Possums Pollytics

Politics, elections and piffle plinking

IPDI and the Primary Vote Redux.

Posted by Possum Comitatus on June 30, 2007

Over in The Oz, George Megalogenis writes, “THE existential divide between real and imagined financial stress can decide the coming election. Well-off Australians can be convinced to toss out the Government on the false assumption that their living standards have gone backwards, whether through the spectres of Work Choices, interest rates or climate change.”

He’s spot on – but he’s missed the economic measurement that ties most of this up in a neat little bundle that longer term readers here know about well.

Interest Payments to Disposable Income

So let’s redo the two key graphs again. First the Newspoll estimations of the Opposition primary vote (on the left hand side) and the Interest Payments to Disposable Income percentage (on the right hand side) going back to 1985.

howardsproblem101.jpg

Next let’s do the Newspoll government primary vote estimation (on the left hand side) and the Interest Payments to Disposable Income (on the right hand side, log scale and inverted).

howardsproblem102.jpg

Source: http://www.rba.gov.au/Statistics/Bulletin/B21hist.xls
http://www.newspoll.com.au

What’s important here is not necessarily the growth in the size of interest payments to disposable income, but how how that growing debt servicing obligation impacts upon discretionary (rather than disposable) income for a key demographic- middle income earners with 1.5 jobs and a large mortgage.That’s where it bites in the self-perception of living standards for mortgage holders as discretionary spending is what funds lifestyle, and lifestyle is a key self-perceived yardstick of household standard of living. As a greater proportion of disposable income keeps flowing to debt servicing, that leaves a smaller proportion of income for discretionary spending.We discussed the ins and outs of this at length over here for anyone interested and whom may have missed it the first time.

The Howard government may have many problems on its hands, but its this one that will cause them the most electoral grief.

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4 Responses to “IPDI and the Primary Vote Redux.”

  1. gusface said

    Possum
    The sacred cows are coming home to roost
    (sorry for mixed metaphors)

  2. swio said

    I can see the link there but there’s an obvious counter. As long as you can still borrow to buy, rising interest payments to disposable income don’t actually reduce your spending power. You may have less money left over for buying the groceries, but until those interest payments get so high that you get declined when buying a plasma TV on “interest free terms” your effective buying power is unchanged.

    The way modern debt works you can keep borrowing like a drunken sailor up to a certain level of debt or missed payments, and then all of a sudden your ability to borrow dries up quite quickly. The big question is whether the electorate percieves its economic well being based on
    1) what’s left in the pay packet after paying off loans, or
    2) whether Harvey Normam/GE will let them buy big ticket items “interest free”

    If its 1) we’ll see steadily dropping support for the government as the Interest/Disposable income rises. If its 2) we’ll see a spring loaded effect. Little initial effect followed by an exponential reaction as the fraction of the electorate in significant debt stress starts to rise.

    As a left leaner I wish Labor oppositions had consistently talked up the debt problem to get it on the radar of voters. Its by far the best counter to the government’s talk of economic management. Your numbers scream out for a slogan of something like “11 years of economic growth. Do you feel better off?”,

    or have the guts to flip the government’s strength around with

    “Howard wishes to remind his battler’s to keep borrowing. The economy depends on it.”

    That sort of the campaign would mean the government could talk about economic management until its blue in the face. All it will highlight is that the debt boom has made people more vulnerable to an econmic downturn than ever.

  3. Possum Comitatus said

    You’ve got to remember that Australian borrowers are actually quite restrained in terms of the amount they borrow as a proportion of the amount they could borrow if they so chose to. I’ve seen some representative figures somewhere not that long ago (I’ll try and drag them up if I can find them) that shocked me, in that a much smaller proportion than I would have expected had actually borrowed to their absolute limit.

    On the whole, as a population, we still have a fair bit of theoretical debt “wiggle room” at the moment, but we (again, generally “on the whole) impose debt constraints on ourselves… which I suppose is quite a good thing.

    I agree with your two hypothesis – slow grind vs spring loaded explosion, in fact, I wouldn’t be surprised if both are working at the moment. The slow grind for many of the 1.5 job households with a mortgage, and a spring loaded explosion in areas that have had negative equity issues from the boom, like some parts of South and South West Sydney.

    I think the governments clichés on economic management have lost most of their bite anyway – the nincompoops that believe party propaganda have been taught a lesson from 4 interest rate rises since the last election (although the wrong lesson – the lessons to learn are that political parties tell you whatever horseshit they think will get you to vote for them, and interest rates are more complicated then Treasurers pulling the levers of the economy on a daily basis like some grand piece of Marxist machinery).Instead the lesson learned is that you probably cant trust any party… which is still probably a step in the right direction😉

    I think the government reached the point after the 2005 budget where people stopped listening to them.Up until then, people would still listen to them even if the only thing the government was saying was about how bad the ALP would be.

    Now all this “Boo! There’s a unionist.” “Boo! There’s an aboriginal paedophile” twaddle, coming off the back of the Burke nonsense, and the Kevin Rudds childhood nonsense and Kevin Rudds wifes nonsense and the Sunrise nonsense etc etc…

    I think Howard is now suffering Simon Crean syndrome.His face comes on the telly and people get up to make a cup of tea.

  4. Tanks To Information

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