May 16, 2008 | Graham

Cheap economically illiterate populism not the way to win next election



Brendan Nelson’s address-in-reply to the budget shows just how far away from finding the range on the government the Opposition is. While reducing fuel excise may be politically popular, it is short-sighted and will be wiped out by just a small increase in the price of oil.
A more logical, and ultimately more politically productive, response to higher petrol prices might be a co-ordinated plan to encourage people into smaller cars faster. Afterall, if the mileage figures on the Peugeot 308 are right, buying one of those would cut my fuel-bill by two-thirds, an effective fuel reduction of $1 per litre on what I’m paying for diesel at the moment!
I’m not even sure that opposing the tax on alcopops is politically popular. There is obvious public concern about binge drinking, and while you can be sceptical, as I am, about whether there is in fact an epidemic, putting a tax on alcopops is just the sort of externalisation of guilt that a parent who supplies their kids’ parties with alcohol might be looking for! “Don’t blame me, they wouldn’t drink so much if it wasn’t so cheap”.
You couldn’t expect logic from the Opposition on the alcopops tax, because the logical position is that all alcoholic drinks ought to be taxed on their alcoholic content irrespective of how they are marketed or what they are made of. The problem with that is that wine is relatively lightly taxed, and you’d be able to hear the screams on my balcony at Coorparoo all the way from the Barossa, and Margaret River, as well as the Riverlands if you raised it to parity. Good economics, but bad politics from opposition. Looks like the wine cask may be making a comeback as the drink of choice for oblivion!
If there is a case against the government that the opposition should be making at the moment it is that much that they said was a problem in opposition is being perpetuated by them. Nelson had a good line about watching the fuel price doing nothing to keep it down, but he didn’t persevere with the theme of a do-nothing government, pleased with itself to be in government. He could have moved on to Wayne Swan’s productiivty theory of inflation.
During the election campaign we were told that Labor’s spending wasn’t a problem because they would address the productivity bottle-necks in the economy, which were the real cause of inflation. That being the case, why are we putting money aside for tomorrow in infrastructure and and education future funds rather than spending it now? If productivity is the problem with inflation, then it should be fixed now, not later.
In fact, what the government has put in place is designed to ensure its second term by having spending co-incide with the next election. This will be at a time when we will have passed through the dip in economic activity that we are having at the moment and when the spending will most certainly add to inflation!
The opposition has to accept that they can’t expect to hit any home runs this year and that what they should be doing is laying down a platform that will resonate at the next election. Cheap, economically illiterate populism is not the way to do that.



Posted by Graham at 8:48 am | Comments (5) |
Filed under: Australian Politics

5 Comments

  1. Why are people still buying V8s in droves? Recent figures from Holden indicate one in five new Holdens sold are V8s (http://www.smh.com.au/news/national/v8-a-gas-gas-gas-as-car-lovers-rush-to-beat-price-rises/2008/05/16/1210765174065.html). Granted these trophy cars tend not to be used for commuting.
    Fuel costs are only a small part of the motoring cost equation. What about depreciation, interest, registration, servicing and parts. Many small European diesel cars in the past have suffered from high service and parts cost and significantly higher depreciation. In many ways they were more expensive to run. Many small Japanese, Korean and Australian petrol & LPG cars however have combined fuel economy with lower overall ownership cost. Rather than this preoccupation with fuel economy in isolation, what is really needed is a truly independent comprehensive measure of the total cost of running particular cars based on the aggregate kilometres travelled per year. A table that indicates say a new Commodore/Falcon/Camry etc costs X dollars for 5000 km, 10,000 km, 20,000 km, etc. People then could make an informed decision. It would also give an incentive to manufacturers of the fuel efficient vehicles to also drive (no pun intended) down total cost of running.
    Regarding the oppositions overall budget strategy. Nelson should be focusing on the lack of philosophical consistency within the budget and between the budget and the Rudd team’s rhetoric prior to the election. Prior to election Rudd said he would end the blame game between the Federal Government and the States over health. The Medicare surcharge changes will clearly tip many more patients into the public system than the budget indicates (http://www.smh.com.au/news/national/audit-says-medicare-will-bear-the-brunt/2008/05/18/1210765248330.html. Watch the State Governments revive the blame game when the waiting lists are published. But this is just one example. The conflicting priorities are all over the place. Your example of Alcopops and wine is just another in a long list.
    A budget is an important document for sending signals to the various stakeholders in the community. For instance, by changing the levy, is this government saying that it wants to dramatically reduce private health? That is what the insurance companies believe. So where is the comprehensive strategy for expanding the public system? With increase in tax on Alcopops the wine industry could also be forgiven if it thought wine would be next. If so, where is the strategy to deal with the impact on the wine industry?
    There are these sort of inconsistencies right though the budget. It is almost as if they went back through the policy grave yard and just dug up and stitched together budget parts. I think they should call Swan’s first attempt a “Frankenstein Budget”. Swan will try to disguise the stitch marks and bolts. Nelson’s job should be to point them out.

