Because of the Liberal and Labor parties’ slavish dedication to earning the votes of outer-suburban swinging voters, we now find ourselves in a “cost of living” debate.
“Cost of living” is in this context a misnomer. The more accurate term is “cost of consumption choices”. This is about Australians’ expectations that their expensive lifestyle choices will be supported by governments. Actual poverty, where the cost of living has real, everyday consequences, won’t feature in the campaign. There are no votes in addressing poverty. This is about telling middle-income Australians that their high-consumption lifestyles are a matter of legitimate public policy focus.
Labor shamelessly exploited the issue in 2007, convincing voters they understood how tough they were doing it amid an unprecedented economic boom, high wage growth and consecutive tax cuts, and that John Howard and Peter Costello did not.
Howard throughout his prime ministership had played an important role in legitimising voters’ expectations that governments should support their aspirations to have a high-income lifestyle even if they didn’t necessarily have quite high enough income. Private health insurance was subsidised; private education was as well; middle-class welfare was doled out by the bucketload.
That those expectations ended up being deployed so effectively against Howard was one of Labor’s masterstrokes in that campaign.
The Liberals are now trying to pull the same trick on Labor in this campaign — express deep concern about the cost of living, and couple it with larger versions of the government’s “modest assistance” to “help make ends meet” — pumping up the education rebate, indexing child-care rebates. If Labor had left the CPRS on the agenda, the Liberals would have pounded that as likely to drive up electricity prices.
Instead they themselves are being pounded, with the paid parental leave levy being heavily targeted by Labor, who have now successfully linked the issue to grocery price rises. If Labor can make the levy issue stick, it will be deeply damaging for the Liberals.
This is all rather unfair on Tony Abbott, because the PPL levy will have an absolutely minuscule effect on grocery prices. In fact it would be so small, it would be even tinier than the impact of the CPRS on prices, which was shown to be trivial — although Abbott, of course, gave the impression the CPRS would have caused a vast surge in prices. A nice case of what goes around comes around.
The next stage of the cost of living campaign won’t be so welcome from Labor’s point of view. The conventional wisdom is that when the RBA meets next week, it will hold the fate of the government in its hands, because a rate rise will spell electoral doom for Labor.
Maybe. But a 0.25% rate rise would leave the RBA’s cash rate target 2% below November 2007, and 2.5% below its March 2008 peak. Three of the Big Four banks did not automatically pass on the reductions in mortgage repayments occasioned by interest rate reductions (NAB’s policy is to pass them on on the next anniversary of the loan). According to one bank, in the months following the interest rate cuts, fewer than 20% of customers took the initiative to reduce their mortgage repayments as the RBA hit the emergency button and sent rates into freefall.
Some of us doubtless subsequently did so, but it means the number of households facing actual increases in their mortgage repayments as a consequence of rate movements below the levels of two years ago — which next week’s will be, if there is one — is considerably fewer than appears to be assumed by commentators. It’s also one of the reasons why the argument that monetary policy was as important as fiscal stimulus in warding off recession doesn’t hold up — the RBA didn’t give us more cash to spend during the GFC because most of us just kept on paying our mortgages off at the same rate anyway.
It won’t be until the cash rate gets up to 7% that many of us will be looking at increases in our repayments. The only group to whom that doesn’t apply is households that have taken on a new mortgage in the past two years, who started with repayments based on interest rates at emergency lows.
That’s all mere detail, though. This is ultimately not about the real cost of living for people “doing it tough”, “trying to make ends meet”, “living within their means” and “setting their alarms early”. It’s about catering to the psychological and financial dependence of many voters on governments to prop up their lifestyles. As both parties have discovered in government, it’s awfully hard to ever satisfy these people, but they won’t give up trying to please them.
What I find interesting is that the KPMG figures on the front page of today’s Herald detailing the impact of an equivalent 2% rise in company tax (from 30% to 31% + no reduction fro 30%to 29%)
Food : 0.5%
Clothing Footware : 0.5%
Housing : 0.6%
Health : 0.3%
Transportatoin : 0.5%
Communication : 0.9%
Education : 0.2%
Financial/Insurance Services : 0.6%
Overall CPI : 0.5%
are exactly the same absolute figures as the effects of cutting the company tax by 2% (which was modelled in this report by KPMG in April) (from 30% to 28%) http://www.kpmg.com.au/Portals/0/KPMGEcontech-Report-CGE-Analysis-of-part-of-Governments-AFTS-Response.pdf
page 40
Food : -0.5%
Clothing Footware : -0.5%
Housing : -0.6%
Health : -0.3%
Transportation : -0.5%
Communication : -0.9%
Education : -0.2%
Financial/Insurance Services : -0.6%
Overall CPI : -0.5%
Has KPMG actually run the model again or did they (or the SMH) just decide to switch the signs around in the figures of the old report to change a decrease to an increase?
