The budget’s dirty secret is the hikes in tax rates you’re not meant to know about



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The wheels of the economy will grind more slowly because of undeclared tax rate hikes in the budget.
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Steven Hamilton, George Washington University

As I mentioned a few days ago, Treasurer Josh Frydenberg and Prime Minister Scott Morrison recycled three pretty big tax ideas in the 2019 budget, each one originally from the 2018 budget but supercharged, and in one case doubled.

The ideas were:

  • eventually eliminating the 37% bracket to make the tax system flatter;

  • upsizing the Low and Middle Income Tax Offset to A$1080; and

  • increasing the value of business investments that may be written off.

Today I’ll deal with the second: the Low and Middle Income Tax Offset, also known as the LMITO or lamington.

In last year’s budget it was to be worth up to $530 per person, but this year the government intends to more than double that to $1,080. And they’d do so retrospectively, so that by the time people put in their 2019 tax returns, many will get a tax cut more than twice as big as originally expected.

(As it happens, the operative word is “intends”. In budget week Morrison said the Tax Office would be able to make the changes “administratively” without the need for legislation. He didn’t have time to introduce the leglislation and Labor would broadly support it. Last week in its official pre-election overview of the government’s finances, the public service said no. It would need “the relevant legislation to be passed before the increase to the Low and Middle Income Tax Offset can be provided for the 2018-19 financial year”.)

The idea of the lamington

But let’s examine the idea of the lamington anyway because it does have bipartisan support and will become law and part of the tax scales. On one hand, it will deliver a welcome boost to taxpayers on middle and low (but not the lowest) incomes. On the other hand, it will push up a key marginal tax rate and kill incentives in a way the Treasurer hasn’t yet acknowledged.

The offset is a gift of $530 (soon to be $1080) slipped into the tax returns of everyone who earns between $48,000 and $90,000.

People earning more than $90,000 will get less of the offset as their income climbs, up to an income of $125,000 when it the offset will vanish. Low earners will get $200 (soon to be $255), climbing to the maximum of $530 ($1080) as their income climbs from $37,000 to $48,000. People with an income too low to pay tax won’t have any tax to offset, and so will get nothing.

Described in dollar terms as I just have, it’s easy to understand. You can work out the tax cut you’ll get, and the Coaltion has helpfully prepared tables to let you see.

But it is possible to describe the changes in another way, not in dollar terms, but as a new set of marginal rates. And this is where they get interesting, and unattractive.

As a longer-term goal, the Coalition says it wants most taxpayers to pay the same unchanging marginal rate of 30% for all incomes between $45,000 and $200,000. It believes that high marginal rates and frequently changing marginal rates sap incentive.

By 2024 it wants the tax scale to look like this:



Commonwealth budget papers

Frydenberg says the lower, flatter scale would incentivise “people to stay in work, to work longer, to work more”.

So you would think he wouldn’t want to make it bumpy, or lift the marginal rate, which is exactly what his LMITO does.

What the lamington does to those rates

You won’t find the following chart anywhere in the budget papers, but it is what the offsets in this budget and in the last one will do to the tax scale for the next four years before they are replaced by the flatter scale.

First, here’s what we are told the rates look like today:



Australian Tax Office

Now, here’s what they will actually be when you take account of the existing Low Income Tax Offset (or LITO) and the promised supersized Low and Middle Income Tax Offset (LMITO) in the budget.



Derived from Commonwealth Budget Paper 2, 2019

The graph is lumpy in part because the LMITO is clawed back at the impressive rate of 3 cents for each extra dollar earned between $90,000 and $125,000.
This means it adds 3 cents to the marginal tax rate in that range, pushing it up from 37 cents to a high 40 cents, before at higher incomes it falls back to 37 for taxpayers earning more than $125,000.

Bizarrely, it means the party that has pledged to abolish the 37% rate because it saps incentive has decided to first boost it to 40% over a substantial range of incomes.

The graph is lumpy further down the income scale for another reason: as the LMITO climbs between $37,000 and $48,000, the separate LITO is is clawed back.

Below are the “including offsets” and “excluding offsets” scales together, to enable you to see the differences. The tax rates people will face are those including offsets.



Derived from Commonwealth Budget Paper 2, 2019

The graph clarifies the trade-off at the heart of the lamington: it targets tax relief at low and middle earners at the necessary cost of higher rates further up the income scale.

How much of a problem is it? Well, that depends.

It’s a classic example of what economists call the equity-efficiency trade-off.

Arthur Okun, an adviser to US President Lyndon Johnson, described it thusly: redistributing income is like transporting water from one place to another in a leaky bucket – you can do it, but you’d better be prepared to lose some water as you ae doing it.

In much the same way, you can restrict tax cuts to low earners, but that means high earners have to face higher marginal rates which to some degree will shrink economic activity.

The critical question is how much it will shrink economic activity, how leaky is the bucket?




