28 May 2016
by Karen Middleton

Scott Morrison's black hole serves its campaign purpose

Their attack on Labor’s economic figures may have backfired, but the Coalition’s campaign HQ is just happy the focus is back on the economy.

At Coalition campaign headquarters, the view of Tuesday’s unfolding news conference with Treasurer Scott Morrison and Finance Minister Mathias Cormann blasting Labor over a costings “black hole” was that their performance was a bit mixed.

The pair started out accusing the opposition of having a $67 billion gap between spending and savings and ended up conceding their own calculations could be out by $35 billion, prompting journalists to ask if there was a “black hole in the black hole”.

In Labor’s campaign hub in Melbourne, they believed Morrison had “used his smoking gun to shoot himself in the foot” and urged their MPs and candidates to say so at every opportunity, accusing the government of making up numbers to deliberately mislead Australians about the cost of Labor’s “positive policies”.

But back at Coalition HQ, the campaign team was far from unhappy about the ensuing media coverage.

Why? Because all the newspaper acreage and broadcast minutes that followed were not focused on disputing the existence of a black hole, but on how dark it actually was. The exercise in exaggeration had done what it was designed to do. It had shifted the debate onto Coalition ground.

“The budgetary situation will be okay if nothing else goes wrong. But you can’t really assume in life that nothing will go wrong over an extended period.”

On Thursday, Morrison conceded the point publicly.

“No one’s arguing about whether this is a black hole on Labor’s promises,” Morrison said on ABC Radio. “There is a black hole. The question is, just how big is it?”

He followed up with a news conference to reiterate his point.

“A few days ago when I set this challenge out to Labor I knew they would be exposed but I didn’t think they would be exposed so quickly,” Morrison crowed.

The shift of focus in the public debate back to the economy followed Labor’s success in swinging the campaign’s attention to health, the issue on which it does best, by promising to unfreeze the indexation of the Medicare rebate. For several days the barbs the leaders traded were about the content of health policy and the revelation that Health Minister Sussan Ley’s colleagues in the economic portfolios had forced her into maintaining the freeze after she failed to find savings elsewhere.

Labor capitalised by rolling out a series of health policy announcements, one a day, until Tuesday’s Coalition double act swung control of the public debate back onto conservative turf.

Textor laments polling questions
At the end of week three, with five to go, Coalition strategists remain confident in their chances of victory on July 2, despite the trend in the published opinion polls. The polls’ quantum favours the Coalition and Turnbull. Their trend favours Shorten and Labor.

That’s true on both the primary vote, as well as on the “better prime minister” and approval/disapproval measures. It’s also true on likeability.

Newspoll surveyed voters on the question of likeability and they rated Turnbull at 68 per cent and Shorten at 57. For Turnbull, that was a fall of three points; for Shorten, a rise of nine. Among the respondents, 60 per cent also declared Turnbull arrogant while 47 per cent said the same about Shorten. That was a rise of five points and a fall of two, respectively.

Arrogant leaders still get elected. And the Coalition is convinced likeability on its own is not enough – that when voters are pressed about the importance of liking a leader, they often say that won’t be what they’ll vote on.

The Coalition’s pollster Mark Textor, of Crosby Textor, has lamented what he says is an obsession with one-dimensional polling that does not advance voters’ understanding of issues or fully explore what influences their voting intentions.

Writing for Business Insider magazine this week, he quotes the World Association for Public Opinion Research guidelines on polling and suggests more pollsters should follow them.

“As good practice in conducting pre-election polls, researchers should: … measure key variables such as … reasons for party choice or attitudes on issues or other aspects of the campaign,” the guidelines read. “Such polls will have greater political and social value if they do not confine themselves only to measuring voting intention but also explore the reasons for party choice and opinions on important campaign issues.”

Textor is more willing than many pollsters and strategists to offer his thoughts publicly both before and during election campaigns.

On the eve of the last election, he offered would-be campaign workers a 10-point plan for surviving the gruelling weeks until election day. Textor is a cycling nut and point No. 7 was about endurance.

“As they say in the Tour de France, pace yourself and wait for the mountains,” he wrote in the pages of The Sydney Morning Herald. “Energy is finite. Save it for the times of greatest pressure. Waste no energy on that which does not matter.”

The rest of his advice was about avoiding “the booze”, making time to keep in touch with family and friends, sleeping and eating well – “you don’t win a race on McDonald’s” – and looking after your feet and “your soul”. He advised campaign workers to ignore media commentators, be frank with colleagues, admit mistakes and only gamble on the election if they wanted to be sacked.

The Tour de France strategy is presumably being employed again, and then some, in the current eight-week campaign marathon.

At Coalition HQ, they essentially believe these past three weeks don’t much matter. They believe voters listened to the opening arguments and then tuned out. They don’t believe voters have tuned in again yet.

They also believe economic management remains the most potent issue, and that Shorten and Labor have failed to lay the groundwork for changing their reputation ahead of this election.

They point to Kevin Rudd’s approach to the 2007 election and how he successfully remade Labor’s image on economic management by portraying himself as an “economic conservative”, arguing that Labor will suffer this time around for failing to similarly contradict that negative sentiment adequately in advance.