Where are all the people supposedly doing it tough though except those in the mortgage belt too dumb not to go into massive debt.
Not to worry Bernard. ’tis all in hand.
First: we practice on Indigenous Australians. “Racial Discrimination Act’? We spit on it! ” (” Well we actually kind of sort of rescind it-troublesome bloody thing”).
Then: we hand out plastic cards so that our natives can by very expensive food from exploitative outlets (“Well we actually kind of sort of lead them to the path of true nutritionness”).
(” If the scanning equipment breaks down we have to fly in technocardscanfixers, which is OK. because our natives can live on seeds and grubs and things which they are familiar with”)
(“Or they can drive to other providers and make the choice between petrol cost and food. Choice is always a good thing.”).
Right. Sorted. (” The evidence shows this has not worked, but we are Government so we ‘refute’ that”).
Now: we roll it out for others (“we’ll avoid the oldies-they are a popular cause at the moment-and besides they have crumbly bones all they need is calcium tablets”).
(“The disabled don’t need nutritional guidance,-they have their hands full trying to get on buses , and into public buildings and disabledy things”).
The breeders – the bludgers- are to be led to the path of true nutritionness. (” They are not special. They are just easier to case manage”).
Right. Sorted.
Now for the whingeing bastards who are left.
We will feed the ‘illegals’. To them.
Right. Sorted.
Thank God for some sanity. People have incredibly short memories about interest rates, in my experience. I’ve had this conversation with people countless times: “Rates are going up again! “Yes because they were at emergency low levels because of the crisis. They were never intended to be kept that low.” “Still, they just keep going up. Someone should do something.” Sigh.
The really pernicious thing about the cost-of-living “debate” is that it taints every other substantive issue by causing people to focus exclusively on the state of their own personal balance sheet. To wit:
1. Immigration. The SMH had a feature the other day on voters in (where else) Lindsay. One of the women they interviewed said, to paraphrase: “why should we be letting asylum seekers in when we have Australians doing it tough? We have had to refinance our home, and we need renovations but now we can’t afford them, so I don’t see why we should have to pay for these queue-jumpers.” Quite right, lady, because clearly all that money we give asylum seekers (?) would be put to much better use subsidising your family’s renovations.
2. Fiscal policy. Tony Abbott during the debate was employing the following talking point: Australians have been doing it tough and tightening their belts, and they expect their government to do the same instead of running up debts. Well, they might, and in fact they probably do because, let’s face it, most people are economically illiterate. But the government’s ability to engage in counter-cyclical spending is a) a key distinction between private and public finance and b) what kept us from doing it a hell of a lot tougher in the first place.
3. And then there is climate policy, about which it is impossible to have a sensible conversation because people freak out every time somebody gently suggests that energy prices might rise as a result of any half-decent carbon reduction scheme.
Like Bernard says, none of this is about the poor – people who are genuinely living below the poverty line. It’s about the entitled middle class who can’t quite afford as much as they would like. Then again, when pollies rely on this kind of stuff to get elected, they can hardly complain when the electorate goes on to blame them for every 10c rise in the price of bread.
WEATHER REPORT …”The sky is falling down”!
The Arctic ocean is warming up, icebergs are growing scarcer and in some places the seals are finding the water too hot, according to a report to the Commerce Department yesterday from Consulafft, at Bergen, Norway.
Reports from fishermen, seal hunters and explorers all point to a radical change in climate conditions and hitherto unheard-of temperatures in the Arctic zone.
Exploration expeditions report that scarcely any ice has been met as far north as 81 degrees 29 minutes. Soundings to a depth of 3,100 meters showed the gulf stream still very warm. Great masses of ice have been replaced by moraines of earth and stones, the report continued, while at many points well known glaciers have entirely disappeared. Very few seals and no white fish are found in the eastern Arctic, while vast shoals of herring and smelts which have never before ventured so far north, are being encountered in the old seal fishing grounds. Within a few years it is predicted that due to the ice melt the sea will rise and make most coastal cities uninhabitable.
Oh I’m sorry, I neglected to mention that this report was from November 2, 1922, as reported by the AP and published in “The Washington Post”.
Nearly 88 years ago but we’re still here !!!