The Liberals won't win without more women and fewer oldies

If the Liberals have any sense, they won’t waste too much time blaming their shocking election result on Peter Dutton, Donald Trump, Cyclone Alfred, the party secretariat, an unready shadow ministry or any other “proximate cause”, as economists say. Why not? Because none of these go to the heart of their party’s problem.

The Liberals’ problem is that Australia has changed but their party hasn’t. They’re like someone still driving a Holden Commodore: a great car in its day but looking pretty outdated today.

In other words, the Libs’ problem is structural, not merely cyclical. It can’t be fixed just by finding a more attractive leader – not unless that leader has the authority to make what many Liberal MPs and party members would regard as radical changes.

Liberal leaders have been aware of their party’s two key problems for some years without facing up to them. The first is their “women problem”. While Labor has put much effort into increasing the proportion of women among its parliamentary members and ministers, the Libs have been quite half-hearted about it, refusing to use quotas to speed up the process.

I’m sure Labor people have been sincere in believing a roughly 50-50 split should become the norm, but I’m equally sure they’re aware of the political advantage that comes with making sure they attract the votes of at least half the female voters, and preferably more.

Go back far enough and you find Australia’s women slightly more attracted to the Coalition than Labor. Not these days. The Australian National University’s Australian Election Study, which uses polling of people after they’ve voted – at the democracy sausage stage – found that, in the previous, 2022 federal election, while 38 per cent of male respondents voted for the Coalition, only 32 per cent of females did.

I’d be surprised if that disparity was much reduced on Saturday, and not surprised if it had increased. Surely a party incapable of attracting its share of the female half of the voting population is a party without a bright future.

Did you notice Monday’s photo of Labor’s just-elected federal members in Brisbane? Seven broadly smiling, youngish women. A lot of them who’d just taken seats from the Libs.

And, as I’m sure you have noticed, all the teals are women. Could there be a message in there somewhere? If so, Labor’s got it, but the Libs haven’t yet.

Another relevant finding from the study of the 2022 election: whereas only 9 per cent of men voted for the Greens, for women it was 16 per cent. My guess is that a lot of those women voting Greens were young.

You surely can’t have missed the news that Saturday’s was the first election in which the great bulge of Baby Boomers has finally been outnumbered by the Millennials and Gen Z, which now account for 40 per cent of the electorate.

With some Zoomers yet to reach voting age, the younger share of the electorate can’t fail to grow as the Boomers start falling off the twig. (Last week I had to go to Melbourne for the funeral of a mate. I stayed with another mate whose wife died last year. Could mortality be catching up with the invincible Boomers?)

So let’s shift from gender to age. The 2022 electoral study observes that “across the democratic world, younger voters tend to prefer parties and candidates of the left and centre-left more so than older voters”. But each Australian election study since 1987 has found that as age increases, so, too, does Coalition support.

In 2022, however, the Coalition’s share of the vote fell in almost every age group, but especially among the youngest age groups. Question is: will today’s younger voters drift to the Coalition as they age, as previous younger generations have?

Probably not. As the Millennials aged between 2016 and 2022, the Coalition’s share of their votes actually fell from 38 per cent to 25 per cent. In both 2019 and 2022, only 26 per cent of Zoomers voted for the Coalition, with 67 per cent voting for the Greens or Labor.

“No other generation records such skewed preferences at similar early stages of the life course,” the 2022 study concludes.

What could possibly cause the latest batch of younger voters to be so down on the Coalition that they may never grow more conservative as they grow older?

Well, one candidate is “intergenerational inequity”. Home affordability has been an issue for yonks, but never has it been as big as it was this time. “How come our parents had little trouble buying a home of their own while we’re finding it almost impossible?”

Until now, politicians have shed only crocodile tears for first home buyers – with the most openly unsympathetic of them being the Liberals’ second Menzies, John Howard.

But home affordability is just one of the ways the system of taxes and benefits has been biased in favour of the well-off elderly – the self-proclaimed “self-funded retirees” – at the expense of younger, working taxpayers.

Who was it who did most to advantage better-off single-income families who could afford private schools and private health insurance? The same John Howard. He rejigged the system to benefit the Liberal heartland, but now that heartland has resigned from the party.

Why? Many reasons, no doubt, but one that stands out: the Liberals’ lip-service-only support for action to reduce climate change. Turns out women worry more about climate change than men, and young people worry more than oldies – for obvious reasons. Thinks: I’ll be dead before it gets intolerable.

Ever since Labor’s Julia Gillard introduced a carbon tax in 2012, the Libs, while denying they were climate-change deniers, have taken the low road: don’t worry about climate, just stop electricity prices rising.

