether is whether it is wise to reduce government debt to zero in the coming decade.

Fiscal discipline is good and avoiding structural budget deficits is important.

But as I’ve written before, we live in an age of “secular stagnation”, where there is a glut of global savings chasing too few productive investment opportunities and where economic growth is permanently lower than in previous decades.

As former US Treasury Secretary Larry Summers has pointed out, in a secular-stagnation world it will likely take a lot more government spending to sustain full employment and reasonable wages growth without financial bubbles.

Or, to put it another way, if the Australian government can borrow at less than 2%, there are a lot of attractive public investments in physical and social infrastructure that should be made. The idea of “Social Return Accounting”, which the UNSW Grand Challenge on Inequality launched last year and I wrote about here, offers a framework for thinking about this.

The live hand of Peter Costello

The treasurer presumably didn’t mean to be ironic when he said of the down-to-zero debt paydown:

Only one side of politics can do this… John Howard and Peter Costello paid off Labor’s debt.

But it is ironic that Peter Costello’s Future Fund is doing a good deal of the heavy lifting in paying off Josh Frydenberg’s debt.The Conversation

Richard Holden, Professor of Economics, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Tax giveaways in Frydenberg’s ‘back in the black’ budget


Michelle Grattan, University of Canberra

The Morrison government has delivered an election-launch budget with big personal income tax handouts to attract voters and a A$7.1 billion 2019-20 surplus to display its economic credibility.

The budget – the first brought down by Treasurer Josh Frydenberg – doubles the tax relief that average earners were due to receive within weeks, from $530 in last year’s budget to $1,080.

This outbids the relief that Labor promised last year. But the opposition immediately announced it would support the tax cuts that begin on July 1 “for working and middle-class people”.

“This is essentially a copy of what we proposed last year, and they are simply catching up to us,” Labor’s Shadow treasurer, Chris Bowen, and finance spokesman, Jim Chalmers, said in a statement.

“The Liberals are so out of touch that they’ve given a much smaller tax cut to two million Australians earning less than $40,000. Labor will fix this and give these working people the tax relief they deserve,” Bowen and Chalmers said.

Four things you need to know about the budget, according to The Conversation’s Business and Economics Editor, Peter Martin.



Read more:
View from The Hill: budget tax-upmanship as we head towards polling day


People with incomes between $48,000 and $90,000 will be eligible for the maximum $1,080. About 4.5 million people will receive the full benefit.

In July 2022 the government will lift the top threshold of the 19% tax rate from $41,000 to $45,000

From July 2024 it will cut the rate of the middle tax bracket from 32.5% to 30% – leaving a rate of 30% between $45,000 and $200,000, beyond which it will be 45%.



The cost of the tax relief is $19.5 billion over the four-year forward estimates period and $158 billion over a decade.

Frydenberg told parliament: “The budget is back in the black and Australia is back on track.

“For the first time in 12 years our nation is again paying its own way.”

Earlier, in the government parties’ meeting, Scott Morrison told his MPs the available election dates were May 11, May 18 and May 25 and he would determine when the election would be in a short while.

The surplus of $7.1 billion is for the coming financial year. In the current year, ending June 30, the budget is expected to come in with a deficit of $4.2 billion.




Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


The surpluses will build over time – projected to total $45 billion over the next four years. “Surpluses will continue to build towards 1% of GDP within a decade,” Frydenberg said. The government’s goal was to eliminate Commonwealth net debt by 2030 or sooner.

He said the government’s economic plan restored the nation’s finances without increasing taxes, strengthened the economy and created more jobs, and guaranteed essential services, while tackling the cost of living.

For the 2019-20 year, economic growth is forecast at 2.75% and wages are forecast to increase by 2.75%. Unemployment is expected to be 5%.

One major saving in a budget that avoids widespread cuts is changing the social security income assessment model, saving more than $2.1 billion over five years.

The change will simplify and automate the reporting of social security recipients through the Single Touch Payroll. From July 2020, recipients who are employed will report income that is received during the fortnight rather than calculating and reporting their earnings. The government says this will greatly reduce overpayments.

