Saturday, May 12, 2012

Budget a political loser?

This is an online poll so is very unreliable

JULIA Gillard's cash splash on families may not be enough to win back public support, with twice as many voters saying they will be left worse off by the Budget than those who feel better off.

Despite $5 billion in new family and welfare handouts in the Budget, almost two thirds of voters believe the Government has not done enough to offset the likely increase in costs from the carbon tax.

In a warning sign to Treasurer Wayne Swan, 80 per cent of those surveyed did not believe he would be able to deliver his promised Budget surplus next year.

The findings - in an exclusive Galaxy poll conducted for The Courier-Mail - come as new Treasury analysis reveals some low-income families on $40,000 will pocket an extra $6099 over the next two years from a combination of carbon tax compensation and the new Budget perks.

Labor is hoping to win back low and middle-income voters with a series of cash injections through tax cuts and welfare boosts designed to create a buffer ahead of price rises from the carbon tax starting to flow in the coming months.

The Budget set out further boosts to parents, welfare and family payments that will roll out between next month and July 2013 - only months before the next election is due.

But judging by the first poll since the Budget, Labor's sales pitch has failed.  A third of those polled said the Budget made them less likely to vote Labor. Only 11 per cent said they were more likely to vote Labor.  About 46 per cent of voters believed they would be worse off after the Budget.

Even among those who identified as Labor voters, 37 per cent thought they would be worse off, while two thirds of Coalition voters thought they would suffer from the Budget.

The poll surveyed 602 voters across the country via online questions on Thursday and yesterday.

 A majority of families earning more than $90,000 expect to be worse off, but even 43 per cent of those on less than $40,000 think they will be Budget losers, the poll found.


The sleight of hand in the Gillard/Swan budget

It's a surplus only in a technical sense.  A lot of the announced "goodies" come out of this year's budget, not out of the budget just announced.  And  the big NBN expenditure is left out!

Swan has had to move a lot of things around between years to make it possible to keep the Prime Minister, Julia Gillard's, election promise to get the budget back to surplus in 2012-13. When he's taken spending and pulled it forward into the last few weeks of the old financial year, that's not genuine for our purposes. For the government's accountants, whether something happens on June 30 or on July 1 makes all the difference in the world. You've got to draw the line somewhere, and that's where we draw it.

From the perspective of the budget's effect on the economy, however, a difference of a few days or a few weeks is a difference that doesn't make any difference.

And it turns out a big part of the $46 billion turnaround is explained by Swan's decision to draw spending forward into the last few weeks of the old year. There's compensation for the carbon tax (which doesn't start until July 1) of $2.7 billion, advance payment of natural disaster relief funds to Queensland of $2.3 billion, a bring-forward of infrastructure spending of $1.4 billion, the new "schoolkids bonus" cash splash of $1.3 billion, and financial assistance grants to local government of $1.1 billion.

That long list adds up to $8.8 billion. But here's the trick: when you take money out of one year and put it into the year before, you have twice the effect on the difference between the two years. So Swan's bring-forward of that spending explains $17.6 billion of the $46 billion turnaround.

Another thing to take account of is that the new year's budget is expected to benefit from increased revenue from resource rent taxes of $5.7 billion (that's from the existing petroleum rent tax as well as the new minerals rent tax). The point is that these taxes are explicitly designed to tax "economic rent", so they have no effect on the incentive to exploit petroleum or mineral deposits and thus have no effect on economic activity. A further factor is that, thanks to a quirk of public accounting, Swan's underlying cash surplus of $1.5 billion takes no account of the government's spending on the continuing rollout of the national broadband network.

The budget item "net cash flows from investment in financial assets for policy purposes" is expected to involve increased spending of about $6 billion in 2012-13. Not all of that would be the broadband network rollout. But to the extent it involves the government funding economic activity, it has the effect of reducing the budget's adverse effect on economic activity.

Put these three arguments together and you conclude the budget's drag on demand would be less than half the 3 percentage points of GDP we started with.

Even so, it's still a big effect. There's no denying the stance of fiscal policy is contractionary.

But the budget is only one of the factors affecting aggregate demand. It's also only one of the instruments available to the macro-economic managers to influence demand.

So if fiscal policy proves to be too tight, the obvious remedy will be to further loosen monetary policy - to cut the official interest rate, in plain English. The stance of monetary policy is already mildly expansionary and, if necessary, it can be made more so.


Latest unemployment statistics not what they seem

 The national jobless rate - the number of jobless people expressed as a percentage of the total number of people either employed or looking for work - fell from 5.2 per cent to 4.9 per cent, an unusually large fall in one month.

This was particularly odd given total employment rose only 15,500, pretty much in line with the historic average monthly gain over the past 20 years.