If the Liberals want a future, a future with more votes from women and younger people, the place to start is getting fair dinkum about climate change.

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Dutton's election campaign rout lets RBA off the hook

Reserve Bank governor Michele Bullock must be breathing a quiet sigh of relief now the Albanese government has been triumphantly returned to office. If you can’t think why she should be relieved, you’re helping make my point.

There was something strange in all the accusations hurled at the Labor government for doing little or nothing to ease the great cost-of-living pain so many voters had suffered over the three years of its first term in office.

And that was? Never once did Peter Dutton mention the Reserve Bank. The tough state of the economy was 100 per cent Labor’s fault. And never once did Anthony Albanese or Treasurer Jim Chalmers say what they could have: “Don’t blame us, it was the central bank wot dun it.”

“And there was nothing we could do to stop it doing what it did,” Labor didn’t say. “Had we tried to counter what the Reserve did in increasing mortgage interest rates by a massive 4.25 percentage points, it would just have raised rates even further.” (As every macroeconomist knows, such behaviour is dignified by the title “the monetary policy reaction function”.)

So Albo & Co. did what the system required of them: they stood there and took all the abuse on their own chin. Since the Reserve was granted independence of the elected government in the mid-1990s, the deal between the elected government and the Reserve is that the Reserve says nothing about the government’s conduct of fiscal (budgetary) policy, and the government says nothing about interest rates.

Albanese’s quite unexpected landslide win will tempt many people to start rewriting history in favour of the victors. “Ah yes, Labor was never really in any bother and there was never much risk that all the cost-of-living pain could see it tossed out.”

Bollocks. Before the formal start of the campaign in late March, the polls showed there was a big chance Labor would be tossed out. The Coalition was ahead in the polls, and Dutton’s personal approval rating was high.

It was only as the five-week campaign progressed, and voters got their first close look at Dutton and started listening to what he was saying, that the Coalition’s lead in the polls started sliding down and voters’ comparison of him with Albanese started shifting in Albo’s favour.

Both sides knew from their research that the cost of living was the only issue voters wanted to know about. So both sides vowed to talk about little else. Labor stuck to that resolve, but Dutton couldn’t make himself.

The truth is, throughout his long career in politics, Dutton has shown little expertise or interest in the management of the macroeconomy. He’d been a copper, who saw his life’s vocation as to “protect and serve”. He was on about the threat to our security from abroad and the threat on our own streets. And, as the campaign progressed, that’s what he kept returning to.

He was the wrong person to be leading the Coalition at a time when economics was all that mattered. He had a powerful (though misleading) line asking people if they felt better off than they were three years ago, but failed to keep pushing it. This left Labor room to push its antidote: “don’t worry, the worst is over, interest rates have started coming down, and soon everything will be back to normal”.

But what’s that got to do with the Reserve Bank? Just this: had the Coalition succeeded in getting Labor sacked, Labor would rightly have blamed the Reserve’s tardiness in cutting interest rates for that sacking, and its side of politics would have gone for at least a decade seeing the central bank as the enemy.

But don’t think the Coalition would have loved the Reserve forever. It would have thought: “If those blasted bureaucrats can trip up Labor, next time they might trip us up”. Get it? Both sides would have been looking for ways to clip the Reserve’s wings.

Two points. First, central bank independence and democracy make awkward bedfellows. They mean the Reserve has all care and no responsibility. Much as they may want to, the voters can’t sack Michele Bullock. The only people voters can take the Reserve’s performance out on is the elected government.

Second, the post-pandemic price surge is the first big spike in inflation in the 30 years since the rich economies adopted the policy of handing over primacy in the day-to-day management of the economy to an independent central bank with an inflation target.

So, only now has this regime been stress-tested. This test has revealed how hard it is for a democratically elected government to carry the can for a central bank taking a seeming eternity to use higher interest rates to get the inflation rate back into the target zone.

The truth is, all the seeds of the inflation surge were sown before Labor was elected in May 2022. But Labor didn’t waste its breath trying to mount that argument. The retort would have been obvious: surely three years is long enough for any macroeconomic problem to be fixed?

Good point. When Labor took over, the annual inflation rate stood at 5.1 per cent. By the end of 2022, it had peaked at 7.8 per cent. But by this time last year – 15 months later – it was down to 3.6 per cent. And now it’s back in the 2 to 3 per cent target range.

So, with consumer spending almost flat, the past year has seen inflation do what it could always have been expected to do: keep falling back to target. So why did the Reserve start cutting the official interest rate only in February?

The first rule of using interest rates to manage demand (spending in the economy) is that, because rate changes affect demand with a “long and variable” delay, you don’t wait until inflation reaches the target before you start cutting rates.