The budget anticipates a substantial amount of additional revenue – $3.6 billion through cracking down on tax avoidance by large corporations, multinationals and high-wealth individuals.

As the government flagged ahead of the budget in a series of specific announcements, the budget includes an extensive infrastructure program, which it says it has boosted to $100 billion over the decade.

Frydenberg announced a four-fold increase in the Urban Congestion Fund – from $1 billion to $4 billion.

The fund will include a $500 million Commuter Carpark Fund to “improve access to public transport hubs and take tens of thousands of cars off our roads”.

Budget measures also target small and medium-sized businesses with an increased and expanded instant asset write-off. The write-off will rise from $25,000 to $30,000 per item and be extended to businesses with a turnover of up to $50 million.

There would be a $525 million skills package, including the creation of 80,000 new apprenticeships in industries with skills shortages. Incentive payments to employers will be doubled to $8,000 per placement. New apprentices will also receive a $2,000 payment.

Ten new training hubs will be established connecting schools, local industries and young people in regional areas with high youth unemployment. The government is also promising $62 million to boost students’ literacy, numeracy and digital skills, as well as further funding to increase the participation of women and girls in science, technology, engineering and maths.

There is also $453 million to extend preschool education, enabling 350,000 children to have 15 hours of early learning a week in the year before school.



Responding to Labor’s promise to unfreeze the Medicare rebate, the budget provides $187.2 million over four years to reintroduce indexation to all remaining general practitioner services.

It offers $527.9 million over five years for the recently announced royal commission into violence towards and abuse of people with disabilities.

The budget contains a new $3.9 billion Emergency Response Fund to “ensure additional resourcing is available to support future natural disaster recovery efforts”.

A $100 million Environment Restoration Fund is to deliver “large-scale environmental projects”, including protecting the habitats of threatened species, the coasts and the waterways and cleaning up waste.

Frydenberg warned about the economic outlook, saying: “The fundamentals of the Australian economy are sound but there are genuine and clear risks emerging both at home and abroad.

“The residential housing market has cooled, credit growth has eased and we are yet to see the full impact of flood and drought on the economy. Global trade tensions remain.”

Bowen and Chalmers said: “Scott Morrison has delivered an election con, filled with the same Liberal cuts.

“This is a Budget from a government that has given up governing. There is no plan for wages, no plan to tackle power prices, no plan to address climate change, and no plan for the future”.

Business was basically positive. The Business Council of Australia described it as both “a strong and responsible budget that delivers a surplus, lowers personal income taxes and invests in jobs, health, education and infrastructure. This is the payoff for the community from spending discipline and hard work.”

The Australian Industry Group said the stimulus inherent in the budget “is a timely and welcome boost for a slowing economy at a time of wavering business and household confidence”. But it criticised the cut in migration.

The ACTU slammed the budget as failing the fairness test. “It’s a cynical attempt to buy votes, but Morrison and Frydenberg are giving with one hand and taking away with the other.”

The Brotherhood of St Laurence attacked the budget for failing to do for more for the disadvantaged, including providing no increase to Newstart.The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

It’s the budget cash splash that reaches back in time


Peter Martin, Crawford School of Public Policy, Australian National University

Talk about retrospective. In his determination to quickly inject money into the economy (for economic as well as political reasons), Treasurer Josh Frydenberg has reached back in time to give us an extra tax cut on income already earned during the financial year that’s about to finish.

Almost a year ago, in May 2018, Frydenberg’s predecessor, Scott Morrison, promised a “sort-of” tax cut for the financial year beginning in July 2018. People earning between A$48,000 and A$90,000 would get a tax offset – a bonus – of $530 as part of their tax return.

People earning more, or less, would get lesser amounts but would still get something, right up to a cutoff of $125,333.

The arrangement meant they wouldn’t get the money until the following financial year, the one beginning this July, after they submitted their tax forms.

Labor trumped him within days, announcing a bigger offset in its budget reply speech.