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It worsens incentives for the roughly 700,000 Australians earning between $90,000 and $125,000. For every additional dollar each of them earns, the government will take away an extra 3 cents. That might not sound like much, but the evidence suggests it will have an effect.

How? Well, the tax rate increase lowers the benefit of generating additional taxable income. And there are a range of ways to avoid generating additional taxable income. The most obvious is working fewer hours, for example by not working overtime or by working fewer days per week. Secondary earners (often women returning to work after maternity leave) are particularly prone to that kind of response.

But it also could mean not going for promotions or pay rises where they take effort, for example by not gaining extra skills or not putting in additional work effort. And, as I found in a recent study, it could involve claiming more deductions to put a brake on your taxable income.

What will the lamington cost us?

Relying on data for the Australian tax system, I find that a 3 percentage point increase in the marginal tax rate results in an average reduction in taxable incomes of around 0.6%. For someone earning $125,000 per year, that amounts to a reduction in taxable income of $750 per year, by any of the means described above or others.

If we assume the average affected person earns in the middle of the relevant range, that implies an aggregate reduction in taxable income of almost half a billion dollars a year from the 3 percentage point tax increase. That means around $300 million less in consumption and saving and around $200 million less in income tax revenue, all because of LMITO.

That half a billion per year is the real, measurable, and unavoidable cost of targeting the Coalition’s tax break. When economists talk about “distortions” or “deadweight losses” created by tax increases, that’s what they mean. It is the cost of fairness. Whether that cost is worth paying is an open question. The government has evidently decided that it is. And now we can decide at the ballot box, ideally armed with proper information.

But it is of concern that the presentation of the policy – while politically attractive – obscures the genuine increases in marginal tax rates the Coalition’s changes will bring about, and thereby their real economic costs.

Eliminating most offsets and concessions, as recommended by the Henry Tax Review in 2010, would do the tax system good. And it do all of us good by making it easier to see what we are being asked to vote for come election time.




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The Conversation


Steven Hamilton, Assistant professor, George Washington University

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

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Shorten promises $2.3 billion package to relieve costs for cancer patients


Michelle Grattan, University of Canberra

Bill Shorten has promised his government would introduce a A$2.3 billion four year package to slash cancer patients’ out-of-pocket costs, and has committed $1 billion to give extra tax relief for low income earners, above what they would get from Tuesday’s budget.

In his budget reply on Thursday night, the opposition leader pitched to voters on a Labor strength – health – declaring his cancer care plan would be the “most important investment in Medicare since Bob Hawke created it”.

Shorten rejected the government’s second and third tranches of tax cuts, due to start in 2022-23 and 2024-25 and worth about $143 billion of the $158 billion ten year package. The last stage was a “radical, right-wing, flat tax experiment”, far off in time and skewed disproportionately to a relative few, he said.

Stressing Labor’s economic responsibility, Shorten recommitted to delivering “stronger surpluses, paying down debt faster” than the government.

“What we need is a fighting fund for the country, a strong surplus to protect us from international shocks”, he said.

He attacked the government – which has a $7.1 billion surplus in its budget for next financial year – for “shortchanging the NDIS [National Disability Insurance Scheme] by $1.6 billion, to prop up a flimsy surplus forecast”.

Shorten – who in his speech referred to his late mother Ann’s battle with breast cancer – said the cancer care plan would provide for millions of free scans and consultations, and cheaper medicines.

Cancer “is frightening, it’s isolating, it’s exhausting”. And all too often, it was impoverishing, he said.

“For so many people, cancer makes you sick and then paying for the treatment makes you poor. And that’s a fact that I think a lot of Australians would be surprised to learn.

“Because if you haven’t been through it yourself, you might not realise that all those vital scans and tests and consultations with specialists aren’t fully covered by Medicare. Instead, they cost hundreds of dollars, adding up to thousands, out of your own pocket,” he said.

One in four women with breast cancer paid more than $10,000 for two years of scans and tests, he said. Some men with prostate cancer were paying more than $18,000. Most people with skin cancer – and Australia has the highest rates of this cancer in the world – paid more than $5000 for the first two years of treatment.

Each year 300,000 people who needed radiology did not get it, because they couldn’t afford it.

People needing treatment for cancer were often not well enough to work, so they were already under massive financial strain, Shorten said. Those living in regional areas had the extra costs of travel and accommodation.




Read more:
Shorten’s budget reply will outbid government on tax relief for low income earners


A Labor government would:

  • invest $600 million towards eliminating all out-of-pocket costs for diagnostic imaging, with up to six million free cancer scans funded through Medicare – reducing out-of-pocket costs from hundreds of dollars to zero. This would include MRIs too. At present only half the MRI machines were covered by Medicare, and regional patients often had to drive for hours or pay thousands of dollars. “If we win the election, not only will we provide more MRI machines to communities where they are needed most, but Labor will guarantee that every single MRI machine in Australia that meets a national quality standard is covered by Medicare for cancer scans.”