But the Reserve has ignored this rule because of its fear of a wage explosion that was never likely to happen. Its “blunt instrument” has hurt voters with mortgages more than was needed. Fortunately for the Reserve, however, its mismanagement hasn’t got an innocent government kicked out.

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Young people will decide who's the next PM

By MILLIE MUROI, Economics Writer

By now, it’s no secret that young people are the biggest voting group. While no demographic fits neatly into either the Labor or Coalition camp – or completely agrees on any given issue – it will be a relief for many young Australians to know they are more than an afterthought this election.

Neither party has been exceedingly visionary, but as Prime Minister Anthony Albanese and Opposition Leader Peter Dutton jet around the country in a final scramble to cement their messages in the dying days of the election campaign, one leader will be tossing and turning far less when they hit the hay every evening.

For the past few decades, voters have tended to be “rusted on” to the major parties. That is, there wasn’t much anyone could do to change their minds in the weeks leading up to election day – and “safe” seats, where one party was practically guaranteed to win, were actually safe.

But young people have thrown a spanner in the works. Not only do Gen Z (born after 1996) and Millennials (born between 1981 and 1996) make up more than 40 per cent of the national vote – outnumbering Baby Boomers for the first time – but they are increasingly pulling their support from the major parties.

The Greens have taken a bigger bite of the youth vote in recent elections, and the Australian Electoral Study – which has surveyed voters after every election since the mid-1980s – has found support for the major parties more widely has dropped to the lowest level it's seen.

That may also be thanks to the rise of independent or teal candidates who have offered platforms more in tune with issues such as climate change – especially hurting the Coalition in wealthier, inner-suburban electorates.

While there is diversity within the youth cohort, there are certain trends, shared experiences and grievances that have clearly shaped the major parties’ campaigns – and which will ultimately determine the result of the election.

Issues such as housing affordability, climate change and cost of living consistently dominate polling among young people.

With house prices continuing to slip out of reach of younger Australians (which their parents and grandparents are also seeing secondhand), both Labor and the Coalition have put housing policies front and centre in their campaigns.

Their demand-side policies are not especially helpful for dampening house prices because they increase the number of people bidding for a new home (and therefore push up house prices). Labor has guaranteed to allow all first home buyers to buy a place with a 5 per cent deposit, and the Coalition has promised to allow first home buyers to withdraw some of their superannuation and reduce their income tax by deducting their mortgage payments.

But these policies are short-term carrots that both parties know will appeal to first home buyers – many of whom are younger.

After facing a red-hot rental market, wage growth failing to keep up with the growth in everyday prices, and a pandemic which could have a long-term drag on their career progression, a seemingly lower hurdle to enter the housing market may be welcome for many young people.

It’s also more immediate than policies aimed at increasing supply, such as the Housing Australia Future Fund aimed at building thousands of homes, and the Coalition’s less direct promise to invest in housing infrastructure such as water, power and sewerage systems, which are more effective, longer-term responses. Both Labor and the Coalition know voters do not have the patience to wait (more) years to be able to crack into the housing market.

While cost of living has persistently been the number one issue for voters, one party has taken the extra step when it comes to easing pressures for young people. Labor’s promise, for example, to wipe 20 per cent off student loans, is a compelling proposition – especially for recent graduates who have racked up record levels of debt amid higher course fees. It’s a policy that has strong support – even among young Coalition voters.

The risks for Labor, of course, include the tendency of voters to “punish” or kick out whoever is in power during hard times, even if those hard times had little to do with the government, and the possibility of young people – who tend to be more progressive – choosing to back minor parties such as the Greens who have pushed for more radical policies such as capping rents.

While there’s recent evidence some young men are leaning more to the right and holding more conservative views than older generations, young people are, for the most-part, “issues-based” voters, meaning action on top offenders: housing affordability, climate change and cost of living are crucial to gaining their support.

Albanese, while arguably lacking extraordinary charisma, speaking ability or policy ambition, has done the basics well. He has relentlessly hammered home announcements on urgent care clinics, affordable medicines, childcare and fee-free TAFE, many of which matter to many, but especially young people.

By contrast, the campaign period has revealed some of the cracks and weaknesses in the Coalition. While their fuel excise cut is undeniably one of the policies with the strongest cut-through this election, they have been slow in releasing their costings, backflipped on their policy to end work-from-home for public servants, and only spoken about their nuclear policy when prodded.

Meanwhile, Albanese has consistently demonstrated he has a solid grasp of how systems, from health to roads and renewables, work – focusing on small improvements but never backing down or straying from his core policies.

