What’s a Headline Worth? Oh, about $34 Billion
Posted by Possum Comitatus on October 16, 2007
Continuing on from yesterday, we can all see the target voter demographic (apart from the media) this exercise is squarely aimed at – low and middle income households with 1.5 jobs and dependent kids.
But the problem the government faces with the policy response in the electorate is the Damoclean Sword of Workchoices that is hanging over the experience and perceptions of those the policy is aimed at.
Remembering back a little while ago, where we talked about the real problem of the increasing ratio of interest payments to disposable income, what is important to households in terms of the way they perceive their standards of living is their discretionary spending budget; that part of the family budget that is left over after housing costs, general living expenses and utilities. This is the part of the family budget which is used to buy the little luxuries of life. Things like holidays, take away food, going to the pictures, the types of presents the kids get at Christmas and flashy shiny things for the kitchen, the lounge room and the back yard.
As housing costs rise, the money in the discretionary budget reduces as it gets shifted across to spend on housing. Similarly, Workchoices, particularly for the second income earner in many of these households, has seemed to either reduce household income directly via cutting wages and conditions for part time workers, or there is a perception that this could be the case at any time.
So these families see the quality of their lifestyle, which they equate as being a large part of their standard of living, getting reduced as a consequence of the reduction in their discretionary spending budget.
Assaulting someone’s perceived standards of living doesn’t make you friends in the electorate.
So when the government comes along every year and offers tax cuts, tax cuts that are, to these households, a smaller value than the reduction they’ve recently made in their discretionary spending budgets – it’s a one step forward and two steps back syndrome.
It’s why tax cuts don’t bounce the polls for this group and haven’t for years.
If you are the 0.5 job holder in a 1.5 job household and you’ve recently had your pay effectively cut with an AWA via the reduction in terms and conditions related to overtime and penalty payments, and if this reduction in income has been greater than about $30 a week (a couple of hours of penalty rates) – the $34 billion dollar tax cuts don’t make you better off than you were before Workchoices, they just reduce the amount by which you are worse off. And when you take into consideration the fact that the 0.5 job holder through penalty rates and overtime was often an easy vehicle for households to build up their discretionary spending budget for things like Christmas or going on family holidays – the negative power of Workchoices swamps any beneficial voter reaction from the target demographic of the tax cuts.
When you combine Workchoices with increased housing costs, the effects on discretionary spending budgets for this target demographic is poison.
And even if Workchoices hasn’t affected these households, it’s the threat…. the perception that it could which gives Workchoices its power in the wider electorate as a force that discounts the value of Howards economic management and tax cuts spiel.
Elections aren’t about what is true in all cases; they’re about what is self-perceived as true in most cases.
And that’s why $34 billion is just an expensive headline for too much of the electorate that matters on the 24th November.
Diana in comments pointed out an interesting George Meganomics interview on Life Matters that’s well worth listening to on the electoral demographic front.
Song of the day is nostalgia time – Courtney Love and Hole at their best (or worse) .. Celebrity Skin.
[odeo=http://odeo.com/audio/6630523/view]
Possums Pollytics 
Andos the Great said
Possum says “If you are the 0.5 job holder … and you’ve recently had your pay effectively cut with an AWA …, and if this reduction in income has been greater than about $30 a week … the $34 billion dollar tax cuts don’t make you better of (sic) than you were before Workchoices…”
Sharron Burrow says “The sad reality is that around $20 won’t make up for the damage done to people’s income where they’ve lost up to a third of their pay with AWAs…”
There seems to be a consensus!
Careful Possum, or JWH will label you a Union ‘Boss’…
Rod said
Another aspect of this sort of thing is that what is good for the goose is good for the gander. The same “pool of gaming chips” is available to both sides. Labour, at some point, will respond. It may cop some flack until it does so, but if it comes up with a “package” that targets the relevant voters at least as well, while at the same time providing many of the same people with better industrial defence it will pick up whatever it has lost.
In the mean time some nasty cynical people might also start reminding us that Costello was complaining a few weeks back (when challenges were still in the air) about Howard’s profligate use of his surpluses, and sow the seeds of doubt about whether the current Lib offering will survive as policy once Howard has done his final “Reconcilliation” tango!
David Gould said
I would not be so quick to dismiss this as an electoral winner. People are concerned about work choices, certainly. But these tax cuts may well sweeten things sufficiently to pull back a few per cent of voters who were on the margin of switching their votes. In 2004, the big vote winners were tax cuts and child care rebates. Expect to see significant child care stuff in the next week or so.