  • invest $433 million to fund three million free consultations with oncologists and surgeons. Over four years this would mean an extra three million appointments were bulk billed, reducing costs of hundreds of dollars to nothing

  • guarantee that every drug recommended by independent experts would be listed on the Pharmaceutical Benefits Scheme.

On tax, Shorten said people earning between $48,000 and $126,000, no matter who they voted for in May, would get the same tax refund.

But the Liberal plan did not do enough for the 2.9 million people who earned less than $40,000 – about 57% of whom were women.

In Labor’s first budget Labor would provide a bigger tax refund for low earners than the Liberals proposed.

“6.4 million working people will pay the same amount of income tax under Labor as the Liberals – and another 3.6 million will pay less tax under Labor,” he said. “All told, an extra billion dollars, for low income earners”.

Under further details provided by Labor, it said workers earning up to $37,000 a year would receive a tax cut of up to $350. For workers earning between $37,000 and $48,000 the value of the tax offset would increase up to the maximum tax offset of $1,080.

A worker on $35,000 would get a tax cut of $255 a year under the Liberals, compared to $350 under Labor. A worker on $40,000 would receive a cut of $480 under the Liberals compared to $549 under Labor.

On TAFE Shorten promised to double the size of Labor’s rebuilding TAFE program – up to $200 million – to renovate campuses.

Labor is committed to paying the upfront fees for 100,000 TAFE places to get more Australians in high priority courses. “I am proud to announce that 20,000 of these places will be allocated to a new generation of aged care workers and paid carers for the NDIS,” Shorten said.

Finance minister Mathias Cormann said Shorten had put forward an agenda for $200 billion in higher taxes that would weaken the economy and bring higher unemployment. The Conversation

Provided by Labor.

Michelle Grattan, Professorial Fellow, University of Canberra

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

The budget super change that helps the wealthy at the expense of the young



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If your’re wealthy you’ll be able to put more money into super without even working.
Shutterstock

Brendan Coates, Grattan Institute

Another federal budget, and yet more tinkering to superannuation tax breaks. But the latest changes will only help older wealthier Australians. The losers are younger workers and taxpayers.

What’s the plan?

From July 1 2020, Australians aged 65 and 66 will be able to make voluntary pre- and post-tax superannuation contributions without having to pass the Work Test, under which they are required to work a minimum of 40 hours over a 30-day period.

About 55,000 Australians aged 65 and 66 will benefit from these changes at a cost of A$75 million over the next four years.

It’s another boost for tax planning

Treasurer Josh Frydenberg says the changes will help Australians save for their retirement.

But most 65- and 66-year-olds still working to top up their superannuation are already eligible to make voluntary super contributions, because they satisfy the Work Test. Working 40 hours over a 30-day period – or little more than one day each week – is hardly onerous.

For every dollar contributed to super that genuinely helps Australians save more for their retirement as a result of these changes, there will be many more dollars funnelled into super to make extra use of superannuation tax concessions.

The biggest winners will be wealthier retired 65- and 66-year-olds with other sources of income, such as from shares or property, which they will now be able to recycle through superannuation.




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They will be able to put up to $25,000 into super from their pre-tax income and then – because super withdrawals are tax-free – take the money back out immediately. Their contributions to super are taxed at only 15%, whereas ordinary dividends or bank interest is taxed at their marginal tax rate. The tax savings can be as high as $5,000 a year.

Such strategies aren’t costless: other taxpayers must pay more, or accept fewer services, to make up the difference.

It will mean larger inheritances

The government is also allowing 65- and 66-year-olds to make three years’ worth of post-tax super contributions, or up to $300,000, in a single year.

These changes will mainly boost inheritances.

Most people who make after-tax contributions already have large super balances and typically contribute from existing pools of savings to minimise their tax.

Grattan Institute’s 2016 report, A Better Super System, found that only about 1% of taxpayers have total super account balances of more than $1 million, yet this tiny cohort makes almost one-third of all post-tax contributions.

These changes will turbo-charge so-called “recontribution strategies” that minimise the tax paid on superannuation fund balances passed on as inheritances. When inherited, super fund balances originally funded by pre-tax contributions can be taxed at 17% (including the Medicare levy), depending on the age of the deceased and the beneficiary.

To avoid this tax on their estate, individuals can withdraw superannuation funds tax-free and contribute them back as a post-tax contribution, up to the annual post-tax contributions cap of $100,000 each year.

It fails the government’s own test

In 2016, the government tried – but failed – to define the purpose of superannuation as providing “income in retirement to supplement or substitute the Age Pension”.

The proposed objective rightly implied that super should not aim to provide limitless support for savings that increase retirement incomes.

The benefits of super changes should always be balanced against the costs of achieving them. The government’s latest changes fail that test.




