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Australian election minor party guide
While the federal election is still seven months away, consideration of another election got me delving into an old hobby of mine and checking up on the many small political parties that sit on the fringe of the political game. Most people don’t know most of these parties even exist, and that’s not likely to change soon… but as a way to procrastinate from what I should be doing (my PhD) I thought I’d offer a very short guide about the smaller parties.
For the sake of this article I’m going to ignore the big three players — the coalition (including Liberal, National, Country Liberal & Liberal National Parties), the Labor Party, and the Greens. If you haven’t heard of them before, then this article probably isn’t for you.
I’ve split the remaining parties into three groups. First the “big little parties” which round out the top ten political parties based on the 2010 Senate election plus a few others that are likely to be top ten this year. Then there is the “micro-right”, and finally the “micro-left”. I hate the false “left-right” dichotomy, but unfortunately that’s still the way most people consider politics.
Big little parties
Family First — first came to attention with electoral success in South Australia, FF really came to national attention when they got a Senator elected in 2004. Though they now have no federal representation, they did score 2.1% of the vote in 2010 which gave them fourth place. The party is generally pidgin-holed as a Christian party, but under the leadership of Bob Day they have tried to shift their focus towards a more small government agenda, while keeping a fair amount of Christian social conservatism. This means they are slightly differentiated from the many “big government conservative” parties discussed below. Not a bad choice for conservative “tea party” types.
Sex Party — the “anti Family First” party came onto the scene in 2010 and engaged Family First about moral issues. While not getting anybody elected, they did manage 2% of the vote which put them just behind FF in fifth place. The party primarily promotes civil liberties and a socially progressive agenda, as well as gender quotas in parliament, but they haven’t been drawn too much into economic debates. Sometimes seen as an economically safer version of the Greens.
Liberal Democrats (LDP) – Australia’s only libertarian political party has been around since 2001 but has only had electoral success at the local council level. The party received 1.8% of the Senate vote in 2010 which put them in sixth place. The LDP is clearly the most free-market party in Australia (the only party to promote real spending cuts), as well as being one of the most socially progressive (marijuana legalization and gay equality). The only choice for libertarians, classical liberals and Ron Paul types.
Treasury’s non-modelling of the stimulus
Late last year I published an article with Agenda (the public policy journal of ANU) that critiqued the Treasury “modelling” (sic) of the Rudd government stimulus that followed the global financial crisis. It is an article that I started writing a long time ago, but sat in the “to do” pile for too long.
My main point was that the Treasury approach was hopelessly inadequate, a point that is abundantly clear to any economist who glances at their attempt, and has been readily admitted by some Treasury friends. As I wrote in the article:
“The biggest problem with the Treasury model is that because it misunderstands the issue of international crowding out, it drastically underestimates the impact on net exports. In addition, it entirely ignores the issues of domestic crowding out, monetary policy responses, and the costs of repaying the debt. While its estimate for the private savings response to the stimulus is at the low end of the range, this is the least of the problems.
“The ignorance of open-economy macroeconomics suggests that Treasury has neglected much of the advances made in macroeconomics over recent decades, and its strange assumptions on domestic crowding out and private savings response show that it has forgotten much of its own research. As Harvard economics professor Robert Barro said in 2009 when the US was debating its own stimulus policies, ‘The financial crisis and possible depression do not invalidate everything we have learned about macroeconomics since 1936’ (Barro 2009).”
Good news in the “war on drugs”
There has been some good news in the “war on drugs” in Queensland recently. The government has been working hard to achieve their goals, and they are proud of their success. In the Australian Crime Commission Illicit Drug Data Report 2010-11 we are told that the Queensland police managed over 17,000 seizures of marijuana. Well done to the boys (and girls) in blue.
Now, some of you may be thinking that this is all a horrible waste of time & money. People have argued that the “war on drugs” is too expensive and draconian, and does more harm than good. But those people would be missing the point.
It’s true that prohibition does cost hundreds of millions, harass many peaceful people for their lifestyle choices, help organised crime and leads to more violent crime, leads to worse health outcomes and more deaths, and it doesn’t prevent drug use to any noticeable degree. But there is another effect that is often ignored — it helps switch drug-users from marijuana to other “harder” drugs.
And this is the good news.
“Once in a generation budget”
Before the budget came down, Campbell Newman described it as a “once in a generation budget”. That is certainly what Queensland needed. Our long-term budget position is actually worse than the audit report or old budget papers claim, since they don’t factor in the growing fiscal pressures over the coming decades caused by an aging population. Put simply, current policies are unsustainable, and some tough decisions are needed.
The first thing to note is that the government decided to give up on fixing the 2012/13 budget.
They have allowed the operating deficit to increase from an estimated $4.9 billion (Audit) to $6.3 billion, and the fiscal deficit to increase from an estimated $9.5 billion (Audit) to $10.8 billion. This is perhaps understandable since the federal government has been playing games with their grants (shifting money around to try and manufacture a federal government surplus) and the lag time involved in reforms. So the real place to watch is the estimate for the 2013/14 budget balance.
The middle ground on climate policy
Climate change makes people angry. The left refers to skeptics as denialists, corrupt, heartless, and stupid. The right refers to activists as traitors, fools, frauds, and socialists. Discussions about global warming and climate policy hardly live up to the word “debate” and are more likely to descend quickly into name-calling and dramatic assertions of doom.
When I wrote a monograph back in 2007 looking at some details of a carbon tax, I very intentionally side-stepped the heated debate about the science and just looked at the economics. This earned me hate mail from both sides of the isle.
