A Strayn Connection

The relationship between Federal and State branches of a political party must often be a fraught one.

We've read countless stories in recent years about whether a poorly performing federal party is having an effect on a state election, or whether a state party wracked by scandal is affecting the federal vote.

Of course, these things are impossible to determine, given that, even when they are specifically asked, no one can know why a voter ticks a certain box or answers a polling question one way or the other.

Not that that stops all those blasted columnists and bloggers.

In any event, it seems like the most common source of friction must be issues where an option is good for the country as a whole but effects states differently.

The infrastructure funding is a good example.  The Federal Government allocates a particular sum of money each year to Infrastructure projects, and the states jostle each other for the cash.

In the last year of the NSW Labor government a fairly half-hearted application was made for Federal funding. As a result of the sub-standard effort the state missed out entirely.  This was despite the fact that a large injection of cash may have significantly boosted NSW Labor's numbers in the lead-up to the 2011 election.

Of course, that didn't stop Federal Labor offering to throw great big wads of money at the NorthWest Rail link during the campaign, but that's another issue.

It's not often, however, that a State branch and a Federal Branch are perceived to be working at cross purposes.

Full Story here

Now, O'Farrell is on record as opposing the Carbon Tax.

Additionally, the NSW Liberal website has great big swathes of space dedicated to the issue. I went there to download a press release or comment, but found this instead.

In any event.

Now, despite some people's protestations, pursuit of clean energy will undoubtedly create jobs.  Whether those jobs will replace those lost because of the carbon price is all but impossible to determine, but it would be plain wrong to say that NO jobs will be created.

And, of course, those jobs will have to be created somewhere. So the NSW government has to chase those jobs for the state. I don't think anyone would argue with that.

The most interesting part, though, is the fact that this announcement was only the creation of 40 jobs. It's not an enormous investment in Sydney's future - in the face of approximately 3. 5 million people employed in NSW, it is a miniscule number.

Notwithstanding, a big fuss was made about it, including a joint press conference with O'Farrell and Gillard.

Brad Burden, O'Farrell's media man, had this to say:

He may be right, he may not be.  But the more I think about, the more I see this announcement doing very little help the NSW Coalition, but probably hurting the Federal Coalition quite a bit.

What it shows, in short, is NSW getting on with the job - accepting that there will be a price on Carbon, and that energy is best invested dealing with that rather than rending garments in protest.

No matter, what you think about the Carbon Price, I think NSW would be stupid to not try and ensure that as many of these new jobs as possible are in NSW.

Having said all that, it seems that the debate on the Carbon Price and in particular the reporting from certain segments of the media means that all reason may well have flown out the window, so what would I know?

A Taxing Misdirection

I've decided I'm not going to blog about the detail of the budget.

There are a few reasons for that.  First of all, I have a job and a life, and starting this blog at 9:45pm means that I don't have the energy or the time to read every page of the budget papers and provide a detailed, informative summary.

In any event, there will be plenty other pieces that cover that same ground, and I don't see any point in reinventing the wheel.

On that, I commend Ross Gittens piece to you.  The Herald had this helpful piece on the winners and losers. No doubt all the major papers will have extensive coverage on the budget tomorrow (Wednesday) if that is what you're after.

What I do want to blog about, however, if this extract from the budget speech delivered by Mike Baird:

What a load of crap.

Before I explain why, some background.

We all remember the massive controversy over the mining tax and its various incarnations.

In the end, the Federal Government signed an agreement with the biggest mining companies.  Part of that agreement was that the government would reduce the amount of mining tax payable to the Federal Government by the value of the royalties payable to the state governments.

On that - in researching this piece, I found a number of articles that suggest that under the mining tax the royalties will be deductible, whilst other articles suggested that the royalties will be refunded.

As anyone who has worked with tax goes, the difference is crucial. Something that is deductible reduces your "taxable income" - so a reduction in your taxable income of $10 might mean a net tax saving of maybe $4.

Something that is refunded, or (to use the word the income tax legislation uses, offset) against a tax reduces the tax payable by the full $10.

For present purposes, I'll rely on Mike Baird's statement in his speech that the Commonwealth has agreed to "reimburse" mining companies for any increase in royalties ie that royalties will be refunded in full by the Commonwealth.

There was a fuss earlier in the year when Western Australia's Liberal government increased the royalty rate on iron ore in the knowledge that the companies affected would have the loss offset by the Federal Government.

How the news was reported by WAToday.com.au

Unsurprisingly, the Federal Government has responded by threatening to slash WA's share of the GST revenues:

From this WAToday article

As a sidenote, it is difficult to comprehend how the Federal government did not see this issue coming, especially from the states with Liberal governments.