Albanese has also connected more effectively in the social media space where young people tend to reside, at least much more than older generations. Dutton’s refusal to engage with influencers has narrowed his reach, while missteps such as his declaration that he would prefer to live in Sydney’s Kirribilli House over Canberra’s Lodge, did the rounds.

While Albanese has made his fair share of mistakes and neither leader has a natural flair for social media, the prime minister’s quips, vulnerability when speaking about his mother, and ability for banter may have put him in a stronger position on platforms such as TikTok where a sense of authenticity and personality are key to connecting with users, most of whom are younger.

Young people may have an appetite for bolder reform and back in more independents and minor party candidates this election, but Albanese will almost certainly secure a second term as prime minister. While there’s no one-size-fits-all approach to attracting young voters, doing the “ordinary” well is probably enough to get Labor across the line.

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Be warned: Ever-higher defence spending means ever-higher taxes

By tacit agreement of both sides, election campaigns exist in a highly contrived fantasy world where the future holds nothing unpleasant. Government spending only ever goes up to meet our growing needs, while those nasty taxes only ever go down. Debt and deficit have been banished to the never-never land of Don’t You Worry About That.

But last week Peter Dutton ripped a great big hole in the circus tent, through which you could see a frightening prospect: we seem to have strayed into a land where taxes just keep going up.

And this from the leader of the Liberals, the party that long has assured us taxes would always be lower under it than under its evil Labor opponents, the party of “tax and spend”.

It’s a lovely thought: there’s a party you can vote for that will always keep taxes lower. It’s just a pity the record doesn’t bear it out. I learnt long ago never to play the game that says one side is always better at running the economy or keeping taxes low.

This may shock you, but the record shows the two sides are much of a muchness. That’s because much that happens in the economy is caused by factors beyond a government’s ability to control.

When taxes are low relative to size of the economy, it’s usually because we’re in a world recession. That’s also when government spending is soaring and the budget deficit’s blowing out.

When taxes are particularly high, it’s usually because the economy’s booming, the government isn’t having to spend quite so much, the budget balance is heading back to surplus, and income tax collections are growing like steam – thanks to something you may have heard of, bracket creep.

Don’t believe any politician who tells you the other side’s into bracket creep, but we’re not. No sign of that in the record books. Similarly, don’t be fooled when some pollie – Dutton last week, for instance – tells you he “aspires” to end the tyranny of bracket creep. Even if he really believed it, his treasurer would take him into a back room and sort him.

Get this: it’s the magic of bracket creep – the effect of inflation in steadily increasing your income tax bill even though you’re no better off – that sustains the whole happy illusion that government spending can keep growing without any announced increases in the rates of income tax.

The pollies never have to announce an increase because inflation – even at a low rate – does the increasing without being asked, or much noticed. Bracket creep is the tax increase you have when the politicians have sworn not to increase tax rates.

What few of the people complaining about the cost of living realise is how much of the pain they’re suffering comes from bracket creep. They see prices rising at the supermarket, they see the Reserve Bank increasing interest rates, but they don’t see the taxman quietly increasing the income tax they pay.

Remember Anthony Albanese and Treasurer Jim Chalmers’ incessant boasting about the two financial years in which the annual budget deficit suddenly turned into two surpluses in a row? Much of that turnaround was caused by bracket creep – a point they didn’t think to mention.

Note, too, that it’s bracket creep which allows governments to announce modest tax cuts before elections, or promise them after elections. Bracket creep quietly but continuously pushes up the average rate of tax on all our income, allowing politicians to look like they’re cutting tax by occasionally giving back some of the bracket-creep proceeds.

But let’s get back to what Dutton did last week. It was yet another effect on this election campaign coming from Cyclone Donald. Trump has not just increased tariffs, he’s pressuring America’s former allies to greatly increase their spending on defence so they’re not as reliant on America’s own defence spending.

It’s true that we’ve gone for decades spending less than we might have, hoping that the way we’ve slavishly sent troops to just about everywhere in the world the Americans have picked a fight will ensure that, should we ever face a threat from some foreign power, the Yanks will fly to the defence of their loyal Aussie buddies.

This hope has always been dubious, but now Trump has turned on America’s defence allies it has become impossible to believe. So, although just a third of poll respondents think we should increase our defence spending, that’s pretty sure to be what happens.

At present, we’re spending about $56 billion a year on defence, equivalent to 2 per cent of our national income (aka gross domestic product). Labor’s existing plan is for this to rise to $100 billion a year by 2034, or 2.3 per cent of GDP. But the Americans say we should be spending 3 per cent. So last week Dutton promised to raise it to 2.5 per cent by 2030, on the way to 3 per cent by 2035.