Not only bigger, but backdated

Now Frydenberg has trumped Labor and Morrison, announcing a rebate of almost twice the original size — $1,080 — to be paid out after the end of the financial year.

But, in an innovative piece of policy, he is applying the increased offset to the financial year that’s almost over, as well as the ones to come. It means that after submitting their tax forms for the financial year that’s about to end, most Australians will get $1,080 back for the work they did during 2018-19, instead of the $530 that was promised at the time (assuming the measure is enacted).

It will work the same way as the Rudd government’s “cash splash” during the global financial crisis. It’ll be paid into bank accounts within weeks, providing near-instant, much-needed spending power.

The fact that it will be bigger than the first Rudd government cash splash (which was $800 for qualifying taxpayers) is probably no bad thing.

It’s what we need, unfortunately

Consumer spending is much weaker than was expected in the December budget update just five months ago, and a lot weaker than was expected in Morrison’s last budget as treasurer a year ago.

Morrison expected consumer spending to climb 2.75% for 2018-19. Frydenberg cut that forecast to 2.5% in December and to 2.25% today.

Morrison expected consumer spending to climb 3% in 2019-20, and Frydenberg held the line in December. Now he has marked down the 2019-20 forecast to 2.75%. He has also marked down (yet again) the forecasts for wage growth and economic growth.



Home prices, not explicitly forecast in the budget, are also lower than was expected in the last budget and budget update. Along with lower-than-expected wage growth, this is depressing consumer spending.

The markdowns in spending, wage growth and economic growth have started to hurt revenue forecasts, but the damage isn’t yet apparent because at the same time dramatically higher iron ore prices have been pouring more money into the budget than was expected.

When iron ore prices fall, we’ll be exposed

When, for whatever reason, the higher iron ore prices recede (and that’s what the Treasury says it is expecting), the budget will look much worse. Unless consumer spending and wages pick up, which is also what the Treasury says it is expecting, in the face of evidence to the contrary.

That’s what makes Frydenberg’s cash splash so important. It will push an extra $3.5 billion into the economy within weeks. On top of it will be an extended instant asset write-off for small and medium-sized businesses, the operative word being “instant”.

From now on, businesses with a turnover of up to $50 million (up from $10 million) will be able to buy equipment worth up to $30,000 (previously $25,000) and deduct the full cost from the tax they will owe from July.




Read more:
Iron ore dollars repurposed to keep the economy afloat in Budget 2019


The measure won’t cost the government money until next financial year, but it will inject money into the economy from Wednesday in the 14 weeks before that financial year starts, as as many as 22,000 previously ineligible businesses spend up to $30,000 on equipment (even cars) and then spend it again and again without limit.

A peculiarity of the instant asset write-off is that businesses can spend as much as they like and get it all back, as long as it is broken up into parcels of less than $30,000. In an example quoted in the budget papers, a previously ineligible food manufacturing business buys ten new commercial ovens, each for $12,000. The entire $120,000 can be written off within weeks, helping the business “invest, grow, and employ more workers”.



Frydenberg would probably prefer it if the measures weren’t called “stimulus” measures, but that’s what they are. And they are needed, for economic reasons as well as for political ones.

The economists surveyed in January for this year’s Conversation economic survey assigned a 25% probability to a recession within the next two years. The downward revisions in the budget have done nothing to change that assessment.

The government elected in May will inherit a fragile economy in need of help.

Frydenberg has demonstrated that he is just as prepared as was Kevin Rudd during the global financial crisis to provide it.The Conversation


The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Iron ore dollars repurposed to keep the economy afloat in Budget 2019



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The budget points to weaker times ahead unless wages and spending pick up.
Wes Mountain/The Conversation, CC BY-ND

Warren Hogan, University of Technology Sydney

A weaker domestic economy has cost the budget A$15 billion over the next four years, but booming international commodity markets are more than offsetting this. The net result is a budget that will remain comfortably in surplus for the next four years, assuming the economic situation improves rather than disappoints.

Much lower payments on a range of different programs have also given the government some extra money to play with. Lower spending on the National Disability Insurance Scheme, a big drop in debt servicing costs and lower pension income support payments are just a few of the expenditure surprises that paint a very healthy picture of federal government finances right now.



