The Battlelines for the Next Election will be about Analytics
The next election will mainly be fought about tax but it won’t just be about who is giving the bigger personal income tax cuts and who gets what when: it will be about picking the demographic that is going to decide the election and providing them with a bespoke package designed to make them wealthier.
Bill Shorten and Labor have decided that the demographic that will elect the next government are workers with incomes of between $40,000 and $90,000 a year.
This is the group which deserted the government at the 2016 election according electoral analyst John Black writing in Saturday’s ‘Weekend Australian’.
However they are also the demographic that is the biggest supporter of Pauline Hanson’s One Nation.
If Labor locks in this vote it could win the next election, given that the recent distribution gave it a four seat advantage over the government.
Analysis undertaken by Ben Phillips of the Australian National University shows that in 2019-20 disposable income for the low and middle income earners will rise by 1.2% under Labor compared with 0.7% under the government however Labor’s tax cuts will be funded by changes to the dividend imputation rules that will end cash refunds for many retirees.
Most of these retirees fall within the $40,000 to $90,000 demographic.
This was the basis for Scott Morrison’s comment on Sunday’s ‘Insiders’ programme that “Labor’s tax cuts would be paid for by Nannas, Nonnas and Yah Yahs.”
While Labor’s dividend imputation changes will realise $10.7 billion over the four years of the budget, the personal income tax cuts will cost $19.2 billion over the forward estimates and Labor hasn’t disclosed where the rest of the money will come from.
There are not many options: the funding from ending negative gearing, halving the capital gains tax concessions and cancelling the tax cuts for businesses earning up to $10 million a year.
All of these have the potential to adversely affect people in Labor’s key demographic.
The government is pitching its policies at a smaller demographic than Labor’s low and middle income earners.
It is the ‘aspirationals’ in the $70,000 to $120,000 group who are affected by bracket creep and who are looking for security into the future to offset the risk of higher interest rates.
The government’s analytics tell it that these voters coincide with the people who are most likely to change their votes in an election.
Beyond the four year budget cycle the government’s plan is better for middle income workers than Labor’s because it virtually does away with bracket creep.
Treasury analysis shows that by 2025 average earnings will be $100,000, outside the target range of Labor’s cuts.
To date Labor has not shown how it will deal with bracket creep and still maintain its pledge to fully fund schools, universities and hospitals while at the same time reducing debt at a faster rate than the government.
The government also has an advantage with its smaller target group.
It can produce individualised packages for this demographic showing how each household will be better off under its programme.
Labor’s target group of 10 million voters is too big for the same approach to be taken.
On Friday a Reachtel poll conducted for the Australia Institute showed that the government was ahead 53% to 47% in the Queensland electorate of Longman.
This may be a rogue poll but it may also indicate that Labor is misinterpreting the values of its target demographic.