Compromise seems unlikely, but it is worth at least considering our options.
The key part of the policy puzzle – that often gets ignored in the climate shouting matches – is that effective mitigation can only be achieved with a strong global binding deal. Without such a deal, everything else is smoke and mirrors.
The cost of bracket creep
Each year the government increases income tax rates, and most people don’t notice. They do this through “bracket creep” where workers are moved into higher tax brackets due to inflation. For example, if your income jumps from $37k to $38k to compensate you for higher prices, then you will be pushed up a tax bracket so that you are now paying a 35.5% marginal rate (instead of 20.5%) leaving you with less disposable real income.
This implicit tax increase could be easily removed by indexing the tax brackets to inflation.
To work out a rough estimate of the size of bracket creep, we can make the simplifying assumption that income tax should grow at the same rate as nominal GDP growth. Looking at the coming three years, nominal GDP is expected to increase by 16.9%, while income tax is expected to grow by 25% over the same three years. The difference can be attributed to bracket creep, and amounts to a total secret tax increase of $13 billion over three years.
If the government does not offer at least $13 billion worth of income tax “cuts” over the next three years, then they will actually be increasing income taxes.
Historically, the government has been happy to allow bracket creep to continue as it gives them extra tax revenue each year which they can then give away to special interest groups or loud lobby groups in the hope of buying an election victory. Because the tax increase is not well publicized and not well understood, the government is able to increase the tax burden with a relatively low political cost. But while it might make for good politics, the continuous increase in income taxes has been squeezing family budgets, reducing work incentives, and slowing down our economy.
In the long run we need to have income tax indexation. In the meantime, we need to demand at least a $13 billion income tax cut.
Note: If the government introduced an inflation indexation on income tax rates, that would ensure that nobody was pushed into a higher marginal tax bracket due to inflation. However, there would still be a gradual increase in average tax rates as real economic growth pushed more people into higher tax brackets. To ensure that there is no increase in average income tax rates it would be necessary to index tax brackets to nominal wage growth. But that is a topic for another day.
Australia’s carbon tax and global temperatures
Australia now has a carbon tax , and there is now much chatter about how this will impact on the economy. There has been less discussion about the potential impact on the environment.
Andrew Bolt has continued to ask all comers about how the Australian carbon tax will impact on global temperatures, and most people have refused to answer. So he decided to work out his own estimate. Using the calculations of Damon Matthews, who suggests that a tonne of co2-e will change temperatures by 0.0000000000015 degrees, and given that the government plans to reduce our emissions by 160 million tonnes, then Bolt estimates that our carbon tax will change the global temperature by about 0.00024 degrees. Fair enough.
From the other side of the fence, the only person I have seen willing to put their name to an estimate is John Quiggin, who thinks the carbon tax will be 100 times more effective and reduce temperatures (compared to “business-as-usual”) by 0.02 degrees. Quiggin should be congratulated for putting his name to an estimate, and it’s appropriate to note his caveat “as should be pretty obvious, it’s not meant to be precise, and claiming precision would be silly in any case”. Fair enough.
Australia’s income tax rates
Each year the government releases a budget that outlines our income tax system (among other things), and each year they hide the truth. Instead of simply reporting the marginal tax rates, the government reports three different sets of numbers (basic rates, medicare levy, LITO) and then leaves the reader none-the-wiser about how they interact to produce the actual income tax rates. The first time I publicly complained about this silliness was back in 2009.
In 2011 the government announced a series of changes to the income tax system as compensation for the impending carbon tax. At the time, I ran the numbers to show how they would change the actual tax rates.
Now that the 2012/13 Budget is out, it’s time to run the numbers again to strip away the magic and report the honest marginal tax rates faced by Australian workers. These numbers are quite similar to the numbers I reported last year, except for an increase in the threshold for the Medicare Levy. Last year I had pointed out that the Medicare Levy was going to kick in at a lower income than ordinary income tax starting in 2012-13… and it’s good to see that somebody in Treasury has noticed this problem and fixed it.
Climate change “action”
Some people are worried about climate change. Many of these people believe that the solution to climate change is to throw politicians and bureaucrats at the problem, and maybe have a conference about setting up the terms of reference for a steering committee that will investigate the rules for a community forum that elects a board to appoint a working group to write a discussion paper.
Take THAT you evil climate.
For the proponents of climate change “action”, I have some good news. Not only will Australia have the world’s biggest carbon “tax”, but we also have a few government programs working to save the penguins from sun-stroke. Did I say “a few”? Let’s have a closer look… Read more…
My 2012-13 Queensland budget
The recent Queensland budget audit showed an expected 2012-13 operating deficit of $4.9 billion (up from $4.2 billion), and proposed a range of tax increases and soft spending restraint over several years, with serious structural reform only briefly hinted at in a few sentences on page 203. We can do better.
This document shows how we can immediately return to surplus, fundamentally reform hospitals & schools, cut taxes in half, and slash regulation to get the economy booming.
The below reforms are a clear break from “business as usual” and would require brave political leadership. The spending cuts will be unpopular, especially from those people who previously received the “free” money.
However, while these reforms introduce some short-term pain, the long-term benefits are clear and significant. A more competitive hospital and school system will lead to better quality health and education. Dramatically lower taxes and fewer regulations will spur new investments and productivity growth – leading to more jobs and higher wages. And importantly, these reforms ensure the budget position is sustainable so that we do not leave a legacy of debt and deficits for future generations.
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