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The Conversation


Brendan Coates, Fellow, Grattan Institute

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

Budget 2019 boosts aged care and mental health, and modernises Medicare: health experts respond



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The budget provides some short-term boosts for aged care and mental health but little opportunity for much-needed structural reform.
Shutterstock

Stephen Duckett, Grattan Institute; Hal Swerissen, Grattan Institute; Ian Hickie, University of Sydney; Lesley Russell, University of Sydney; Peter Sivey, RMIT University, and Philip Clarke, University of Melbourne

This year’s budget includes $448.5 to modernise Australia’s Medicare system, by encouraging people with diabetes to sign up to a GP clinic for their care. The clinic will receive a lump sum payment to care for the person over time, rather than a fee each time they see their GP.

The indexation freeze on all GP services on the Medicare Benefits Schedule (MBS) will lift from July 1, 2019, at a cost of $187.2 million. The freeze will be lifted on various X-ray and ultrasound MBS rebates from July 1, 2020.




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The budget announces $461 million for youth mental health, including 30 new headspace centres, some of which will be in regional areas. But it does little to address the underlying structural reforms that make it difficult for Australians to access quality and timely mental health care.

In aged care, the government will fund 10,000 home care packages, which have been previously announced, at a cost of $282 million over five years, and will allocate $84 million for carer respite. But long wait times for home care packages remain.

Other announcements include:

  • $62.2 million over five years to train new rural GPs
  • $309 million for diagnostic imaging services, including 23 new MRI licences
  • $331 million over five years for new pharmaceuticals, including high-cost cancer treatments
  • $107.8 million over seven years for hospitals and facilities including Redland Hospital, Bowen Hospital, Bass Coast Health and Ronald McDonald House
  • $70.8 million over seven years for regional cancer diagnosis, treatment and therapy centres
  • $114.5 million from 2020-21 to trial eight mental health facilities for adults
  • $43.9 million for mental health services for expectant and new parents
  • $35.7 million over five years for increased dementia and veterans’ home care supplements
  • $320 million this year as a one-off increase to the basic subsidy for residential aged-care recipients.

Here’s what our health policy experts thought of tonight’s budget announcements.


A hesitant step forward for Medicare

Stephen Duckett, Director, Health Program, Grattan Institute

Medicare funding is slowly creeping into the 21st century. The 19th-century model of individual fees for individual services – suitable for an era when medicine was essentially dealing with episodic conditions – is being supplemented with a new fee to better manage the care of people with diabetes.

The budget announcement, as part of the Strengthening primary care package, is for a new annual payment for each person with diabetes who signs up with a specific GP. Funding is provided for about 100,000 people to sign up – about 10% of all people with diabetes in Australia.

The new item number is consistent with the recent MBS review Report on General Practice, which recommended a move toward voluntary enrolment.

The precise details of the new fee – including the annual amount and any descriptors – have not yet been released. But it should encourage practices to move towards a more prevention-oriented approach to chronic disease management, including using practice nurses to call patients to check up on their condition, and using remote monitoring technology.

The budget announcement contained no evaluation strategy for the initiative. The government should produce such a strategy soon.


Support for aged and disability care

Hal Swerissen, Emeritus Professor, La Trobe University, and Fellow, Health Program, Grattan Institute

The budget has short-term measures to address major issues in aged care and disability while we wait for the royal commissions to fix the long-term problems.

The National Disability Insurance Agency (NDIA) is struggling with the huge task of putting the National Disability Insurance Scheme (NDIS) in place.

There has been a major under-spend on the on the scheme. Price caps for services such as therapy and personal care are too low and nearly one-third of services are operating at a loss. The under-spend would have been more if there hadn’t been a last-minute budget decision to significantly increase service caps, at a cost of $850 million.

$528 million dollars has also been announced for a royal commission to look at violence, neglect and abuse of people with disabilities – the most expensive royal commission to date.




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There is more funding for aged care. Currently, 130,000 older people are waiting for home care packages – often for a year or more. Nearly half of residential care services are losing money and there are major concerns about quality of care.

The short-term fix is to give residential care $320 million to try to prevent services going under. The budget includes 10,000 previously announced home care packages, at a cost of $282 million, but that still leaves more than 100,000 people waiting.

There’s still a massive shortfall in home care places.
eggeegg/Shutterstock

Little for prevention, Indigenous health and to address disparities

Lesley Russell, Adjunct Associate Professor, Menzies Centre for Health Policy, University of Sydney

Prevention

Preventable diseases and conditions are a key factor in health inequalities and rising health-care costs. The two issues looming large are obesity and its consequences, and the health impacts of climate change.

There is $5.5 million for 2018-19 and 2019-20 for mental health services in areas affected by natural disasters, and $1.1 million over two years for the Health Star rating system – otherwise nothing for primary prevention.

Indigenous health

The Treasurer did not mention Closing the Gap in his budget speech, and there is little in the budget for Indigenous health.

Just $5 million over four years is provided in the budget for suicide-prevention initiatives. And the Lowitja Institute receives $10 million for health and medical research.




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Some announcements in March contribute a little more:

Inequalities and disparities

Disadvantaged rural and remote communities will (ultimately) benefit from efforts to boost National Rural Generalist Training Pathway, with $62.2 million provided over four years. This was a 2016 election commitment.