Further, the tax cuts may also win over small l liberals in seats potentially at risk, such as Wentworth, because they are actually pretty well targetted at the lower income earners while still being pretty sweet for those higher up the chain.
I bet that this initiative will see a two per cent swing to the government (although it will be difficult to prove this, given the margins of errors on opinion polls, but anyway). Whether this is temporary or not will depend on what the Labor response is.
I would bet the government to have a big policy on child care waiting in the wings to be released on the same day that Labor come out with their tax policy, in the hope of neutralising that swing back to Labor.
Diana said
Poss,
You can add Petrol Stress to your list of the issues that are impacting on the discretionary spending of the 1.5 job and living on the margins of the capital cities voters.
When where you live and how many cars your household has to run is combined with a need to fill up the petrol tanks two or more times a week…and the price of fuel bounces around the way it does…this is a recipe for cranky voters. Add to this the impact that the drought is having on food prices…cranky people with their household budgets in shreds want someone to blame.
Diana
dany le roux said
There are those who are unemployed or nearly unemployed and very many of them have much less than .5 of a job. Despite the crap about sending the unemployment rate to 3 point something under a newly elected Ratty and Tip,those working .4 of a job (i.e. working for the dole two days a week) will gain no tax benefit whatsoever because they are receiving no income whatsoever from their work.
The last I heard there were 1.7 million on Newstart and very many of them work for the dole.
That tax cuts are given to the upper income people is only going to make this lot and their families even angrier.
This same demographic and their families and friends are also going to be very pissed off at the huge increase in immigration mapped out by Ratty’s lot this financial year.Its not just Workchoices but also the push from migration which is making fair paying jobs scarce.
Dave Solomon said
State and Federal Labor Governments: Working Together
We can expect to see Kevin Rudd call a conference of Labor State and Territory Premiers/Chief Ministers in the coming weeks in order to demonstrate what cooperative federalism means.
This will work for Rudd on at least three fronts:
1. It will neutralise Howard’s attacks on the so-called “wall-to-wall” Labor argument.
2. It will demonstrate to the masses how cooperative federalism can be of benefit in terms of investment in major infrastructure projects such as roads, hospitals and schools.
3. It will put an end to the “blame game” between state and federal governments.
Expect Rudd to commit $10 billion + for major infrastructure upgrades, to be co-funded by all eight Labor state and territory governments.
The best aspect of it is that it cannot be dismissed as a cynical ploy to win votes in marginal seats: rural and regional punters in safe Coalition seats will be big winners!
David Gould said
As a percentage of income, lower income earners do far better from these tax cuts than higher income earners.
The Keegan said
Possum,
there’s a lot to like in the shape of that ‘why Howard is rooted’ graph you posted back in May, and as Diana (4) says, chuck petrol into the mix and that supposedly makes for an angry electorate in battlerland. Getting off topic for a mo, how about Toad of Toad Hall on ACA last night, did you see the hands on the face and the squirming as the average wages and interest rate Qs came at him! I’d like to play euchre against that. And I’m also thinking the Toad is likeier than Krudd to make such gaffes over the journey, he just doesn’t seem to be on top of things as he once was. Have his colleagues stopped talking to him perhaps? Thoughts?
Grumblebum said
David Gould at #7
“As a percentage of income, lower income earners do far better from these tax cuts than higher income earners.”
The point being……?
You may have cottoned on to something if a loaf of bread or a litre of petrol cost ‘a percentage of income’.
disenfranchised Gippslander said
Grumblebum! yes! two fifths of five eighths of very little is still only a quarter of notmuch at all!
David Gould said
When your income is X and your money available for discretionary spending is a very small percentage of X (say, Y) then a small percentage increase in X equates to a large percentage increase in Y.
The key point here is that it is spare cash in your pocket that you see at the end of the fortnight. If currently you are earning 1000 and spending 950, then you have 50 spare at the end of the fortnight. An increase of 50 fortnight doubles the money available for discretionary spending.
At the moment, people are already paying the extra money for bread and petrol. As such, that is already factored into their spending and thinking.