But weaker domestic economic numbers have come at a considerable cost to the budget in an ominous warning about how vulnerable the government’s finances would be to a domestic economic recession.

Since the release of the mid-year economic outlook last December, economic data have generally disappointed expectations, culminating in a much-weaker-than-expected GDP report for the December quarter of 2018. This has forced the Treasury to reset the government’s baseline for the economy and its revenues.

This has been quite small in the scheme of things, with economic variables such as consumption, GDP and wages down by about 0.25% to 0.5% for this year and next.




Read more:
View from The Hill: budget tax-upmanship as we head towards polling day


But these otherwise small changes to the economic baseline have had a big impact on government finances. Revisions to the outlook for wages have cost the budget $800 million in 2019-20 and a total of $8.1 billion over the four years to 2022-23.

Weaker-than-forecast consumption has knocked $1.7 billion out of GST receipts for 2019-20. It’s not a problem for the feds, but another sign that state government budgets are about to take a walloping over the next few years.

Economic story hasn’t changed, even if the starting point has

In terms of the picture the government is painting of the economy over the next three years, the economic forecasts are basically unchanged from those presented in the update in December. Sure, there have been some substantial downward revisions to the current year’s numbers and a knockdown in growth in 2019-20. But this is almost entirely the result of a weaker starting point courtesy of the soft GDP numbers we received last month.

The economic story hasn’t changed. Australia’s economy is set to ride out the bursting of the housing bubble in Sydney and Melbourne. Employment is expected to continue to grow at a pace that is strong enough to soak up new entrants into the labour force.

Meanwhile the international economy will maintain a healthy growth rate of 3.5% over the next few years. There is no US recession, no sudden shift down in China’s rate of growth.

The Treasury has adopted a pleasingly conservative approach to international commodity prices. Both met coal and iron ore are expected to drop back to more sustainable price levels over the next year in what is an important nod to good budgeting assumptions.

Iron ore is forecast to fall back to US$55 a tonne by March 2020 and then stay at that level while met coal is expected to shift back down to US$150 a tonne over the same time frame.

The oil price, interest rates and the Australian dollar are all forecast to stay at current levels over the forecast horizon. With bond yields having fallen to near-record lows in Australia in recent weeks, this assumption has had a dramatic effect on Australia’s debt service costs, delivering the government a financial windfall of $2.7 billion over the next four years.

Blue Skies or foggy glasses?

Against this backdrop Australia’s economic expansion is forecast to go well past the 30 -year mark in 2021. Unemployment is projected to be 5% and wages growth rises back to 3.5%.

This is a rosy picture of the economic outlook. The wage growth forecasts will rightly come in for some criticism. The risks to this forecast are not evenly balanced.



At least the government can’t be criticised for being at odds with the Reserve Bank (RBA). The RBA’s latest set of forecasts, released just a few weeks ago, are basically the same. If anything, the RBA is even more optimistic than the Treasury, with an unemployment forecast of 4.75% versus the government’s 5% for as far as the eye can see.

Even though the RBA and the Treasury seem to be on the same page about Australia’s economic outlook, there is now a clear distinction between what private and public sector forecasters are looking for over the next few years.

Over the past three months there has been a substantial shift in private sector forecasts for the economy, which has not been replicated by either the RBA or the Treasury.

This has left the RBA and the Treasury at the top of the range of forecasts for the economy. You’d be hard pressed to find a private sector forecaster more optimistic on Australia’s economic outlook than our policymakers are right now.

A short-term fiscal stimulus could keep the RBA at bay

The great fear within financial markets and across the business community is that Australia’s domestic economy could buckle under the weight of high household debt and falling house prices. A run of weak economic data in the last three months has added weight to these concerns and seen a number of economists call for interest rate cuts.

Even though businesses have thus far maintained a deal of optimism about the economic outlook, the concern is that eventually business will shelve hiring and investment plans if consumer demand weakens enough.