Coming back to NSW, this new increase in royalties will apply only to those companies that are liable for the mining tax .

The NSW Liberal government has decided to increase the royalty rate on (it would seem) all minerals presently subject to the royalty regime. The justification for this increase is (apparently) the carbon tax.

Mike Baird said the following:

It may well be the case that the carbon tax will cost the NSW state budget. If NSW Treasury modelling says so then I wouldn't dare disagree.

The problem that appears to have been lost in the fuss surrounding the budget is that this loss has NOTHING to do with the mining tax.

The NSW budget will increase the royalties that it charges the companies that are "subject to the Commonwealth’s proposed Mining Resources Rent Tax."

I don't know whether any of these companies will actually have to pay the carbon tax directly, although all will pay additional power costs due to power prices rising.  This is as most, if not all, power companies with coal powered plants will incur the carbon tax.  Those of you that follow these things will know that the carbon tax (in its present form) will apply only to those companies that produce 25,000 tonnes of CO2 from any one facility.

I'm not on top of precisely how many coal mines actually produce that much CO2.  It should be noted that the tax will only be payable on a mine that produces 25,000 tonnes of CO2 getting the coal out of the ground - not on a mine that produces enough coal that, when burned, will produce 25,000 CO2.

The hysteria on various websites means that it is difficult to find any figures I feel comfortable quoting.

The point is, however, this.  The companies that pay the mining tax will be the ones subject to the additional royalties. Baird confuses the issue by calling it an "offset increase" but it is simply a tax increase.

This is being done because the NSW government is "prepared to use all means within our power to recover the costs to the state of the Gillard Government’s carbon tax."

These changes will have no net effect on the bottom line of the mining companies.  There is no connection to whether these companies will be subject to the carbon tax or not. It doesn't really matter whether they are or aren't though, because there will be no net effect on their bottom line.

The net effect is that the NSW government will pull in more royalties and the Federal government will pull in less from the mining tax. The ostensible purpose is to cover the additional cost from the carbon tax.

Moreover, judging by what Swan said about Western Australia, it seems likely that NSW will suffer a retaliatory decrease in the amount of GST returned, meaning that it is likely that NSW will pull in less GST and other states will receive more.

Net effect?  Probably minimal. 

Despite that, the most frustrating part of the whole fiasco is this.  The NSW government (like every government) grapples every year with changes to income and expenditure.  Some things go up, some things go down, some things stay the same.  If it looks like things aren't going to balance, programs are cut or taxes are raised.

At the end of the process, hopefully the budget stays more or less in balance and we get through another year.

I've blogged previously about the (in my view) disgraceful pokie tax cut.  It was announced today that new police and nurses are going to be hired, and will of course need to be paid for.  There are a number of infrastructure promises for which O'Farrell has needed to start finding dollars.

These promises all have a negative impact on the budget, and will all need to be paid for somehow.

In the same way, it appears that the Carbon Tax is going to hurt the budget's bottom line.  But why is it THIS new expenditure that is being linked to this increase in the mining royalties?

It's simple. Partisan politics.  O'Farrell is a Liberal, and the Federal government is Labor.  He's taking a shot at Gillard, knowing that Federal Labor's unpopularity and the anger at the Carbon Tax means that he won't upset too many people who would ever actually vote for him anyway.

The fact is that the Carbon Tax has nothing whatsoever to do with these royalties, and the Coalition's attempts to link the two in this speech are nothing more than misdirection.

The budget has (quite properly, I'm prepared to accept) allowed for a negative impact from the Carbon Tax.  The budget has allowed for an increase in royalties, a change the government is entitled to make.

But to link the two in the way that Baird has done in the above quotes is deceptive - nothing more, nothing less. There can be no doubt that he did so knowing that we would see statements like the below in the papers on Wednesday;

He did so knowing that the issue is probably too complicated to canvass in a newspaper's coverage of the budget, and consequently most people's understanding of the changes would start and end with the above quote.

Moreover, he did so knowing the the mining tax and the carbon tax are still to progress through the Federal parliament.  Given present circumstances, who know what kind of tax we may end up with, or whether the taxes will even make it through both houses?

Baird's speech deceptive, it is misleading, and people should be told about that.  But I'm not holding my breath.

Polls Apart

There was a very interesting set of polling numbers released on the weekend, faithfully leaked to the Twitterverse by @ghostwhovotes.  They can be seen here: http://bit.ly/gYdVDy


At first glance, the numbers seem to be a little encouraging for Labor.  Primary vote has risen from 23% in Jan-Feb to 26% in Mar 2010 (down from 39% at the last election).


