Wednesday, September 04, 2013

What can we expect of a new Coalition Government?

This is the first election in my experience in which, at the end, I don't have a real feel for the policy outcomes from the likely result. I am forced back to guesses and first principles. Still, I thought that I should put some ideas down so that you can judge their accuracy later.

Politically, the most likely outcome is a very large Coalition majority in the House of Representatives, so large that the Liberals may have a majority in their own right. The Nationals have been sidelined to some degree in this election. I don't think that they liked it very much. There has also been sniping against the Nationals on the Liberal side. Again, the Nationals didn't like that very much.

The Coalition will continue, but in my experience the closest working relations come (WA has been an interesting apparent exception) come when the Liberals cannot ignore their National brethren. Expect some tensions that will grow over the life of the next Parliament.

In the Senate, the most likely outcome is a Coalition minority. The exact effect here will depend on the final mix. However, the ability of the new Government to do what it likes will be constrained.

The budget position is reasonably difficult. The Coalition hasn't locked itself into silly surplus promises in the way Mr Swan did, but they are still locked in by their pervading rhetoric. They have very little room to move on either the tax or expenditure side. In the medium term, I expect the Australian economy to improve, with consequent improvements in the fiscal position, but that won't help in the short term.

Their position is further complicated by the myriad of  foreshadowed expenditure cuts. We may not know the full details, they still haven't been released, but we know enough to know that there will be a lot. Those cuts involve pain for some, while many will require legislative change. It's also complicated by their commitments to Gonski, to NDIS and paid parental leave.

The Government also face an action/decision backlog, especially in the Commonwealth-State arena where decision making under existing agreements has been stalled for several months.This is apart from any actions required to bring their new initiatives into affect.

If you now look at the Coalition's six key priorities as defined in the little pamphlet we received through the mail or at shopping centres.

First, we have a stronger 5-Pillar economy = manufacturing innovation, advanced services, agriculture, education and research and mining exports. This will come with lower taxes, boosted productivity and more 21st century infrastructure. A Coalition Government could certainly do something about improving productivity. It could do something about improved infrastructure if it was prepared to borrow, but that's difficult. Lower taxes depend on overcoming budget constraints.

Second, the Coalition will deliver stronger borders' aka stop the boats. Leaving aside value issues or our international reputation, this one is mainly potentially costly atmospherics that stand at the left edge of key national priorities. An Abbott Government must move, but there are going to be stumbles; its been useful in campaign terms, but its actually a distraction that may have other costs.

Third, end the waste and debt. This conjoins two very different things. There is always some waste that can be cut, although its not as much as people think. Debt is very different. because that depends on revenue as much as expenditure. The main effect of this pillar will be to constrain other things that the Government might do.

Fourth, the carbon tax will be abolished. This one is a soft underbelly because it actually depends on two legs, the Government's ability to abolish the tax on one side, problems with its direction action alternative on the other. It is far from clear that the Government can abolish the tax. It is far from clear that the direct action program will work. While Mr Abbott is talking about a double dissolution if abolition of the tax is rejected, Senate obstruction may actually be a blessing in disguise for Mr Abbott in allowing him via negotiation to exit from some of the sillier aspects of his current position.

Then in fifth and sixth we have better roads and services and two million new jobs. mmm!

So what might actually happen? Assuming that the Coalition doesn't get sidetracked by its own rhetoric and by the sheer load of coming back to Government, we can expect the following:

  • The new Government will focus as best it can on cost cutting, recognising that it needs to buy space for its own programs and that it needs to do that while its election is fresh. It will then move to patch up the sillier results of its actions. Take a bow, Mr Costello.
  • Second. it will try to lag expenditure commitments or modify them at the margin. Parental leave will go through because the numbers are there, but beyond that? 
  • Third, it will focus in those area where it can get results, and that means a focus on productivity improvement.  

Let's see how close I am.


kvd found this link to an IPA document that gives the line by line Coalition costings. Have a look and see what you think. This tweet from H G Nelson made me laugh.                

‏"@hg_nelson12m Have I got this right? They can starve but we will get new tunnels and freeways going nowhere that will be clogged by boat people".

Seriously, do have a look at the costings. The way this election has been run, this is what we are voting for.

Meanwhile, Michael Pascoe from the Sydney Morning Herald is not impressed


Winton Bates said...

I hope you are right, Jim. That outcome would not be too bad in my view.

Jim Belshaw said...

Difficult to know, Winton! Just my best guess!

Anonymous said...

Hi Jim

While I along with most voters 'expect' a LNP win on Saturday, I have to wonder about your 'possible Liberal in their own right' suggestion. I accept polling data is usually accurate the night before the vote, but think even today it is quite hairy to place much faith in their results.

There was a Reachtel poll (telephone, of 3,698 voters - weighted as per 2010 election results, etc., etc.) which I would cut up as Lab 49% LNP 50.9 - 2PP. I got those figures by allocating PUP 75% to Labor; Greens 80% to Labour; Katter 50/50 split.

I think telephone polling is on the way out simply because fixed landlines are on the way out. The frustrating thing is these companies never provide the raw demographics. And to base their preference analysis on 2010 when neither PUP or Katter existed is fraught.