Malcolm Turnbull and his ministers have also begun using the phrase “same old Labor”, in a bid to link Shorten back to the turmoil of the Rudd-Gillard-Rudd years.

Shorten pitches health
This week, after the Morrison and Cormann show, Shorten tried to wrest the focus back to health at his own press conference.

He’d been asked a question about departing Northern Territory Labor senator Nova Peris and he went on to attempt to change the subject and link the economic debate back to the safer ground of health and education.

“There was an earlier question I neglected to answer where you talked about our relations with business,” Shorten said. (The Peris question had actually been the first one at that event.)

“Labor has excellent relations with business but I don’t think that the price of having excellent relations with business should be to spend $50 billion of taxpayer money on a tax cut. The best thing I can do for business is make sure their workforce is healthy. The best thing I can do for business is make sure they have a well-educated and skilled workforce. And business understand the fundamental importance of these goals.”

The same day, business stepped out in favour of the Coalition’s policies, via the nation’s biggest employer group, the Australian Chamber of Commerce and Industry.

Its new chief executive, James Pearson, appealed for bipartisan support for reinstating building industry watchdog the Australian Building and Construction Commission, cutting company tax and extending small-business concessions to businesses turning over more than $10 million.

“We cannot be complacent,” Pearson said. “That’s why in this election campaign it is so important that leaders and parties commit to policies that will allow us to become more competitive. Other nations are embracing policies to increase the competitiveness of their economies, and their people are reaping the rewards.”

Pearson also called for more cuts in spending, a call that had already sounded from the halls of the bureaucracy beyond the campaign hubbub.

As the campaign swings into its fourth week, there are two economic debates under way – the one politicians are running and a second, arguably more serious, one underneath.

Status-quo economic policy dangerous
Beneath the shouty debate about who is most guilty of spending beyond the nation’s means, there is a more sober message about the task economic managers face into the future.

The secretaries of the Treasury and finance departments laid it out plainly a week ago in their Pre-election Economic and Fiscal Outlook, the bottom-line update the law requires them to provide within 10 days of the issue of writs for an election.

They took the opportunity to offer their own stern warning about reform, spending and about the implications of not having a buffer for the bad times.

“Should Australia experience a significant negative economic shock, the fiscal position would be expected to deteriorate rapidly and not be consistent with the projections,” the secretaries wrote.

They explained that their figures were based on an assumption that the annual productivity growth of recent decades would be maintained. But they warned that a status-quo approach to economic policy would not cut it.

“Continued economic reform would be required in order to achieve this growth,” they said.

They also outlined a second assumption – that tax receipts as a proportion of gross domestic product do not rise about 23.9 per cent over the medium term, which was the average after the goods and services tax was introduced but before the global financial crisis hit.

“The medium-term projections show that, without considerable effort to reduce spending growth, it will not be possible to run underlying cash surpluses, say in the order of 1 per cent of GDP, without tax receipts rising above 23.9 per cent of GDP,” they warned.

In other words, unless spending is slashed in a structural way – not just by eliminating one-off measures – surpluses will only be reached by increasing tax.

They noted that even though Australia’s fiscal position was relatively strong by international standards, debt levels were projected to reach “recent historical highs”.

While interest rates remained low and the economy was still growing, that wasn’t an immediate worry, they reasoned.

“But should Australia experience a significant negative economic shock, or increased interest rates or debt levels rise above current projections over the medium term, the debt burden will impose an increasingly significant cost on the fiscal and economic outlook.”

They said that could risk Australia’s top credit rating, which is what keeps borrowing costs down. And they told future economic managers they would need to deliver “structural reform across all parts of the economy”.

The outgoing governor of the Reserve Bank, Glenn Stevens, echoed their message in an illuminating extended interview at a business summit in Sydney on Tuesday.

“The budgetary situation will be okay if nothing else goes wrong,” Stevens said. “But you can’t really assume in life that nothing will go wrong over an extended period. So I think… I suspect that there’s quite some years of hard repair work ahead for whoever is the government.”

Before he finishes up after a decade in the job, Stevens took the opportunity to stick up for someone it’s become fashionable to wallop – the former treasurer and now Australian ambassador to Washington, Joe Hockey. He praised Hockey’s role in leading Australia’s year as chair of the G20 in 2014, for persuading the G20 countries to “commit to some things that they weren’t otherwise probably going to do”, making Australia a “useful global citizen” whose views carried weight.

On doing the hard domestic work, he said it was “the reality” that more was now required and he was pleased the two departmental secretaries, John Fraser in Treasury and Jane Halton in finance, had made that clear.

Stevens assured the business community that the bank was not wavering in its belief that it should not shift its target range for inflation of between 2 and 3 per cent, simply because it was below that at present.

“On average, in the long run, it will start with a two and that’s a piece of uncertainty you can put away,” he said. “You don’t need to worry about that. You’ve got plenty of other things to worry about as a business or as a household.”

Those “other things” are getting plenty of airtime during that other debate on the economy, the one between the politicians.