Think about that, just for a second.  Even on these improved numbers, one out of every three people who voted Labor in 2007 will not be doing so this time round.


The strange thing is that the Coalition has picked up 4% as well, moving from 46% to 50%, up from 37% in 2007.


That's an impressive number too - a full half of the population marking Liberal or National.


So, where have these numbers come from? It's from the Green column - down from 17% in Jan-Feb to 11% in Mar 2010 (down from 9% in 2007).


Is that actually possible?  Could it be the case that one out of three Greens voters have jumped ship in the last month?  I doubt it.


Some people on Twitter theorised that the fall was, at least in part, due to the announcement of the Carbon Tax.  Personally, I don't think so.


To have moved one's vote because of the Carbon Tax, this hypothetical Green voter needs to so fundamentally misunderstand that Federal/State divide that he/she thinks that their state vote matters on this issue, but have a nuanced enough understanding of the present state of Federal politics that he/she can see the Green fingers all over this move.


Such a voter may exist, but surely not more than one or two of them?


It is possible that this is some sort of Green backlash, but I would have thought that most people who already feel that strongly about the issue are already firmly lodged in the Coalition column.


Far more likely, in my view, is that this result is just statistical noise - a false positive, if you will.


Let's look at the small print.  Obviously only people who are home at the right time of day, interested in being part of a poll, and additionally able to speak English would be polled.  Newspoll no doubt balance for all these things, and besides, the same restrictions applied to the previous poll.


The important point, however, is that only 1000 voters were surveyed in this poll.  1000!  That's such a minute quantity of the NSW population that we're immediately taking a risk extrapolating.


Now, no poll can be truly random.  That goes without saying.   But it's still very easy to forget that polling is an inherently inexact science.


Even if the poll was 100% random, there will still be variation.  Indeed, this poll (like all good polls) tells us that the "maximum margin of sampling error is plus or minus 3.1".  Stretching back to the small amount of statistics I studied at uni, this tells us that there is a 95% chance that the "true" result is no more than 3.1% more and no less than 3.1% less than the stated figure.


Now, the Green vote plummeted 6%, so we're outside that standard deviation - but notwithstanding that, 5% of results will still fall outside that range.


At the end of the day. there may well have been a fall in the Green vote, and it may be a significant one.  But I severely doubt that it could possibly be 6%. I'd be very surprised if there was not an "inexplicable" rise in the Green vote in the next poll back towards the kind of figures we saw in Jan-Feb.


Polls are important.  They let us and politicians know what is going on, and when it is time to punt the old premier and rotate round again. If the Greens are smart, I'm sure they'll be calm about this result.  As the cliche goes, there is only one poll that counts.  


As a final note, according to these numbers, 11% of people think that Labor will win, including 4% of Coalition voters! I guess there are some questions no poll can satisfactorily answer.

Flying High

Tonight I am not interested in writing about Keneally's "gaffe" that the Coalition has saturated the airwaves with. If you haven't heard about it, I wouldn't bother.  It's all about whether Keneally's view on the compensation to be offered under Gillard's Carbon Tax plan is different to Gillard's view.  The fact that Keneally may be a little too busy being slaughtered in her state election to worry about Federal issues appears to not matter very much.

Rather, I'm very interested in Keneally's announcement today about slashing the fees for the Airport link.  Well, that's not quite what she did, but I'll come to that later.

First, some background.  For those of you not aware, the price of a ticket to disembark at one of the stations on the Sydney airport link (Green Square, Mascot, Domestic and International) have always been, in my view, extortionate.  By way of example, a ticket from Town Hall station to the International terminal costs $15.80.  If there are two of you, a cab is cheaper.

This is compared to a ticket from Town Hall to Bondi Junction that costs $3.20

In fairness, travel to the airport from other parts of Sydney becomes economical compared to a cab as the fare doesn't increase much as you get further away, but I think it is fair to say people are generally put off using the line because of the price.

The relevant detail is that there are two other stations on the same airport link (see http://bit.ly/i9dGnY for a map, if you like) that, despite not being in any way part of the airport, attract the same surcharge.  Until now.

Keneally announced today that, from Monday, the government would be "subsidising" the fares to the two non-airport stations, effectively bringing the price of tickets to that station in line with the rest of the CityRail Network.

A number of reports today have commented on the fact that these two stations lie within Keneally's electorate of Heffron.  The Opposition Transport Spokesman Gladys Berejiklian called the move "cynical pork-barrelling" (SMH), although I can't see why it would be necessary - Keneally holds the seat by 23.7%, and no matter how awful things go for Labor on 26 March I think we can mark this one into the Labor column.