The announcement of $200 million over three years to index Medicare payments for ultrasound and diagnostic radiology services (beginning from July 1, 2020) came with claims this will help reduce out-of-pocket costs. But given that these payments have not been indexed in 20 years, will the money go to providers or patients?

Hospitals and private health insurance

Peter Sivey, Associate Professor, School of Economics, Finance and Marketing, RMIT University

There are no major changes to public hospital funding arrangements in this year’s budget.

It’s business as usual for hospital funding, aside from funding injections for a handful of hospital sites.
By VILevi

Funding for public hospitals is predicted to increase at between 3.7% and 5.6% over the forward estimates. However, these figures are contingent on the new COAG agreement on health funding between the Commonwealth and states, which is due to be finalised before the end of 2019.

The states will be hoping to wring some more dollars from the federal government given their soaring public hospital admissions and pressure on waiting times.

There is no change to the government’s private health insurance policy which has just come into force.




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Premiums up, rebates down, and a new tiered system – what the private health insurance changes mean


Government spending on the private health insurance rebate is projected to increase more slowly than premiums at between 1.8% and 3.2% because of indexation arrangements which are gradually reducing the rebate over time.


Smaller targets for mental health

Ian Hickie, Co-Director, Brain and Mind Institute, University of Sydney

Numerous reports and accounts from within the community have noted the flaws in Australia’s mental health system: poor access to quality services, the uneven roll-out of the NDIS, and the lack of accountability for reforming the system.

The next federal government faces major structural challenges in mental health and suicide prevention.

Not surprisingly, this pre-election budget does not directly address these issues. Instead, it focuses on less challenging but worthy targets such as:

  • continued support for expansion of headspace services for young people ($263m over the next seven years) and additional support for early psychosis services ($110m over four years)
  • support for workplace-based mental health programs ($15m)
  • support for new residential care centres for eating disorders ($63m).

A more challenging experiment is the $114.5 committed to eight new walk-in community mental health centres, recognising that access to coordinated, high-quality care that delivers better outcomes remains a national challenge.

Despite the commitment of health minister Greg Hunt to enhanced mental health investments, the total increased spend on these initiatives ($736.6m) is dwarfed by the big new expenditures in Medicare ($6b), improved access to medicines ($40b), public hospitals ($5b) and aged care ($7b).

It will be interesting to see whether mental health reform now receives greater attention during the election campaign. At this stage, neither of the major parties has made it clear that it is ready to deal directly with the complex challenges in mental health and suicide prevention that are unresolved.


New funding for research, but who decides the priorities?

Philip Clarke, Professor of Health Economics, University of Melbourne

The budget contains several funding announcements for research.

The government will establish a Health and Medical Research Office, to help allocate money from the Medical Research Future Fund (MRFF). This will be needed, as the budget papers commit to a further $931 million from the MRFF for:

  • Clinical trials for rare cancers and rare diseases
  • Emerging priorities and consumer-driven research
  • Global health research to tackle antimicrobial resistance and drug-resistant tuberculosis.
The budget includes funding for consumer-driven research and drug-resistant tuberculosis.
i viewfinder/Shutterstock

In addition, the budget includes:

  • $70 million for research into type 1 diabetes
  • a large investment for genomics (although that is a re-announcement of $500 million promised in last year’s budget)
  • a series of infrastructure grants to individual universities and institutions, such as $10 million to establish the Curtin University Dementia Centre of Excellence.



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The government appears to be moving away from allocating medical research funding through existing funding bodies, such as the National Health and Medical Research Council (NHMRC), towards allocating research funds to specific disease areas, and even to individual institutions.

This is a much more direct approach to research funding, but it raises a few important questions. On what basis are these funding decisions being made? And why are some diseases considered priorities to receive funding? There is very little detail to answer these questions.

Australia’s allocation of research funding through the MRFF is diverging from long-held traditions in other countries, such as the United Kingdom, which apply the “Haldane principle”. This involves researchers deciding where research funding is spent, rather than politicians.

* This article has been updated since publication to clarify the 10,000 home care packages have been previously announced.The Conversation

Stephen Duckett, Director, Health Program, Grattan Institute; Hal Swerissen, Emeritus Professor, La Trobe University, and Fellow, Health Program, Grattan Institute; Ian Hickie, Professor of Psychiatry, University of Sydney; Lesley Russell, Adjunct Associate Professor, Menzies Centre for Health Policy, University of Sydney; Peter Sivey, Associate Professor, School of Economics, Finance and Marketing, RMIT University, and Philip Clarke, Professor of Health Economics, University of Melbourne

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

Government gives Newstart recipients energy payment to smooth passage of legislation


Michelle Grattan, University of Canberra

The government has extended the energy payment to people on Newstart – after excluding them only days ago.