Money markets are factoring in a half-percentage-point cut to the cash rate, taking it from 1.5% to 1% over the next year. In effect, the markets are projecting much weaker outcomes than the RBA or the government.

This budget represents a smart short-term fiscal stimulus at a time when consumer sentiment and domestic demand are under pressure. This certainly should take some pressure off the RBA to cut interest rates in the next few months and may even keep monetary policy on hold for an extended period.

The centre piece of the fiscal injection is the lift in the Low and Middle Income Tax Offset (LMITO). This offset has more than doubled to $1,080 and is effective from this financial year. This means 4.5 million Australians will be positively impacted by a higher offset when they file their 2018-19 tax returns after July 1 2019.




Read more:
It’s the budget cash splash that reaches back in time


This is as close to a cash handout as you can get without it being a cash handout – a cash handout by a government ideologically opposed to cash handouts.

This is not only a direct cash injection for many households but a retrospective tax cut in the sense that it dates back to July 1 2018.

People won’t have the extra money until after July, but they know it’s coming and this should immediately help alleviate some financial concerns.

The next leg of the immediate fiscal stimulus is the broadening of the instant asset write-off for small and medium businesses with revenue of up to $50 million. This was previously accessible to small business with revenues of up to $10 million. The asset write-off has been increased to $30,000 (from $25,000).

This too is effective immediately and will last through to June 2020. This is a strong incentive for a vast number of businesses around Australia to increase capital expenditure in the months ahead of the end of this financial year, and then again next financial year.

Even if it doesn’t have much impact on investment plans, it will impact profitability.

Longer-term personal income tax cuts that are happening against the backdrop of a budget that remains in surplus over the medium to long term also have the potential to support consumer confidence.



A strong government financial position will help curtail precautionary saving from households worried about the future of the economy and their finances.

For financial markets the question is whether this fiscal stimulus is enough to keep the RBA at bay over the months and years ahead. This fiscal injection is smart policy and represents a much nimbler government than we’re used to.

In an environment where the effectiveness of interest rate cuts is an open question, a short sharp fiscal injection like this one might make the difference in keeping demand at a rate that will maintain our current low rate of unemployment.The Conversation

Warren Hogan, Industry Professor, University of Technology Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

State of the states: Adani, economics and personality politics



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The Adani coal mine has become a key issue for voters.
Wes Mountain/The Conversation, CC BY-ND

Nick Economou, Monash University; Chris Aulich, University of Canberra; Ian Cook, Murdoch University; Maxine Newlands, James Cook University; Richard Eccleston, University of Tasmania, and Rob Manwaring, Flinders University

Our “state of the states” series takes stock of the key issues, seats and policies affecting the vote in each of Australia’s states.

We’ll check in with our expert political analysts around the country every week of the campaign for updates on how it is playing out.


Victoria

Nick Economou, Senior Lecturer in the School of Political and Social Inquiry at Monash University

The first week of the 2019 election campaign is complete. So far the contest is looking like a dour football match between two defensive teams. Both Opposition Leader Bill Shorten and Prime Minister Scott Morrison have campaigned in marginal seats in the famed “western Sydney”, where – according to legend – national elections are won or lost.

By midweek, both leaders had made it to Victoria, where there might not be many genuinely marginal seats, but the Victorian Liberal party is really anxious about the number of mid-range seats like Deakin, Flinders and even Higgins, which might be lost if an anti-Liberal swing commensurate with the state election should be repeated on May 18.

The two major party leaders have sought to reinforce the themes that underpinned the budget and budget-in-reply. The government hopes swinging voters will be enticed to vote Liberal with promises of tax cuts and warnings about Labor’s fiscal profligacy. Labor seeks to appeal to voters on health policy with grand commitments to addressing the challenges of cancer. These policy espousals occur against a backdrop of visits to marginal electorates where traps await for even the most experienced politicians.

In the seat of Reid, with its significant Chinese community, Morrison greets someone in Mandarin only to discover they are Korean. Shorten, meanwhile, meets someone suffering from cancer and who wants to know (for the benefit of the television crews, no doubt) why state Labor has done so little after promising to boost health funding at the last two state elections.