The super-sized fall in the jobless rate was made possible by a fall in the participation rate - the proportion of the working-aged civilian population either in work or looking for it - from 65.3 per cent to 65.2 per cent.

Why is the participation rate falling if there are more jobs on offer? A very good question and one to which economists have, largely, drawn a blank.

Over the past year, the participation rate has fallen from 65.6 per cent, reversing a longer-term trend of higher participation. Economists estimate that had participation not fallen, unemployment would be in the mid to high 5 per cent range.


Killjoy bureaucrats ban giveaway

Australian businessman Dick Smith will be popping into houses across the country to share his wealth and a cup of tea - Dick Smith-branded, of course - with Australians over the next six months.

But Canberrans will miss out on meeting the entrepreneur during his $20,000 giveaway because the ACT Gambling and Racing Commission doesn't approve of his "promotion" and the way "it is currently being run".

The premise of the cash giveaway, Mr Smith said, was: "If I knock on your door and you have one of my Dick Smith branded products in your home, then I will give you $500 cash on the spot. I will also stay and have a cup of tea with you."  It's all about supporting Australian farmers, he said.

Mr Smith had planned on visiting a few houses in the capital today while he was in town speaking at Parliament House about the importance of Australian farming.

But an email from the commission to Dick Smith Food's marketing and online manager, seen by The Canberra Times, reveals the competition is not allowed in the ACT.

"The winners of this promotion are being chosen at random and there is no way for us to regulate that this is being done in a fair and transparent manner or that all entrants have an equal chance of winning this lottery," the email from the commission read.

"You must provide a statement on the advertising that advises that ACT residents cannot participate in the lottery."

Mr Smith has already given away thousands of dollars since Monday, when the giveaway started. He said the giveaway had been approved by all states in Australia and thought it was "ridiculous" it wasn't allowed in Canberra.

"The Canberra bureaucracy said there had to be an entry form," Mr Smith said.  "How can anyone stop me from giving $500 away if I'm that eccentric? Only in Canberra does this happen."

A spokesman from the commission said yesterday applicants were required to submit the terms and conditions of their competitions. Applicants are not issued a permit if they don't meet legislative requirements and conditions.


Sydney Morning Herald admits to pollution deception

Where there's smoke, there's fire in the bellies of readers. Several times in past months the Herald has used photographs of steam rising from power station chimneys with captions or subheads intimating that the steam was a polluting pall.

The most recent example was on the cover of BusinessDay on April 17. The photo, taken at Bayswater power station in July last year, shows funnels of dark steam silhouetted against white clouds and a blue sky. It is an arresting image, so much so that several readers suggested it had been manipulated. A subhead was placed on it which said "Up in smoke". One picture, three words, dozens of complaints.

An example: "This is clearly a digitally enhanced photograph but, because it focuses on smoke, it has nothing whatever to do with the story below it, which is about government policy regarding global warming, which relates to greenhouse gases such as carbon dioxide, not smoke. Worse, there is no smoke in this photograph. If there was going to be smoke, it would come from the two narrow chimneys in the centre of the photograph. What is inferred to be smoke is actually steam, coming from the two cooling towers on either side of the chimneys."

Another reader suggested it had been shot at sunset "when everyone knows that objects become blacker and more two-dimensional". And another, who described the image and subhead as "an egregious deception", added: "An old trick, been done many times before, and hardly appropriate for a serious section of a serious newspaper."

First, the photographer did not manipulate the image in any way. He says he shot a series of four in the middle of the day using F22, which means a small aperture made the images razor sharp. And the reason he stopped to take the pics on the way to another job was because the scene looked so unusual. He presumes the darkness of the vapour was because it was heavy with moisture.

Second, and for me the most galling, is that the photographer had clearly written in his attached caption: "Please note that it is NOT smoke coming out of the stacks, it is steam."

Many readers feel the Herald and The Sun-Herald do not publish enough alternative opinions and stories on climate change and global warming, that they have formed an opinion and will stick with it. If you read the Herald's editorials, there appears little doubt that it has accepted the scientific consensus on the effects of carbon pollution on climate: there has been a gradual warming of the planet. The Sun-Herald leans that way, too. So when those who question the climate-change science see what they consider examples of the "old trick" referred to by the reader, they feel their concerns are justified.

The decision to use the image with such a misleading subhead was a poor one, and one which drew a message from the editor to ensure it did not recur. Although it was not the first time it has happened, hopefully it will be the last.


1 comment:

Paul said...

I don't think Labor have yet twigged that they are so on-the-nose that they could give voters the earth and they'll just see it as another vote grab. I have never observed so much cynicism toward a sitting Government as I have toward (and from) this one. I can't recall a previous time the public was so overtly conscious of how disrespected they are by their "Leaders". (Well maybe Whitlam before the revisionists moved in).