Treasurer Josh Frydenberg said the decision was made at a meeting on Tuesday night of Scott Morrison, Finance Minister Mathias Cormann and himself. He indicated it was about smoothing the passage of the measure through the parliament.

There was widespread criticism of the exclusion of Newstart recipients from the payment, which will be A$75 for a single person and $125 for a couple.




Read more:
Expect a budget that breaks the intergenerational bargain, like the one before it, and before that


The money is due to go out very soon and the government needed the legislation to pass immediately. While Labor had flagged it would support the one-off payment, the legislation could have been amended, because the government is in a minority in the House of Representatives.

The payment was originally set to be confined to those on the age pension, disability support pension, carers payment, parenting payment single recipients, and veterans and their dependants receiving payments.

The extension, which will also cover those on Youth Allowance and other working age payments, bringing the number of recipients to five million, will add some $80 million to the original cost of $284.4 million.

Labor seized on the backdown, seeking to suspend standing orders to move a motion in the House saying the government’s backflip “has already blown an $80 million hole in the budget”, and showed the budget was “unravelling less than 24 hours after it was delivered”.

The motion condemned the government for “only looking after the top end of town and treating vulnerable Australians as an afterthought”. The attempt to suspend standing orders failed.

Frydenberg, speaking to the National Press Club, explained the original exclusion by saying three-quarters of people on Newstart moved off it within 12 months, and 99% of people on it received another payment.




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


“They get a parenting payment or they get a family tax benefit payment, whereas when you’re on the Disability Support Pension or on the aged pension, you tend to be on it for longer, and that seems to be – that is your principal form of payment”.

Frydenberg said the change “will secure the passage of the piece of legislation through the parliament”.

Appearing on the ABC Q&A on Monday, Liberal senator Arthur Sinodinos could not say why Newstart recipients had been excluded from the payment. “The short answer is I don’t know why,” he said. He also said he thought Newstart was too low.




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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.

NATSEM: federal budget will widen gap between rich and poor



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The National Centre for Social and Economic Modelling has calculated the impact of the 2019 federal budget’s tax and welfare transfer changes.
http://www.shutterstock.com

Robert Tanton, University of Canberra; Hai Anh La, University of Canberra, and Jinjing Li, University of Canberra

The Morrison government’s pre-election budget has not been the bonanza some predicted. It is a fairly modest affair.

But calculations by the the National Centre for Social and Economic Modelling, based at the University of Canberra, show the budget will widen the gap between rich and poor. This is because changes to the tax and welfare system most benefit those paying tax. Those who don’t earn enough income to pay tax benefit least.




Read more:
Infographic: Budget 2019 at a glance


The centre has calculated the impact of the the federal budget’s tax and welfare transfer changes by families, age groups and Commonwealth Electoral Division.

The most significant tax changes are the two stages of tax cuts in 2022-23 and 2024-25. In 2022-23 the point at which the marginal tax rate increases from 19% to 32.5% will lift from A$41,000 to A$45,000. In 2024-25 the marginal tax rate on incomes between A$45,000 and A$200,000 will be reduced to 30%. The top tax rate of 45% (which now kicks in at A$180,000) will apply to any income above A$200,000.

The threshold on which no income tax is paid remains the same, at A$18,200.

Other tax changes involve increases to the Low Income Tax Offset (LITO) and the Low and Middle Income Tax Offset (LMITO). The LMITO (available for those earning more than A$48,000) will increase from A$530 to A$1,090 from this financial year, while the LITO will increase from A$645 to A$700 in 2022-23.

More income, more benefit

The benefit of the 2024/25 tax cuts on high-income families will be dramatic, as seen in Figure 1, which shows the effect of the changes over three years (2019-20, 2022-23 and 2024-25) by income.



National Centre for Social and Economic Modelling

The important point to note is that changes to marginal tax rates and the income tax offsets affect anyone paying tax. There is absolutely no benefit to anyone not paying tax. Which is why there is very little gain for those on incomes below $40,000 (the top of the second income quintile in Figure 1). The gain for those in the first income quintile (who mostly earn no private income) is even lower.

Demographic benefits

Figure 2 shows that the cohort that would gain the most in 2019-20 are those aged 26–35, by an average by A$245 a year for men and A$213 a year for women. This is mainly due to the change in the Low and Middle Income Tax Offset.


Figure 2: Impact of 2019-20 budget tax and welfare system changes by age group and year of impact.


By 2024-25, the cohort gaining most are men aged 46–55, by A$795 a year, and women aged 46-55, by A$759 a year. This is mainly because the tax changes in 2024-25 provide greatest advantage to high-income earners, as shown above.

Family benefits

Figure 3 breaks down the impact by family type and income quintile. Couples with children gain the most for all years. By 2024-25, couples with children in the highest-income quintile gain an extra A$4,573 a year, while those in the lowest quintile get just A$114.



The main reason for this is that couples with children commonly have both parents working and paying tax, therefore tax changes benefit these families more.