Dutton says getting to 2.5 per cent would involve additional spending of a cumulative $21 billion. How would he pay for this? Simple, he says. He’d repeal Labor’s promised tax cut of about $5 a week, rising to $10 a week the following year, which it has already legislated. This would save $17 billion over the next four years, and about $7 billion a year thereafter.

What? Did you get that? Here’s a politician – a Liberal politician, no less – standing up in an election campaign and promising to increase taxes. By the standards of modern elections, that’s brave. Something Albanese would never dare to do. And that’s not all. If our politicians are serious about greatly increasing our spending on defence on the way to 3 per cent of GDP – and they seem to be – we’re talking really big bucks, not something we could just put on tick.

Speaking of which, we’re already looking at budget deficits totalling $150 billion over the coming four financial years. Do you really think we won’t be paying a lot more tax in coming years?

We’ll be seeing a lot more bracket creep, and far fewer seeming tax cuts.

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Question for voters: Which party do I want deciding wages policy?

The craziest thing about this election is that we’re into the last week of the campaign without anyone much bothering to mention the word “wages”. Really? We’re too obsessed by the cost-of-living crisis to have any interest is what has happened, and will happen, to our wages?

Is it possible our voters could be so detached from reality that they don’t see the link between prices and wages? It reminds me of the person who voted for Trump because “prices went up, and they’ve never come back down”.

That’s right, sir, the general level of consumer prices goes up and rarely falls back. That’s why it’s nice to see your wage rising in line with the rise in prices, or even a bit faster than prices. If that’s what happens, you don’t have a lot to complain about.

Is it possible some people think the government can do something about rising prices but has nothing to do with wages?

Actually, the proportion of workers who are members of a union has fallen so far – to 13 per cent – that many workers may feel they have no say in what happens to their wage, and neither does the government. The boss increases your pay occasionally if she feels like it.

The fact is, the cost of living is always high on ordinary people’s list of complaints. But it became a particular concern in 2022 because of the huge surge in prices caused by the pandemic. The annual rate of increase in prices got to about 8 per cent, but is now back down to the 2 to 3 per cent range we’ve become used to.

Trouble is, wages didn’t rise as much as prices did and, to make matters worse, in its efforts to get the inflation rate down, the Reserve Bank caused interest rates on home loans to rise by more than 4 percentage points. As well, “bracket creep” took an extra bite out of workers’ after-tax pay.

That’s what explains the voters’ obsession with the cost of living. But the surge in prices was set in train before the Albanese government won the last election in May 2022. So the real questions are: what has this government done about it, and would a change of government improve the prospects for the cost of living?

We can learn a lot from a new research paper by one of the nation’s top labour-market economists, Professor David Peetz, of Griffith University and the Australia Institute’s Centre for Future Work.

Peetz finds that, despite a fall in “real” wages (that is, after allowing for price rises) during the COVID pandemic and the subsequent surge in prices, by December 2024, real wages had recovered to be equal to what they were at the end of 2011.

Two things to note. First, this is wages before taking account of income tax. Real after-tax wages would not have recovered to their level 13 years earlier, because of the bracket creep made greater by the price surge.

Second, over those 13 years, the productivity of labour improved by 15 per cent. So none of the benefit of that improvement was shared with workers – contrary to the assurances of businesspeople, politicians and economists that, by some magic process, productivity automatically increases real wages.

Sorry, there’s nothing automatic about it. If workers don’t have the bargaining power to insist on their fair share of the spoils, employers don’t pass it on.

What labour-market economists understand, but most economists (including Reserve Bank boffins) keep forgetting, is that wage rates are determined not simply by the balance of supply and demand for labour, but also by the employees’ bargaining power relative to the employers’ bargaining power.

Peetz’s examination of 16 factors that influence or indicate power in the jobs market shows that “almost all economic and labour market trends in the past half century have reduced workers’ power”.

To be precise, he finds that 14 of the 16 factors indicate reduced workers’ bargaining power.

Here’s a list of the 14 – reduced union membership, a reduced proportion of workers whose wages are bargained collectively by unions, fewer days lost through strikes, the advent of the gig economy, businesses’ increased use of labour-hire companies, increased casual employment, fewer workers changing jobs, increased outsourcing of work, industries dominated by fewer firms, more issuing of temporary visas to foreign workers, use of non-compete clauses in employment contracts, increased franchising of businesses, increased importance of share-market capital, and increased competition from low-wage imports.

The two factors indicating increased workers’ power are the gradual decline in the gender pay gap and the fall in the rate of unemployment since 2010, although it’s been creeping up since 2023.

Peetz sees the influence of this overall decline in workers’ bargaining power in figures for the average annualised wage increases under new enterprise agreements. They gradually declined from about 3.5 per cent in 2014 to 2.5 per cent by 2022.