Labor of course tried to sell the move as being the chance to correct a "legacy" from the previous Liberal government, although why it took 12 years to correct this was conveniently not explained. Keneally even went so far as to explain that at the time the airport link was signed off, O'Farrell was chief of staff to the Liberal transport minister, which seemed a silly point to make as it only emphasised just how long it's been since the Coalition were in power.

In truth, my theory on the announcement was simply that it was a way to get people thinking positive thoughts about Labor and transport.  One of the concerns we constantly see ranked highly by voters is transport - by announcing this new subsidy, the government has had pretty solid coverage of them "doing something" to improve the transport system.

According to the SMH story, this move will cost $4 million per year, just 10% of what it would have cost to include the Domestic and International Terminals in the subsidy.  Odds are, many people watching the story won't notice the distinction between the two pairs of stations and will simply understand that the government has done something to decrease the fares on the airport link.

The Coalition can't say anything much because they don't want to be on the other side of a CityRail Fare Reduction Story, so the move is really a certain win for the government.  And I suspect it would have gotten a lot of airplay if not for the distraction of Keneally's non-gaffe.  Not doubt she'll be livid that this savvy bit of politicking has been drowned out by the carbon tax issue, which was always going to get traction because of the present controversy about the carbon tax in the Federal arena.

It remains to be seen how many more state issues are drowned out by the Carbon Tax, and which side of NSW politics will profit the most from it.

A Federal Incursion

With all the drama and inevitable weeping and gnashing of teeth about the Carbon Tax in Canberra yesterday, it was perhaps inevitable that it would become an issue in the NSW election.

Of course, anyone who is influenced by what either leader said on the issue surely misunderstands the delineated roles of the Commonwealth and State governments, but let's put that aside for the moment.

Keneally came out in support of the tax, saying "Climate change is a real problem and we as a nation need real leadership to deal with it," (SMH Online) whilst O'Farrell said that he opposed the tax because it "is going to boost families' power bills by $500, boost the power bills of small businesses by $2,000, and threaten industries like the steel industry in the Illawarra." (ABC Online)

To what extent the Federal leaders have instructed these two to follow the party line is anyone's guess.  The way both fell in line seemingly without question highlights the clear ideological divide between Federal Labor and Coalition on this issue.

To see a stark ideological difference extend past meaningless rhetoric is a treat in Australian politics.  I often have the feeling that it is anyone's guess where the two major parties will land on any particular issue.  

WorkChoices was, until now, the most obvious example.  Labor (and the unions) in the 2007 Federal Election used WorkChoices to brilliant effect, galvanising their base and reminding people who they (ostensibly) stand for.

The Carbon Tax appears to be the next WorkChoices, which should be a guarantee of some first class niggle from both sides.  The NBN and the flood levy have also been interesting to watch, for the same reason.  Abbott's "Oppose or Die Trying" approach has certainly helped lift some pulses on both sides of the aisle.

In NSW, there are few issues on which there is a true ideological split.  Labor have been trying to paint O'Farrell as someone who will privatise everything, in typical Liberal style, but their efforts must seem a little disingenuous given they just crashed through the power privatisation.

There are differences in the plans for transport, but there is no major difference for ideological reasons.  Same goes for health and education.

In fact, it's a little hard to think of a state issue where we have the same ideological battle that we are now seeing in Canberra.  This may very well be a product of the fact that the Coalition knows that all they have to do is stay on their feet long enough to fall over the line - why risk alienating all the Labor voters who have drifted across to them by doing something that will annoy traditional Labor voters?

This all makes O'Farrell's willingness to "nail his colours to the mast" a little confusing.  Have a look at this Newspoll: http://bit.ly/efUTcT 

Admittedly, the numbers are from December last year, and presumably we'll see an avalanche of polling on the issue soon.  Also, I'm not a huge fan of the question asked by the pollsters,  but this will have to do for now.

Labor voters are 57:39:4 (in favour:against:uncommitted) on a price on carbon.  Liberal voters are 31:65:4

As things stand in NSW, there are hundreds of thousands of people who would usually be Labor voters who are telling pollsters they will vote for the Coalition.  

These people voting Coalition on 26 March is surely the key to a crushing Coalition victory - and O'Farrell allowing climate change to become an issue and tying himself to the Federal Coalition position on going to push these people back towards Labor.  Further, it's hardly going win any voters from Labor - based on present polling, I think it fair to assume that the only people still planning to vote Labor would vote naked before they voted Coalition.

In my view, irrespective of whether he actually believes it or not, O'Farrell would do well to steer the conversation towards state issues rather than risk chipping away at the Coalition's monumental lead rather than importing an issue that is only going to lose him votes.