The Weekend Australian
30 October 2017
Dennis Shanahan – Political Editor
The Coalition can’t rely on assumptions it will be seen as the better economic manager
The swearing-in this week of Labour’s Jacinda Ardern and New Zealand First’s Winston Peters as Prime Minister and Deputy Prime Minister to replace one of the most economically successful New Zealand governments generally has been ascribed to the global politics of the new and disruptive.
Although Ardern did not win the election, her remarkable success and the continuing success of the nationalistic Peters were built on a campaign against a failure of capitalism in New Zealand, where economic transformation under John Key’s National Party had “not delivered” for all New Zealanders.
Ardern’s priority is addressing the high level of homelessness in a prosperous New Zealand and she has already banned foreigners buying more residential property.
Peters’s campaign was typically protectionist, with one of his first demands being for New Zealand to abandon attempts to keep alive the Trans-Pacific Partnership trade pact, cut to ribbons by Donald Trump’s US withdrawal.
As with Trump’s election, the British votes to leave the EU and hammer Theresa May’s Conservatives, the election of France’s youngest president, Emmanuel Macron, and Malcolm Turnbull’s one-seat escape from defeat, the rise of Ardern was unexpected and viewed as an “outsider” phenomenon. But clear evidence is emerging in Australia that Labour’s victory in New Zealand and Bill Shorten’s success against the Coalition in last year’s election are the result of more fundamental and longstanding electoral changes.
Apart from all the third-way populism of the newcomers there is a structural change stalking the Liberals and Nationals in Australia that requires a rethink of the Coalition’s electoral strategy of simply relying on being “better economic managers”.
The turfing out of Bill English, Key’s partner in rebuilding the New Zealand economy, could be seen as a parallel to the defeat of John Howard in 2007 after Howard and Peter Costello applied traditional Coalition principles and policies of economic management to debt and deficit.
Essentially, voters had become complacent about the economy and decided a new fresh face — Kevin Rudd — deserved a turn.
Yet, according to new electoral analysis at the Australian National University, Rudd’s success in 2007 and Shorten’s near-miss last year are linked to long-term changes of circumstances and attitudes among Australian voters.
The study suggests centre-right parties such as Liberal and Nationals may be facing institutional changes that give centre-left parties such as Labor and the Greens permanent political and strategic advantages in winning elections.
Ironically, these emerging advantages are sourced in decades of Coalition policies encouraging home ownership, share ownership, property investment and selfmanaged superannuation funds. The efforts to make individuals responsible for creating their own wealth and managing their investments has succeeded to such an extent in Australia that it is changing the voting dynamic
In short, asset ownership and specific policies relating to those assets are beginning to be more important factors in how key people vote than the overall health of the economy. The Coalition can no longer depend on its historical advantage in being seen as a better economic manager than Labor.
Analysis by the ANU’s Ian McAllister with Indiana University’s Timothy Hellwig on the effect of asset ownership on voting shows Labor is best placed to take advantage of the rising importance of assets in economic voting.
The traditional political and academic arguments are that parties of the centre-right will favour free-market economic policies that suit homeowners, property investors, shareholders and selffunded superannuants as part of economic policy and those people will vote for the “economic managers”. The other side is that the centre-left will favour intervention to help those without assets and will be supported by those without assets. But after analysis of last year’s Australian election study and elections going back to 2001, the ANU conclusion is that these assumptions are flawed because asset ownership in Australia has ballooned since the 1990s and voters see little difference in the economic aims of the main parties.
Asset ownership, coupled with a tendency for more Australians to make up their minds about how to vote later in a campaign, are combining to give Labor an advantage.
According to McAllister, the assumptions on economic management and previous views on asset ownership “ignores how parties can shift their positions on these issues”. This shift on specific policies affecting asset ownership changes the reaction of “economic” voters and, according to the ANU study, there is a more pronounced effect as a result of “the centre-left’s decision to oppose free market policies in particular”.
“Our emphasis on party politics indicates that the electoral payoff of an ‘ownership society’, often cultivated by the centre-right, depends on the policies advanced by their competitors on the centreleft,” the study concludes. “We find that asset owners are more likely to support the centre- right. The magnitude of this effect, however, depends on the relative policy positions advertised by parties.”
The conclusion is that when party economic policies converge “the strategies of the left-leaning parties carry greater weight” in economic voting. Essentially, Labor has the ability to attract more economic voters when it adopts “centrist policies” and offers specific policies on asset ownership.
In 2007 Rudd as opposition leader cleverly described himself as an “economic conservative” and revelled in the criticism that he was “John Howard-lite”. Being equated with the Howard government on economic management while offering a softer edge on social issues was what Rudd wanted.
Since the 1950s all major parties have encouraged home ownership and property investment, and the vast privatisation schemes of the Hawke-Keating and Howard-Costello governments lifted Australians into global-scale shareholders as superannuation became the second most important investment after the family home. The ANU study says “Australia represents an ideal case study to examine the impact of assets on the vote” and the parties have not stuck to a simple left-right position on the treatment of those assets (emphasis added).
“The role of the political parties is crucial to evaluating the effect of ownership of these assets on vote choice,” the study says.
At the election last year the Coalition and Labor adopted policies on the treatment of superannuation and negative gearing on investment properties that had a big effect on voting. For the Coalition the changes to high-end superannuation — where voters are susceptible to high risks to their assets — and the retrospective nature of the changes had an adverse effect on votes (emphasis added). For Labor the decision to limit negative gearing tax advantages for investment properties to new housing was seen as a great political risk and portrayed by Turnbull as “destroying the housing market in Sydney and Melbourne”. But Labor ensured there was no retrospectivity, so existing investment properties were not affected, and linked the changes to making housing more affordable by limiting investors in the housing market.
The ANU analysis shows Labor’s position on negative gearing is a positive overall because it does not turn away existing investors and appeals to those who don’t own a home because they think it will help renters or aid them in getting a home.
“When the Liberal and Labor parties are perceived to be far apart, then asset ownership strongly influences party choice,” the study found. “But when the parties converge in policy space, ownership has little or no effect. We further show that this party system effect is driven not by the position-taking strategies of the Liberals on the right, as most stories of policy reform would have it, but of Labor’s position on the left.”
The Coalition can no longer rely on general economic management to deliver an electoral advantage and needs to understand that individual policies can have a broad effect on the vote. Labor’s ability to align with economic policy and not frighten investors gives it a strategic advantage.