But in the two years since then, the average reached a peak of 4.8 per cent, and was higher in every quarter than it was in any quarter between December 2014 and December 2022.

Why the improvement? Peetz argues it’s because of the change in government industrial relations policy since the election of the Albanese government in mid-2022.

Whether voters know it or not, the federal government does influence the size of wage rises via its regulation of the wage-fixing rules. It can shift the balance of bargaining power between employees and employers. Under the Howard and subsequent Coalition governments it was shifted in favour of employers; under the Albanese Labor government it’s been shifted back in favour of employees and their unions.

And whether voters know it or not, the many hundreds of minimum wage rates set out in industrial awards – covering about the bottom quarter of workers – are increased on July 1 every year by an amount determined by the Fair Work Commission.

The federal government can influence these decisions by urging the commission to be generous or stingy. I’ll leave it to you to guess which side of politics likes to see bigger increases, and which prefers smaller.

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Dutton almost promised to fix bracket creep. Here's why he didn't

By MILLIE MUROI, Economics Writer

Taxes are a necessary evil – which is why neither side of politics is willing to sign themselves up to the best way to keep them in check.

While most of us acknowledge the merits, you’ll be hard-pressed to find anyone jumping for joy when they find out their tax bill is growing.

The one you’re probably most familiar with is personal income tax – a chunk of your income scooped out from your salary every pay cycle. Luckily for politicians, it’s not often that they need – or choose – to raise them.

That’s because the tax system is designed in a way that “naturally” fattens the amount of tax raked in by the government every year. You’re paying more in tax this year? “Not our fault,” they can shrug. It’s simply the way things are.

As you know, we pay bigger tax rates within higher tax brackets (slices of our income) with the amount of our income determining which rates – and ultimately, how much tax – we pay. While your income usually climbs each year, those tax brackets and rates don’t budge automatically.

When the growth of your pay packet is faster than the rise in consumer prices (such as the price of the champagne you might crack open after a pay rise), it’s not so bad. But when your pay isn’t keeping up with inflation, your tax bill still increases, leaving you doubly worse off.

This extra tax you pay is called “bracket creep”.

If we let it march on unchecked, by 2031, the average full-time worker is on track to get bumped from the 30 per cent tax bracket to the 37 per cent tax bracket, regardless of whether their wages, in “real terms” (after allowing for inflation) are going backwards, forwards, or sideways.

So, why is no politician on the crusade against bracket creep?

To be fair to Opposition Leader Peter Dutton, he had one of the best ideas in this broadly uninspiring election campaign: change the system. “Bracket creep, as we know, is a killer in the economy,” he declared in an interview this month, adding a worthy note of urgency: indexing (or raising tax brackets in line with inflation) needs to be introduced – quickly.

How quickly, exactly? Well, this is where his sensible idea seems to fade into a vague mist of political fantasies. First, we’ll have to “get the budget into a position where we can index the brackets”, he clarified at a later press conference on his campaign.

That’s about as clear a caveat as mud. What is that magical budget position? A budget surplus? By how much? And with the budget now, under Labor, forecast to remain in deficit for the next decade, it’ll be more than just the average worker being pushed into that 37 per cent tax bracket by the time the budget is back in balance. But if the Coalition (if elected) makes some deep cuts to spending, gets gifted some unexpected jumps in the tax on income from mineral exports, or rakes in significantly more money from other taxes, perhaps then.

But with plenty of policy costings yet to be released just a week out from election day, how are we to know if the Coalition has a coherent plan to get the budget – and apparently the country – “Back on Track”?

Dutton also labelled his idea an “aspiration” rather than actual policy, just about giving it a final kiss goodbye in the graveyard of good ideas. I can “aspire” to kick a goal for the Matildas once I get myself into a position where I can do that. I’ll leave the judgment to you on how likely that is.

Labor’s stance is not promising either. Prime Minister Anthony Albanese hasn’t even expressed a nice, fluffy goal when it comes to indexing income tax brackets. Instead, he has made a fairly safe tax promise: Labor will generously gift us taxpayers 1¢-in-the-dollar tax cuts in 2025-26 and 2026-27 for the lowest slice of our income that we pay tax on. That works out to be a saving of about $5 a week in the first year, and $10 a week the year after.

Sure, that compensates for some of the additional tax we’ll pay from bracket creep. But it’s not a lot, and it doesn’t stop the root problem: the growing number of workers who will be pushed into higher tax brackets in the years ahead.

All we seem to see from either side of politics is this kind of tinkering around the edges. Or, it’s temporary measures such as the Coalition’s low-and-middle-income tax offset in 2018, which gave a tax saving up to $1080 for people earning up to $126,000 a year (until 2022) and their promise this election of a $1200 “cost-of-living tax offset” for Australians earning up to $144,000.