So, I'm agreeing with your overview, but am thinking the result will be closer than the present headlines would have us believe. Or maybe they will become self-fulfilling?


Anonymous said...

Probably better sources, but this is supposed to be the 'Liberal Costings':

- as referenced by the Daily Tele


Anonymous said...

Just looking at the PPL tax levy/offset line items:

F-14 F-15 F-16 F-17

Item 3.5 Levy of 1.5% on company taxable income above $5M

0 +300 +300 +3800 total +$4400M

Item 7.23 Reduce Company Tax by 1.5%

0 -400 -300 -4200 total -$4900M

So in summary,

fiscal 2014 net cost is $0M
fiscal 2015 net cost $100
fiscal 2016 net cost $0M
fiscal 2017 net cost $400M

I do not understand these figures - as to the size, or the variations year on year.


Jim Belshaw said...

There are always surprises at the electoral level, kvd.

Thanks for the costings link. Have tweeted it and will bring it up here as well.

On the PPL, I don't understand them either. However, here is a possible explanation. The 1.5% levy is based on estimated company profits. Once levied, it reduces company profits and hence tax revenues and the value of the 1.5% cut.

Anonymous said...


'Taxes on Income' 2011-2012 totalled $230,871 Million - according to Aus Bureau of Stats.

From same document, the split between individuals and 'enterprises' (yes, I know that doesn't just mean companies) was 2:1 i.e. 'enterprises' raised 1/3rd of that rather large figure above.

So, if you divide that resulting figure by 30 (existing rate) and multiply by 1.5 (proposed cut) I make the 1.5% reduction as $3.8Bn for 'non individuals'. Remember this is 2011-12 stats.

Yet the Lib papers seem to suggest that a cut of 1.5% in 2015 is $400M?

For mine, I think they are rather closer to the mark with their fiscal 2017 figure of $4.2Bn

Maybe, somewhere buried, they are offsetting the individual tax collection from the PPL itself - but then how you get variances from $400M to $4.2Bn over a couple of years is a further puzzle.

ps I am sure it's all correct; just annoyed with myself that I can't follow it.

Jim Belshaw said...

I share that annoyance, kvd!

Evan said...

I predict the viciousness to asylum seekers will continue.

I predict neo-liberal economic tosh will continue to prevail.

I predict 'productivity improvements' will be code for stripping away workers wages and conditions and nothing will be done about the education and capital input side of productivity improvements.

I predict the racist Intervention will continue.

I predict the burden of the cuts will fall on the poor and concessions for the wealthy will continue.

And I think this will be true of whichever major wins government.

Scott Hastings said...

5-Pillar economy = manufacturing innovation, advanced services, agriculture, education and research and mining exports.

>the Coalition stands as always for savage cuts to education, especially TAFE which is despised as a Labor creation.

These cuts will harm manufacturing innovation, agricultural innovation, and research, leaving us with only a mining industry using more and more foreign workers as the skills are lacking here. But who cares? The cuts mean we can afford tax breaks for Australia's richest citizens, and that's all the Coalition really cares about.

The Coalition is possessed of a fierce hatred of the poor, and as such likely to increase the Work For The Dole from 17 hours a week to 30 or more as seen in England. Isn't it our moral obligation to resist regimes that impose slavery?

Anonymous said...

Imagine a world where Clive Palmer is Prime Minister and Abbott and Rudd have to share the opposition. I don't know about you but I think this country needs a good shake up. I think it would be good. I am sick of Abbott's carefully measured responses verses Rudd's insincere phony platitudes. This country is run on bread and circuses so lets have a real clown at the top.

This arrogant assumption that we have a real choice of two parties only riles me. I personally would love to see the major parties licking their collective wounds after being soundly rejected by the voting public. What are they going to say, that the public got it wrong? And who cares if Palmer stuffs up the economy. According to Abbott its already stuffed and according to Rudd the Libs will stuff it up if they win.

So what have we got to lose? I for one reckon it would be worth 3 years of mayhem just to see the look on their faces as they realise that neither of them will be governing the country.

And of course there would be cries and accusations of a miss-count or some other rot, because at the heart of it their expectation is that they are born to rule and any other alternative is unthinkable.

In this election more than any other we have been privy to the internal machinations of how the political process works during election time, thanks to the multi-media platforms widely used today and blogs such as this one. And frankly it turns me off. Just like journo's who cosy up to politicians whilst they invite her into their homes and prepare their home cooked meals. How can we ever take her seriously again. Why doesn't she go skiing with Putin and expound the virtues of Russian democracy.

So I'm almost out rant but let me leave you with this observation. After Saturday it will be more of the same cutbacks back flips and broken promises.

To borrow from the Liberals line "Whoever wins we lose".

Cheers Jim
Augustus Winston

Jim Belshaw said...

Evan, while you and I don't always agree on politics, there is something mean spirited about this campaign.

Scott, you are clearly in Evan's camp! I know where you are coming from.

Augustus, you will be pleased to hear that there has been a last minute surge of support for PUP in Queensland. The undecided have been deciding and they have carried PUP support to over 10%!

Anonymous said...

Ahh those jolly Queenslanders' you've just gotta love em.

Cheers Jim Augustus Winston

Anonymous said...

Gina Rinehart seen at Barnaby Joyce's party. I dread whatever they're cooking up together for New England.