Labor resets fiscal policies
And in that arena, in the wake of this series of messages from senior bureaucrats, Labor is now trying to adopt a new persona of fiscal rectitude and do it by making a virtue of a series of campaign gaffes from the member for Batman, David Feeney.

After forgetting to include a $2.3 million negatively geared investment property in the parliamentary register of members’ interests, Feeney agreed to an interview on Sky News to deliver a mea culpa and try to make things right.

Asked if he had scored the biggest campaign own-goal so far, Feeney responded: “I think unfortunately that is a trophy I managed to secure last week.”

But he went on to make things worse, unable to answer a policy question on whether Labor would proceed with its previously announced plan to reinstate the “schoolkids bonus” – the means-tested cash payment, scrapped by the Coalition, to help low-income families with the cost of sending children to school.

Feeney was unable to answer, and initially asked if the question referred to the unrelated “baby bonus”.

“I’ve been a little… ah… distracted over the last few days,” he said, asking that the question be referred to “the relevant shadow” minister.

To top it off, when he exited the studio he left behind a six-page briefing note of Labor’s campaign talking points, which found its way into News Corp newspapers in its entirety.

The talking points contained a reference to the baby bonus, which it said “this country can’t afford”, but no mention of Labor’s position on the schoolkids bonus.

The embarrassing mistake provided shadow treasurer Chris Bowen with the opportunity to make a policy clarification.

“Families will be better off under Labor but we will not be able to afford to bring back the schoolkids bonus,” Bowen said.

For good measure, he added that if it won government, Labor would also have to dump its plan to repeal the incoming assets test for pensions due to take effect in 2017.

As recently as March, the Labor opposition was still advocating reinstating the schoolkids bonus and restoring the pension cuts.

“Labor will stand with Australian families against these cuts every day up to the next election,” shadow families minister Jenny Macklin said in a statement two months ago.

The first change in position will reduce Labor’s overall spending tally by $4.5 billion and the second by another $2.4 billion.

Scott Morrison was quick to claim credit for the about-face, with another swipe at David Feeney on the way through.

“He may have forgotten a house, he may have forgotten his policies and he may have forgotten his papers last night – that’s all true,” he said. “But the reason he wasn’t able to answer that question on his policies yesterday is Labor didn’t know what their policy was on this issue. And what we’ve been able to do over the last 24 hours or so is to flush Labor out.”

But he wasn’t giving Bill Shorten any credit for actually making the cuts, after Shorten had joked while announcing another $1 million promise this week that cynical journalists could add it to the “spendometer”.

“Everything that he is spending in this campaign, every commitment over and above what they are already opposing in the budget and the forward estimates, is going on his spendometer,” Morrison said, “and that spendometer increases every single day.”

Labor sought to apply a positive spin. “The most recent set of independent budgetary numbers has revealed a very tough financial situation brought about by Liberal incompetence, Liberal mismanagement,” Shorten said on Thursday. “So we will have to make some difficult decisions … But we are rock solid that the only policies we will support are policies that we can fund. The only policies that we are going to promise are policies that we can deliver.”

The policy promises have been coming thick and fast. A tally of Labor’s new-money promises during the campaign so far totals $4.4 billion. The biggest-ticket item is the Medicare rebate indexation, worth $2.4 billion, followed by a $1 billion road funding pledge in Perth and a half-billion-dollar rail upgrade promise in Adelaide. Shorten has pledged about $155 million on education measures in far north Queensland and the Northern Territory and another $100 million on various transport projects in mostly marginal seats nationwide.

Spending promises
On the Coalition side, Malcolm Turnbull’s campaign promises thus far tally about $470 million but that doesn’t include the $50 billion in tax cuts for business and other measures announced in the budget.

The biggest single Coalition campaign pledge to date is a $170 million rail corridor in Townsville, the $60 million pledge to fix mobile phone black spots in the Victorian marginal seat of Corangamite, $54 million on a glucose-monitoring program in the outer-Sydney marginal seat of Macarthur, and a $50 million road upgrade in the same electorate, matching an identical Labor promise the previous day.

Turnbull’s ridicule of Shorten’s “spendometer” line came as he was adding to his own list of pledges on Wednesday.

If re-elected, he promised a $1.2 million upgrade of services at Merimbula Airport on the New South Wales south coast, in the marginal Liberal-held seat of Eden-Monaro, and a $50 million port upgrade at Eden – a promise Labor says was nicked from its campaign pledges for the 2013 election campaign.

Also on Wednesday, Deputy Prime Minister Barnaby Joyce added another $555 million to the ledger, promising concessional loans for struggling dairy farmers. It’s not clear yet exactly how this will be funded.

Both sides insist they can pay for their promises.

But an examination of the bottom-line deficit forecasts at the time of the last election and since shows that what’s known as “fiscal drift” means little has been gained from cutting current spending.

The underlying message from Treasury, finance and the Reserve Bank is that just being able to fund election promises is not enough. To make real headway, they suggest deeper cutting is required.

That means all sides will have to be prepared to make major structural changes if whoever wins on July 2 has any hope of getting out of the hole and back in the black.