A focus on economics (the dismal science) has produced a dismal election debate

In past decades many federal elections (perhaps most) have been fought on economic issues and economic management – most recently the elections in 2013, 2010 and 2004 to name just a few. The 2016 federal election is again supposedly about economic prosperity, our economic transformation from being a commodity supplier to a modern service economy, taxation issues and industrial relations (the last item being the cause of the double dissolution that started the whole process).

Both sides of politics have three word slogans framing the economy as central to their electoral prospects – the Coalition with “Jobs and growth” and Labor with “Jobs, Medicare, Education.” For an election ostensibly about economic matters, the various messages of the major players has not managed to capture the hearts and minds of voters.

Both major parties and some of the minor ones have announced extensive policies addressing the economy and taxation, but one of the main reasons these issues haven’t been more prominent is that, in reality, there is not much difference between many of their formal policy announcements.

The two adversaries have neutralised contentious areas by broadly announcing the same adjustments with a few discernible differences. For example, the similarities in forecasts for the return to surplus (around 2021), changes to superannuation, agreement on income tax reductions to middle income recipients, crack-downs on multinational tax evasion, modest support for infrastructure, subsidies for the Whyalla steel industry, education and training programs.

Due to the inordinate length of the campaign, the main parties have become somewhat bored with dull economic pronouncements and been distracted with other issues that they feel may have more ‘bite’ for them. And over the latter weeks of the campaign they have framed their campaigning to run scare campaigns. This has included the revitalisation of people smuggling, privatising Medicare, a Green-Labor coalition and cuts to education.

Negative gearing

One area where there is considerable difference in policy is the negative gearing of investment properties. This is mainly because when Labor thought the government would act to limit the tax concessions landlords received, it then jumped the gun and announced it would halt all negative gearing on existing homes from July 2017 – only allowing renters to claim concessions on new homes. It also announced that capital gain tax concessions would be halved to reduce windfall gains.

Labor probably expected the Coalition to tweak government policy – perhaps by putting limits on how many homes can be claimed, for how long, or capping concessions at a moderate figure. But the Coalition changed tack and left the existing system in place, although nothing much prevents them tightening eligibility in other ways after the election.

It would appear that the Coalition has not moved on negative gearing to maintain a point of difference and establish an edge over their opponents. By contrast, the Greens announced in 2015 that they would entirely abolish negative gearing for all non-business related properties claiming to save A$2.9 per annum.

The issue of whether changing negative gearing will make housing more affordable to those looking to enter the market is hard to resolve. This is because if landlords quit the market first home prices may come down, but rents may also rise because fewer houses will be placed onto the rental market.

Superannuation

Superannuation changes show both sides reworking the original intent of superannuation – to give tax concessions encouraging (forcing) people who can afford it to make provision for their retirement incomes, so they don’t fall back on the pension. Wealthy superannuates who have had forgone income tied up in super funds, sometimes for decades, are suddenly a lucrative source of additional revenue to both government and opposition.

The government’s policy changes announced without much consultation in the 2016-17 budget have greatly annoyed its own constituency – who are most affected and feel betrayed by their government. In particular, the new $1.6 million limit and the $500,000 lifetime cap on after tax contributions will hit women returning to the workforce particularly hard, despite the policy allowing catch up contributions.

Labor plans to introduce a higher superannuation contribution tax (30% on payments by those earning $250,000 or more) effectively halving the tax concession. Labor also intends to tax the earnings from superannuation payments to retirees at 15% after the first $75,000, which will increasingly hit middle income families.

The technicalities of superannuation have tripped up the Greens on a number of occasions in this campaign with Sarah Hanson-Young showing she had little understanding of the issues. Basically the Greens consider superannuation a “tax haven for the rich” and propose to tax super over a threshold of $19,400 and at 32 cents in the dollar at incomes over $180,000, which will affect many of their inner city profession supporters.

The transition to retirement provisions are even more complicated as Julie Bishop revealed in a radio interview early in the campaign.

Taxes

The Coalition’s intention to reduce company tax to 25 cents in the dollar on business' profits over a ten year phase-in period is opposed by Labor, who think that by not agreeing to it, they can spend the $50 billion elsewhere. Labor, which arguably proposed such a measure and initially offered bi-partisan support, now only agree to the initial reduction and only for micro-businesses with turnover of $2 million per annum.

One other taxation issue that divides the main parties is the retention of the emergency deficit levy on people with higher incomes (people earning over $180,000). Labor proposes to extend it indefinitely, while the Coalition has said it will terminate once the legislation expires at the end of June 2017.

Specific employment policies have been devised to support job growth. The Liberals do not have a jobs target, but link jobs to economic growth. They plan to rely on a Youth PaTH program to help get 30,000 younger unemployed ready for work and then engaged in internships, with employers offered $1,000 up front to take an intern. Labor believes this is casualization by stealth, and instead proposes to train 20,000 young unemployed and assist them get six month’s work on full award wages.

The government and Labor are planning these employment programs within a budget envelope of $750 million, over the period 2017-20. Both policies have been criticised for being administratively costly and not likely to produce long-term jobs, or encouraging unscrupulous employers to simply replace existing employees with subsidised apprenticeship placements.

Industrial relations are predictably too problematic for both sides – Labor with its unpalatable union connections and the Liberals with the ghost of WorkChoices. The Coalition is committed to re-introduce the Australian Building and Construction Commission to police unlawful or intimidating behaviour in the construction industry. Labor has rejected this and tried to downplay perceptions it is beholden to a small group of militant and largely unrepresentative unions.

So, while economic issues have received attention in the campaign, they have not particularly enlivened the debate. On some economic issues there is relatively little to distinguish the major parties, while on other issues where significant differences occur, the technicalities have often stood in the way of these issues gaining any traction.

In this election, however, economic issues may be a latent issue or sleeper issue that voters consider as they contemplate Australia’s future economic management. And while the mainstream media have said Malcolm Turnbull has not campaigned well, these issues may play towards his strengths. Remember other successful Liberal leaders have not been ‘exciting’ campaigners but have nevertheless won elections.

The fact that economic issues have not resonated with the wider electorate, is not to say that in the opinion of voters economic management issues will not decide their voting intentions. I would expect post-election surveys to point to economic and taxation issues as significant factors in determining voting intentions. This may explain why the Coalition is banking on sticking to its guns while Labor is desperately trying to invent scare campaigns to unsettle the listlessness of the Coalition’s campaign strategy.