Our Growing Scepticism

by Peter Martin - Canberra Times

Surely Australians couldn't possibly turf out the Prime Minister while the economy's going gangbusters?
The evidence suggests it would be unusual. All sorts of studies have found we like to reward the party that's in office when times are good up to a point.

One of those points concerns daughters. In Britain at least, the more girls you have, the more likely you are to vote Labor. Seriously. And the more boys you have, the more likely you are to vote Conservative.

British economists Andrew Oswald and Nattavudh Powdthavee examined survey results from 10,000 people and found 66per cent of parents with three sons and no daughters voted Labour or Liberal Democrat, compared with 78per cent of those with three daughters and no sons.

The difference wasn't a coincidence. The parents tended to change their votes that way after they had had their children. Oswald and Powdthavee found that each daughter raised the likelihood of left-wing voting by 2percentage points.

A similar study in Germany found that each daughter raised the likelihood of left-wing voting by 2.5percentage points.

The British researchers think women are inherently collectivist while men are individualistic. As men acquire daughters, they gradually shift their political stance and become more sympathetic to the "female" desire for more public spending. I'm not sure what they'd make of Australia, where women have been more likely than men to vote for the Coalition, though that gap is closing.

In any event, in the lead-up to this election it's the Coalition that's promising the most public spending and promising to save at least one public hospital from closure.

John Howard and Peter Costello say we should re-elect them because the economy is doing well and there's no doubt that it is. So well that, for the first time in an election year, we're likely to get two interest rate rises.

There are sceptical types, like myself, who think that just as John Howard and Peter Costello shouldn't be hung and quartered for those two interest rate rises, they shouldn't get the lion's share of credit for the health of the economy either.

China deserves that. Research by the Australian National University's Andrew Leigh suggests that I'm pretty much out on my own here. Most people give the government of the day the credit for good economic terms, even when those good times are being enjoyed worldwide.

But, critically, more and more people are joining me in taking a closer look at such claims. Leigh examined data from 268 national elections throughout the 1980s and 1990s. He wanted to find the extent to which a good international economy benefited a national leader standing for re-election ("luck", as he called it) and the extent to which doing better than the rest of the world economy benefited a leader ("competence", in his words). He found that competence was only half as useful as luck. But the better-off a country was and the more educated were its people, the more they came to value competence.

Media mattered, too, albeit in a surprising way. The more newspapers were read per head, the more competence mattered to voters. On the other hand, the more television sets a country had per head, the less competence mattered.

Television may well be the best outlet for propaganda, and newspapers for a more complicated discussion of the truth.

In the United States, the pro-Republican Fox News Network, which, in its early stages, was rolled out to some towns and not others, was found to have lifted the vote for George W. Bush by 0.4-0.7per cent in those areas that had it.

In any event, the electoral luck of politicians enjoying economic luck in Australia may be running out. At each of the last six elections, the ANU's Australian Election Survey has asked voters what effect they thought the government had on the Australian economy. Each time the proportion saying "not much difference" has grown, climbing from 39per cent in 1990 to 57per cent in 2004. Most of us are now sceptics.

A paper issued a few days ago by the Parliamentary Library gives clues as to why. It graphs a range of economic indicators under the Whitlam, Fraser, Hawke/Keating and Howard governments. The most obvious patterns have nothing to do with who was in power. Inflation has fallen steadily from one administration to the next. Our exchange rate has fallen steadily as well. Our foreign debt has increased steadily. Our household savings ratio has fallen steadily to the point where it is close to zero under Howard, but he can hardly be blamed for the continuation of a trend. A lot of trends seem to have had nothing much to do with the party in power.

The Australian Chamber of Commerce and Industry must have got wind of this. It has convinced a number of newspapers it has research suggesting 300,000 jobs would go under Labor.

Compiled by the respected modeliers, Econtech, the research predicts five interest rate rises, a loss of more than 300,000 jobs and a $57billion hit to national gross domestic product should WorkChoices be wound back.

But, contrary to the impression you get, the study doesn't examine what would happen if WorkChoices was wound back to where Kevin Rudd has promised to put it with no Australian Workplace Agreements and a continuation of enterprise bargaining but to an earlier time when wages were set centrally by the Arbitration Commission, something no political party is contemplating. (Labor has even promised to abolish the Arbitration Commission.)

Econtech is scrupulous in its report in making clear that it was restricted by limited, and not particularly relevant, terms of reference.

Most administrations seem to change things bit-by-bit rather than all-at-once, a truth that's not particularly useful when you're trying to campaign on an issue or for a vote. And, on some questions, there's no consistency between Coalition or Labor administrations.

The Parliamentary Library finds the unemployment rate rose under Fraser but fell under Howard, that real incomes soared under Whitlam but fell under Hawke and Keating, that the government went into deficit under Fraser and also under Hawke/Keating but went back into surplus under Howard.

It's enough to make you think we just might turf out this Government while things are going gangbusters.

It may not make much difference.


Peter martin is Economics Editor.