In the first year (2019-20), the Low Income Tax Offset and Low and Middle Income Tax Offset mean middle-income earners gain the most (although it is still Quintile 4 gaining the most in this first year). By 2022-23 the tax cuts benefit higher-income households more.

Geographic gains

When it comes to the impact by Commonwealth Electoral Division (Figure 4), we can see that by 2024-25 urban areas gain the most, and regional areas the least.



This is because households in urban areas tend to have higher incomes, and the tax cuts in 2024-25 mean electoral divisions with higher income households will benefit the most.

Effect on poverty rate

The budget’s effect on the poverty rate – the proportion of households living on less than 50% of median income – is to reduce it by 0.2 percentage points by 2024-25. This is a fairly small reduction. But due to the tax cuts in 2024-25 raising the net incomes for high-income households, this means income inequality will be higher.




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The 0.2 percentage point decrease compares to an 0.8% percentage point reduction that NATSEM’s modelling estimates would result from raising the Newstart allowance by A$75 a week from what it is now.

The message from this analysis is that the changes to the tax and welfare system in this budget benefits those with higher incomes and who are paying tax, with little to no gains in future years to some of those low income earners who aren’t paying tax.The Conversation

Robert Tanton, Professor, Institute for Governance & Policy Analysis, University of Canberra; Hai Anh La, Senior Research Fellow, University of Canberra, and Jinjing Li, Associate Professor, NATSEM, University of Canberra

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

View from The Hill: Malcolm Turnbull’s home truths on the NEG help Labor in the climate wars


Michelle Grattan, University of Canberra

An Easter weekend in an election campaign might be a bit of a challenge for a pair of leaders who were atheists. But fortunately for Scott Morrison and Bill Shorten, declared believers, it wasn’t a problem.

Both attended church services during the so-called campaign cease-fire that the main parties had proclaimed for two of the four days.

Morrison on Sunday was pictured in full voice with raised arm at his Horizon Pentacostal church in The Shire, where the media were invited in. On Friday he’d been at a Maronite Catholic service in Sydney.

Sunday morning saw Shorten at an Anglican service in Brisbane, his family including mother-in-law Quentin Bryce, former governor-general.

Neither leader was hiding his light under a bushel.

Church, chocolate and penalty rates

Sunday was an opportunity to wheel out the kids, chasing Easter eggs (Shorten) or on the Rock Star ride at Sydney’s Royal Easter Show (Morrison). This was campaigning when you’re not (exactly) campaigning.

The minor players weren’t into the pretend game. For them, the relative restraint on the part of the majors presented rare opportunity. Usually Centre Alliance senator Rex Patrick would have little chance of being the feature interview on the ABC’s Insiders.

But while Friday and Sunday were lay days for the major parties Saturday was not (and Monday won’t be either).

For Labor, Easter has meshed nicely with one of the key planks of its wages policy – restoration of penalty rate cuts by the Fair Work Commission. Even on Sunday, Shorten pointedly thanked “everyone who’s working this weekend”.

It was the start of Labor’s campaign focus turning from health to wages this week, when it will cast the election as a “referendum on wages”.

Turnbull resurrects the NEG

The weekend standout, however, was the intervention of Malcolm Turnbull, who launched a series of pointed tweets about the National Energy Guarantee (NEG).

Turnbull was set off by a reference from journalist David Speers to “Malcolm Turnbull’s NEG”.

“In fact the NEG had the support of the entire Cabinet, including and especially the current PM and Treasurer. It was approved by the Party Room on several occasions”, the former prime minister tweeted.



“It had the support of the business community and energy sector in a way that no previous energy policy had. However a right wing minority in the Party Room refused to accept the majority position and threatened to cross the floor and defeat their own government”.

“That is the only reason it has been abandoned by the Government. The consequence is no integration of energy and climate policy, uncertainty continues to discourage investment with the consequence, as I have often warned, of both higher emissions and higher electricity prices.”

He wasn’t finished.



“And before anyone suggests the previous tweet is some kind of revelation – all of the economic ministers, including myself, @ScottMorrisonMP, @JoshFrydenberg spent months arguing for the NEG on the basis that it would reduce electricity prices and enable us to lower our emissions.”

And then:

“I see the @australian has already described the tweets above as attacking the Coalition. That’s rubbish. I am simply stating the truth: the NEG was designed & demonstrated to reduce electricity prices. So dumping it means prices will be higher than if it had been retained. QED”

“The @australian claims I ‘dropped the NEG’. False. When it was clear a number of LNP MPs were going to cross the floor the Cabinet resolved to not present the Bill at that time but maintain the policy as @ScottMorrisonMP, @JoshFrydenberg& I confirmed on 20 August.”



(Frydenberg, incidentally, has lost out every which way on the NEG. As energy minister he tried his hardest to get it up, only to see it fall over. Now he is subject to a big campaign against him in Kooyong on climate change, including from high-profile candidates and GetUp.)