Read more:
New research reveals how young Australians will decide who gets their vote


The early loss of some major party candidates has been the only really interesting thing to happen so far. Labor has lost its candidate for Curtin, Melissa Parke, following revelations that she had criticised Israel in a speech she had previously made on Middle Eastern politics. Criticising Israel is hardly the thing Labor wants to be known for when it is seeking to defend marginal seats such as Macnamara in Victoria.

The Liberal party has lost two candidates as well. In a reminder of the ongoing section 44 debacle, Liberal candidates for the Labor-held seats of Lalor and Wills, Kate Oski and Vaishali Gosch, have had to withdraw. Apparently doubts about their citizenship status arose from questionnaires they filled in for the Australian Electoral Commission as part of the nomination process.

Given that the parliamentary Joint Standing Committee on Electoral Matters figured that up to 50% of Australians have been potentially disqualified from being candidates thanks to the High Court, something like this was bound to happen.

New South Wales

Chris Aulich, Adjunct Professor at the University of Canberra

At this stage of the campaign, Labor appears likely to hold about the same number of NSW seats as it did in 2016. A possible Labor loss in the city seat of Lindsay, where Labor’s Emma Husar isn’t recontesting, could be offset by wins in Gilmore or Reid, where sitting Liberal members Ann Sudmalis and Craig Laundy aren’t recontesting either. A small swing of less than 2.5% against the Coalition is needed for Labor to win Robertson, Banks and Page, but currently, the swing isn’t anticipated to be enough for the seats to change hands.

The Coalition has the advantage of the recent strong win at state level in NSW, although its win was marred by a backlash against the Nationals in many regional seats. The Coalition now faces the risk of losing regional seats to several strong independent candidates, such as Rob Oakeshott in Cowper and, less likely, Kevin Mack in Farrer.

In the city seat of Warringah, Liberal Party polling reveals a swing of about 12% against Tony Abbott, who is facing a serious challenge from independent Zali Steggall. If that swing were realised at the election, Steggall would win the seat from Abbott. While Steggall will gain some advantage from GetUp’s targeting of Abbott, the former prime minister has support from the Advance Australia lobby, which has already claimed that Steggall is a “fake” independent.

The battlelines are drawn between traditional and modern conservatives in this seat, with the focus on issues like climate change adaptation, refugee policy and foreign aid. After a feisty first candidates’ debate last month, and recent complaints by Steggall that Advance Australia has “sexualised” her advertising hoardings, this seat promises a close and bare-knuckle contest.

The loss of any of these seats would make Scott Morrison’s task of winning government more difficult. With redistributions since the 2016 elections, the Coalition notionally holds 73 seats in the new 151-member house and cannot afford to lose any seats.

This week we also include seats in the ACT. Redistribution has added a third seat to the ACT, and all seats now have new boundaries. The notional swings needed by the Coalition vary from 9% to 13%, suggesting comfortable wins to Labor. But the Greens are hopeful their candidate in central Canberra, environmentalist and musician Tim Hollo, may be able to capture sufficient votes from the young, urban dwellers in the electorate to win.

In the Senate, the status quo of one seat for Labor and one for the Coalition is likely to remain with Labor’s Katy Gallagher, who is expected to be returned after losing her seat over dual citizenship. Liberal Zed Seselja only needs 33% of the two-party preferred vote to secure a quota and hold his seat.

Queensland

Maxine Newlands, Senior Lecturer in Political Science at James Cook University

The federal government’s final go-ahead for Adani’s groundwater management plan has sparked a large scale grassroots campaign pushing back against the two major parties in Herbert.

The LNP, ALP, and Katter’s Australia Party all support the mega mine. Herbert incumbent ALP’s Cathy O’Toole is on record saying:

If this project has gone through the processes and the regulatory requirements and it’s passed, as it appears it has, it will go ahead, and it will be good for jobs in this city.

The Greens are running on a Stop Adani ticket. Millennials and the undecided voters will play an important role in this election as climate change and mining jobs become key election issues.