It makes you think bracket creep is a problem neither side of politics really wants to solve – and you’d be right.

Have you ever noticed politicians are always announcing tax cuts, but never tax increases? They can thank bracket creep.

It’s a villain that allows whoever is in government to play the hero: “Look at these wonderful tax cuts and relief we’re offering!” It’s a bit like a doctor ignoring the preventative measures their patient could take, instead offering temporary or tiny relief through various medicines that simply alleviate the symptoms.

Bracket creep is also an excellent revenue driver for the government: a way for them to increase their tax take every year without lifting a finger. Not only does the government of the day get to wave offsets and tax relief around as if these things are a big favour to punters – they avoid having to put their name to the unpopular decision of increasing taxes.

Permanently tying the level of tax brackets to inflation also commits future governments to more budget discipline. If they don’t sufficiently limit the growth in government spending, they can’t rely on the quiet power of bracket creep to boost their coffers.

For now, it looks like neither side has the guts to end the sugar hit they get from bracket creep – all at the cost to workers’ pay packets. Getting tax “Back on Track” has a nice ring to it. If only Dutton had the guts to go with it.

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Our democracy's not working well. Here are some ideas to fix it

This limp, uninspiring election campaign is a sign our democracy isn’t working as well as it should. The voters’ preoccupation with the cost of living has been a gift to both major parties, allowing them to wave around a few small tax cuts and other sweeties while avoiding controversial measures to tackle harder problems.

The big two are claiming to want to get us “back on track” and “building Australia’s future” while saying and doing little about limiting climate change, reducing intergenerational unfairness (including unaffordable home ownership) and raising our stagnant standard of living.

The two parties have fought themselves to a standstill, where neither side is game to propose anything unpleasant – raising taxes, for instance – for fear of the scare campaign the other side would run.

What could we do to encourage politicians to try harder and show some courage? Well, John Daley, formerly a boss of the Grattan Institute, and Rachel Krust offer some good ideas in a report sponsored by the Susan McKinnon Foundation.

Their idea is to toughen up the institutions and arrangements that surround our federal politicians, putting more pressure on the pollies to get on with making real improvements. They want “a stronger parliament, a more independent public service, more independent advisory bodies and a competitive electoral system that rewards deep engagement with the whole community and pushes incumbents to do better”, Daley says.

They start with reducing political donations, which feed the perception – and the reality – that money is buying access and influence. Many of the donations come from industries which are highly regulated by the government. Gambling companies, for instance, contribute 10 per cent of the donations from industry despite accounting for just 1 per cent of the economy.

The cap on donations from industry bodies should be reduced from $1.6 million a year to $150,000 over the period between elections. The cap on spending by third parties (such as Clive Palmer) should be lowered from $11 million to $2 million. This would also apply to donations from “nominated entities” such as the Liberals’ Cormack Foundation and Climate 200.

The threshold for public disclosure of donations should be lowered from $5000 to $1000.

Daley and Krust say the limits on how much could be spent on campaigning that were agreed by the two major parties unfairly benefit nationwide political parties at the expense of independents by allowing the parties to buy advertising in marginal electorates which independents aren’t allowed to match.

Turning to the public service, the former Coalition government’s robo-debt scandal, in which senior public servants failed to stand up to their minister’s wish to do something unlawful and Barnaby Joyce’s admission that he fired a department secretary to get more compliant advice, tells us the public service has become too responsive to ministers and not independent enough in serving the long-term public interest.

Daley and Krust say we need legislation to require that department secretaries be appointed from a shortlist supplied by the Public Service Commission and the secretary of the Prime Minister’s Department.

Legislation should also limit the grounds on which a department secretary’s employment can be terminated.

Next, the authors want to curb a prime minister’s ability to call an early election. This gives the government an unfair advantage over its opponents because it can pick a date it thinks will work better for it as well as keeping its opponents guessing.

Speculation about early election dates creates uncertainty and distracts politicians and the media from focusing on policy issues.

The authors favour a fixed four-year term, but this would require a referendum. Three-year terms, however, could be made fixed terms by legislation, unless the government loses a confidence motion or is unable to pass supply bills to keep money flowing.

A further idea is to make civics education compulsory in the latter years of high school education.

It’s tempting to try to fix any and every problem by adding it to the school curriculum, but I think civics is a special case. People need to know how our political system works as part of their rights and responsibilities as citizens.

Testing shows that knowledge of civics is falling. Only 28 per cent of year 10 students were at the proficient standard last year – the worst result since testing began in 2004. Perhaps if young people knew more about how the system worked, they’d take more interest in election campaigns. And perhaps if they’d studied democracy, they’d value it as highly as the rest of us.