    Comment by Sam Tecon — May 18, 2008 @ 9:58 am

  2. Yes, there’s nothing to be gained being the government in opposition. Their job is to ensure that the government is held accountable.

    Comment by Graham Young — May 18, 2008 @ 12:50 pm

  3. I’ve heard that the tax on alcopops is just the thin end of the wedge.All alcohol will soon suffer serious tax increases.They have to do it since young people will simply mix their own or move to wine or beer.
    Why they dropped the subsidy on car gas conversions is beyond me.We now have a deficit of $20 billion pa just for importing petroleum products.
    If we use our natural gas ,we have cheaper fuel which makes our industries more competitive and raises our living standards.Utter stupidity.
    I saw a brief clip of Peter Costello being interviewed today and I was not impressed.He called the press conference and proceeded to mimic the reporters.He was both self indulgent and verging on rudeness.
    Malcolm Turnbull was also criticised for not being more analytical and aggressive in his reponse to the budget.
    The Coalition need to get their act together soon.They have far more depth of talent than Labor,but cannot afford to rest on their laurels.

    Comment by Arjay — May 18, 2008 @ 4:22 pm

  4. I’ve heard that the tax on alcopops is just the thin end of the wedge.All alcohol will soon suffer serious tax increases.They have to do it since young people will simply mix their own or move to wine or beer.
    Why they dropped the subsidy on car gas conversions is beyond me.We now have a deficit of $20 billion pa just for importing petroleum products.
    If we use our natural gas ,we have cheaper fuel which makes our industries more competitive and raises our living standards.Utter stupidity.
    I saw a brief clip of Peter Costello being interviewed today and I was not impressed.He called the press conference and proceeded to mimic the reporters.He was both self indulgent and verging on rudeness.
    Malcolm Turnbull was also criticised for not being more analytical and aggressive in his reponse to the budget.
    The Coalition need to get their act together soon.They have far more depth of talent than Labor,but cannot afford to rest on their laurels.

    Comment by Arjay — May 18, 2008 @ 4:22 pm

  5. I’ve heard that the tax on alcopops is just the thin end of the wedge.All alcohol will soon suffer serious tax increases.They have to do it since young people will simply mix their own or move to wine or beer.
    Why they dropped the subsidy on car gas conversions is beyond me.We now have a deficit of $20 billion pa just for importing petroleum products.
    If we use our natural gas ,we have cheaper fuel which makes our industries more competitive and raises our living standards.Utter stupidity.
    I saw a brief clip of Peter Costello being interviewed today and I was not impressed.He called the press conference and proceeded to mimic the reporters.He was both self indulgent and verging on rudeness.
    Malcolm Turnbull was also criticised for not being more analytical and aggressive in his reponse to the budget.
    The Coalition need to get their act together soon.They have far more depth of talent than Labor,but cannot afford to rest on their laurels.

    Comment by Arjay — May 18, 2008 @ 4:24 pm

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