An Australia Institute report this week shows that 68% of Queenslanders want strong government action on climate change, 50% want no new coal mines, and 64% are looking for a rapid transition to 100% renewable energy. Leichhardt in far north Queensland, one of the eight LNP electorates on a majority of less than 4%, sees climate change as a major issue.

Last federal election, preference votes from minor parties – mainly One Nation – helped get Labor over the line in Herbert. With One Nation yet to declare a candidate in Herbert, Labor’s early seeming rejection of a preference deal with Palmer’s United Australia Party (UAP) could backfire.

Labor assumed that Palmer would still owe A$70 million dollars to the Herbert community. That all changed on Monday with Palmer’s announcement he will repay wages owed to Queensland Nickel workers.

Palmer has announced he will run for the Senate, and he has nominated local rugby league star Greg Dowling as his candidate for Herbert. With no sign of a One Nation putting up candidates in Herbert, it could come down to a tight race between LNP, ALP, the Greens and the minor parties of UAP and Katter’s Australia Party. Rejecting a preference deal with UAP could be harmful to Labor, if Palmer’s payback bounce and recruiting of local sports star wins him votes come May 18.

Down south and Liberal incumbent Peter Dutton is facing a different challenge. Dutton’s role in Malcolm Turnbull’s undoing is still fresh in the minds of Dickson voters. As Michelle Grattan has pointed out:

Nationally, Peter Dutton will have a big footprint in the campaign. It won’t be a helpful one for Morrison.

Dickson is one of the eight marginal LNP seats with a majority of less than 4%. The campaigning there is already getting down to personality politics. Labor has taken the lead with a social media campaign weaponising Dutton’s role in the spill. Comments Dutton made about Labor candidate’s Ali France’s disability will not help shore up support.




Read more:
The myth of ‘the Queensland voter’, Australia’s trust deficit, and the path to Indigenous recognition


Western Australia

Ian Cook, Senior Lecturer of Australian Politics at Murdoch University

Scott Morrison has his work cut out for him when it comes to convincing West Australians to accept his core message to voters: that they should reelect the Liberal-National Coalition government because they’re better economic managers than Labor.

He has two main problems. First, voters in Western Australia threw Colin Barnett’s Liberal-National Coalition government out in 2017, in part, because of its economic record. Second, many West Australians felt that their quality of life declined during the mining boom, so they know that lots of good economic data doesn’t necessarily mean that everyone’s lives will improve.

Economic management wasn’t the only issue that resulted in the Barnett government’s loss. Tension between the Coalition parties and the preference deal with One Nation didn’t help. But Labor focused part of their campaign on the Coalition government’s economic mismanagement during that election. And voters responded.

The evidence that conservative governments are just naturally better at managing an economy is thin, and there is just as much evidence that the reverse it true, as economics professor James Morley has pointed out. But the idea won’t go away as long as the economic orthodoxy is that governments shouldn’t interfere in the economy. And Australians believes that Coalition governments don’t interfere. Both views are open to question.

While other Australians may not question these assumptions about economic management, their recent experience with a Coalition government means that many West Australians will question them, and they’ll need convincing that they shouldn’t.

On the second problem, many West Australians recall a time when the economy was booming. Mining booming. And few of us felt better off, and many felt worse off. Of course it didn’t help that state governments, of both parties, increased utilities charges during this period. But the boom meant that the price of housing became ridiculous (and destined to crash), rentals were very hard to come by and, applying the definitive cappuccino test, we were paying more for our coffees than anyone else in Australia.

We had a two-speed economy shoved in our faces and one takeaway from this was that everyone doing well is not just about the economy doing well. The prime minister will get a chance to explain how I’ve gotten things terribly wrong when he appears in the first of the Leaders’ Debate in Perth on April 29.