Turnbull might justify the intervention as just reminding people of the history. But it is damaging for the government and an Easter gift for Labor – which is under pressure over how much its ambitious emissions reduction policy would cost the economy. It also feeds into Labor’s constant referencing of the coup against Turnbull.

Turnbull’s Easter tweets are a reminder

  • the Coalition sacrificed a coherent policy on energy and climate for a hotchpotch with adverse consequences for prices;

  • it dumped that policy simply because of internal bloodymindedness, and

  • the now-PM and treasurer were backers of the NEG, which had wide support from business.

Shorten has strengthened his commitment on the NEG, indicating on Saturday he’d pursue it in government even without bipartisan support.

“We’ll use some of the Turnbull, Morrison, Frydenberg architecture, and we will work with that structure,” he said.

Given the hole it has left in the government’s energy policy, pressing Morrison on the economic cost of walking away from the NEG is as legitimate as asking Shorten about the economic impact of his policy.




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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.

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.




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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.




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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.




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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.

The false hope offered by talk of a living wage



File 20190328 139377 1qgqh0p.jpg?ixlib=rb 1.1
Supporters outside the offices of the Fair Work Commission in Melbourne on Friday, June 1, 2018 after it lifted the minimum wage by 3.5%
JOE CASTRO/AAP

John Freebairn, University of Melbourne

Labor is promising a “living wage” rather than a “minimum wage” if elected.

It will ask the Fair Work Commission to first determine what wage would offer a “decent standard of living for families”, and then to determine the time frame over which it should be phased in, taking into account the capacity of businesses to pay, and the potential impact on employment, inflation and the broader economy.

It is selling the idea of what would be a very big increase on the present minimum wage as “good for workers and good for the economy”.

“Consumer spending makes up 60% of the Australian economy,” its employment spokesperson Brendan O’Connor said. “When low-paid workers get a pay rise, they spend it in the local shops and help small businesses. It’s good for everyone.”

The idea harks back to the 1907 Harvester judgement, in which an arbitration court judge decreed that wages at a Melbourne factory should be based on the cost of living “for a worker and his family”.




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To get there from the current bare minimum wage of A$18.93 per hour would almost certainly require increases bigger than the sum of productivity growth and inflation, which are running at a combined annual rate of around 3%.

Unacknowledged by Labor in spruiking the policy this week was the fallacy of its consumer spending argument, the cost of the proposal to jobs, and the likelihood that it won’t much help many of the people who need it.

The false increased spending argument

One of the claimed benefits of a living wage is that employees will spend most of their extra income, resulting in large increases in national spending, national income, and even the tax take.

An implicit assumption is that the extra money comes “as manna from heaven” with no second-round effects.

But given that other labour costs won’t come down (it is hard to see executive pay being cut), the labour cost for each affected business will climb, pushing down returns to the providers of capital, including the returns to shareholders and small business owners.

With lower returns, less capital will be put up to invest.

Where businesses can, they will pass on the increased costs not matched by increased productivity by increasing prices.

They will get away with it unless they face competition from imports or other exporters.




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Where import competitors and exporters face international competition, they will reduce output. In turn, the greater amount of money sent out of the country will eventually push down the Australian dollar, pushing up the Australian dollar price of import and export products.

In the short term, the increases in prices of goods and services will cut the purchasing power of the wage increase. In the longer term, it might create a vicious cycle of wage and price hikes, with adverse economic consequences.

The bad news on jobs

It is well established that wage increases above the rate of productivity growth plus inflation lead to less employment than there would otherwise be, in both the number of employees and the hours worked per employee.

Labour costs are a major expense for most businesses.

In response to higher labour costs, many employers will choose less labour-intensive ways of making their products. The large and rapid wage increases in the mid-1970s and early 1980s resulted in sharp reductions in employment. In contrast, the recent low rates of labour cost increases have helped drive significant increases in employment and a fall in unemployment.

With the Australian economy facing a likely slowdown over the next year or two, a large increase in wages might be particularly poorly timed.

The false hope for those most in need

Universal education and health care, and the redistribution of income via social security payments funded by a progressive income tax, are the most direct and effective ways to fight household poverty.

The world today is very different to the world of the Harvester case in 1907. Then, most workers were in full-time employment and needed a living wage to support a family. Now, about a third are employed part-time. Redistribution via the tax and payments system is how we support families who need it.




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A higher minimum or “living wage” would provide minimal assistance to some on low incomes, and would lift the incomes of many others not generally considered in need of support.

Many of those below the poverty line who are only employed part-time or not at all would not be lifted out of poverty. A higher living wage would provide more to those already in full-time jobs than it would to part-time workers.

And it would provide more to low-wage employees who are members of high-income families, who probably shouldn’t be our first concern.

We can do more more directly to alleviate poverty by reforming the income tax and social security systems. They are specifically designed to redistribute income according to need.

We should start by reducing income tax on low earnings, automatically indexing tax brackets, and increasing Newstart.The Conversation

John Freebairn, Professor, Department of Economics, University of Melbourne

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.




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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.




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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.




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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.