Again, I would not write this off as a vote winner for the government. It will not win them anywhere near enough votes to get re-elected, and those votes may even swing back to Labor. But it is not a bad strategic play, imo.
happy chap from Griffith said
yeah you’re right on the money Keegan. Did you see the ol’fella on the 7.30 Report last night? I reckon he hasn’t had a spanking like that since Granny Howard kicked the bucket! He almost spat at Kerry O in signing off.
marrickville mauler said
My comment as below has been stuck in moderation over at PollBludger all afternoon, am I really that eccentric or is it just a software glitch? … anyway, comment was:
Peter Hartcher seems about the only one in the MSM to grasp that the Libs “brilliant” tax move coming this soon is actually likely to prove very poor strategy – probably motivated by a desire to keep their own side together at all, as opined by the Possum (all hail our noble Possum).
Any game theory specialists in the group care to comment on committing yourself to a big first move in this sort of game?
Or for those like me with an interest in military strategy (come on Glen, how about it), is anyone reminded of the disastrous Anglo-French moves of their forces north-west in 1914 and 1940, which far from seizing the initiative handed it over to the other side in a big way?
Costello as Colonel Grandmaison – without the personal courage of course …
Grumblebum said
I take your point at #11 David.
It’s a fair enough perspective but as a ‘low income earner’ my initial reaction is to compare dollars – and the fat cats continually get more than me under the coalition policy of creating a new aristocracy c/w serfs.
CL de Footscray said
Possum, as is well known you are a genius, and not just ’cause I agree with you. The long term poll trend was terrific, but the take on tax cuts was superb. Over at the Age Colebatch pointed out that the libs only have about $4 billion left to bribe us with, and the Kerr guy at Crikey points out that the whole thing is agift for Rudd – he can take his time and do whatever he likes with it, once the punters have analysed it and decided whether it might change their minds a teeny bit. Why would it? When the first tranche of these tax cuts were announced in the May budget (yes, this is mostly a re-announcement as far as I can see) the body politic appeared somewhat underwhelmed. It will be most interesting to see how they react this time around. I guess this is desperately seeking a bounce time … and of course, I’m intrigued at how the journos are queuing up to point out how the tax cuts announcements have wrong footed Rudd. Yes, those whacky coalition stragists have gone all radical and come up with a surprising and astonishing new idea – tax cuts! I mean, really.
Rod Hagen said
David, at 11, wrote:
“When your income is X and your money available for discretionary spending is a very small percentage of X (say, Y) then a small percentage increase in X equates to a large percentage increase in Y.”
The reality, for people on low incomes, rarely works this way. Generally there is no real “discretionary” margin. Instead there is the art of balancing the things that you absolutely can’t afford not to pay this week against the things that you can get away with until the next pay check, or the holiday bonus, or the medicare refund cheque, etc etc.
WorkChoices is frightening if you are in such a situation because it makes you less certain that there will be a pay cheque at all next week, and makes it pretty clear that “bonuses” or a bit of extra overtime with penalty rates just won’t be there to pay that bill you had to delay on until that little bit extra came your way before the bailiffs arrive.
People in such circumstances almost invariably live life behind the eightball. If the Rudd proposals, whenever they may arrive, make them feel they are less likely to get potted by a boss with a Howard loaded cue, and still puts them in roughly the same weekly situation, give or take the price of a packet of fags, then they will grab it.
Day 2 - Many a slip twixt cup and lip… « The Dog’s Bollocks said
[…] biggest strategic problem for Team Howard trying to win support for the tax cuts, according to Possum Pollytics, is that the target demographic is the same one most disadvantaged by Work Choices and the credit […]
Alan said
Spot on as always, PC. There’s also the AWAs’ propensity to change conditions with little or no notice, such as part-time workers suddenly required to work weekends (those ACTU ads were very prescient). I know four working mums who’ve suffered this. The wash-up from this is spending even less time with the kids. They may be coping with their outrageous mortgage payments, but they are increasingly time-poor. When the Kirribili Coconut tells them they’ve never had it so good, they just want to shred him.
Verity said
I had wondered at the mainstream media’s inability to put the dots together. Workchoices and its likely impact on the Part time worker (female) and where wages have already been shown in a number of studies to be lowered and small tax cuts over many years.
Women know that they were not given equal pay for equal work in Workchoices and that AWAs re-introduce all of the old inequalities. This is exacerbated by family unfriendly hours caused by a loss of penalties ie they get to work hours they would prefer to be with their children and get less money for doing so and probably struggle to find child care which is expensive as well. The media males just haven’t understood that this is why the tax cuts are not impressing those of us in the general workforce.