South Australia

Rob Manwaring, Senior Lecturer in Politics and Public Policy at Flinders University

Political memories can be short. At the last federal election, perhaps the single biggest factor shaping voting patterns was the impact of Nick Xenophon’s Centre Alliance. For many years, Xenophon was a mainstay of South Australian politics, with a canny knack for finding appeal. The ubiquitous politician was both a longstanding member of the SA parliament, first elected in 1997, and then a federal senator from 2008 to 2017. Xenophon, at one stage touted as a future premier for South Australia, left Canberra to try and make a splash at the 2018 state election.




Read more:
No matter who wins the election, many Australians think real leadership will be lacking


Three years ago, at the national level, the Centre Alliance were poised to become a third force in South Australian politics, and a key disruptor to the major parties. In 2013, Xenophon’s team picked up a remarkable 24.9% of the vote, and in 2016 this was a still an impressive 21.3% of the vote. Last time out, the Centre Alliance had one member of the House of Representatives – Rebekha Sharkie picking off Liberal Jamie Briggs in Mayo, and three Senate positions. In terms of vote share, just over 250,000 South Australians voted for the the Centre Alliance.

But what now? With the charismatic Xenophon off the stage, it remains unclear what will happen to their vote share. While Sharkie is likely to hold off the challenge from Georgina Downer again, and it’s unclear how much impact the Centre Alliance will have. They are running three candidates, including Sharkie, for the lower house. Skye Kakoschke-Moore will be their lead Senate candidate.

At best, they seem to be angling to play a key kingmaker role in the Senate, making noises about limiting a potential Labor government’s franking credits and negative gearing policies. Yet, this seems a reactive campaign, and lacks Xenophon’s ability to pick key outlier issues. Moreover, where will moderate liberal and conservative voters find their voice?

Tasmania

Richard Eccleston, Professor of Political Science and Director of the Institute for the Study of Social Change at the University of Tasmania

Labor now holds four of the five House of Representatives seats on the Apple Isle. With popular independent Andrew Wilkie’s vice-like grip on Tasmania’s fifth seat, the recently renamed electorate of Clark (formerly Denison), the chance of a Coalition upset next month seems remote.

But Tasmanian voters have ignored national trends, and delivered more than their fair share of upsets in recent elections, so there must be an outside chance that the Coalition could claw back a seat against the national tide.

Labor’s Ross Hart holds Bass, which takes in Launceston and much of North East Tasmania, by a reasonably comfortable 5.4%. But history suggests Labor shouldn’t be complacent given the electorate has been a graveyard for political careers in recent years. The last time a sitting member was returned for a second term was back in 2001, with the last five elections delivering big swings and unprecedented volatility.

The Liberals will be pinning their hopes on Bridget Archer, the mayor of the working class town of George Town, near Launceston. Archer may be the circuit breaker the Liberals need. She has a high profile in a community traditionally dominated by Labor, and, unlike the vocal conservative Andrew Nikolic who lost the seat in 2016, she won’t have to run the gauntlet of a national GetUp! campaign.

Scott Morrison has visited Bass twice in recent weeks, and a new poll commissioned by a forest industry group put the Liberals in front on a two-party preferred basis. But this result may have been skewed by the design of the poll and its focus on the future of forestry, an industry long championed by the Liberals in Tasmania.

On the other side of the ledger, Labor’s commitment to more funding for health and education, and greater tax relief for lower income households, is more likely to resonate with the electors of Bass than the Coalition’s emphasis on smaller government, and retaining concessions for property investors and self-funded retirees.

While the smart money is on Labor’s Ross Hart holding Bass, history suggests that we shouldn’t rule out an upset on election night.The Conversation

Nick Economou, Senior Lecturer, School of Political and Social Inquiry, Monash University; Chris Aulich, Adjunct Professor at the University of Canberra, University of Canberra; Ian Cook, Senior Lecturer of Australian Politics, Murdoch University; Maxine Newlands, Senior Lecturer in Political Science: Research Fellow at the Cairns Institute, James Cook University; Richard Eccleston, Professor of Political Science; Director, Institute for the Study of Social Change, University of Tasmania, and Rob Manwaring, Senior Lecturer, Politics and Public Policy, Flinders University

This article is republished from The Conversation under a Creative Commons license. Read the original article.