A further proposal by the authors is that independent members of parliament be given increased staff to help them review proposed legislation, particularly if they hold the balance of power.

Daley and Krust’s ideas are good and could give our politicians’ performance a shot in the arm. But the system as it is now is what makes life easier for the two major parties. Why would either Labor or the Coalition ever want to make such changes?

They wouldn’t. But that’s what makes the pair’s suggestions so timely. If either of the majors wins a majority of seats, those proposals are likely to go straight to the most unreachable shelf in the parliamentary library.

But there’s a high likelihood neither side will win enough seats to govern in its own right. In which case, one side or the other will need to gain the support of enough minor party and independent members to convince the governor-general it’s able to govern with stability.

So these are just the circumstances in which the crossbenchers will be well placed to bargain for their support and the authors’ wish list could come in handy.

I’ve never forgotten that NSW’s move to four-year fixed terms came as part of the bargaining with four independents after Nick Greiner’s Coalition government fell short of the numbers at an election in 1991.

Political miracles do sometimes happen.

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My Easter sermon: How we can Trump-proof our society

Since it’s Easter, and we’ve got the day off – and politicians have gone to ground – it’s a good time for, if not religious observance, then at least a little moral reflection.

According to The Economist magazine, Christianity is struggling across the developed world. The Americans seem more devout than other English-speaking countries, but since the turn of the century, church attendance there has fallen from 70 per cent of people to 45 per cent. In Italy, home of Catholicism, the number of churchgoers has shrunk by almost half over the past decade.

Of course, churchgoing and religious identification aren’t quite the same thing. For example, I still put myself down as Salvation Army on the census, which would come as a surprise to my local minister. As a mate explained it, “you can take the boy out of the Salvos, but you can’t take the Salvos out of the boy”.

Anyhow, here in Oz, according to the 2021 census, the proportion of people identifying as Christian has fallen from 61 per cent to 44 per cent in a decade. The proportion of those reporting “no religion” has risen from 22 per cent to 39 per cent.

Well, to each their own. If people are less religious than they were, how does that make much difference to anything? Actually, I think it could. To me, Christianity and other religions are a mixture of beliefs about the supernatural and beliefs about morality – what’s right and wrong behaviour, especially towards others.

It’s the latter that keeps me lining up with the Christians. And if reduced religious adherence leads to less ethical behaviour, then it certainly does make a difference, to our mutual cost.

In my essay last week about the decline in election campaigns, I noted that, these days, both sides of politics limit their appeal almost exclusively to our self-interest. Who was it who said “ask not what you can do for your country – ask which party is offering you the better deal”?

When politicians are no longer game to appeal to the better angels of our nature, that’s when you know we’ve got a problem. When politics becomes little more than making sure you and yours, or your company, or your industry, gets a bigger slice of the national pie, decline must surely follow.

Conventional economic theory is built on the assumption that the economic dimension of our lives is motivated by nothing other than self-interest. If so, heaven help us.

In Adam Smith’s familiar words: “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

There’s much truth to his idea that the “invisible hand” of market forces can transform all that self-interest into an economy that meets our material needs pretty well. But that’s not the whole story, and it’s clear Smith never believed we could get along fine without moral behaviour.

The rich world’s experiment with what Australians called “economic rationalism” and academics now call “neoliberalism” had a price we’re still paying. It had the effect of sanctifying selfishness.

There’s a lot of self-interest in the world, and there always will be, but it’s wrong and damaging to imagine that it’s the only emotion that does or should drive human behaviour. As some behavioural economists have reminded us, humans co-operate with each other as well as compete.

To put it in terms more appropriate to Easter, all of us have our “better selves” by which we care about the feelings and needs of others, where we don’t like seeing others treated unfairly, getting an inadequate share of the pie or being denied the opportunity to flourish.

This brings us to Donald Trump. If things keep going the way they are, I won’t be surprised if many people conclude Trump and his tariff madness played a big part in this election’s outcome. The difficulties all the rich economies are having recovering from the post-COVID inflation surge have caused many incumbent governments to be punished for cost-of-living crises – even if, like the Albanese government, they weren’t in power when the seeds were sown.

If Albanese escapes that fate, Trump and his antics will be credited with having united our voters with their government against a threat from a hostile foreign power. But if Peter Dutton doesn’t do well, some will attribute this to his earlier admiration for Trump and his dalliance with some of his policies, such as his attack on government spending and public servants.

What I wonder is how such a crazy man with so many dangerous notions was able to talk his way into such a powerful office in what’s supposed by Americans to be the world’s greatest democracy, especially after they’d had a four-year test-drive to see what he was like.

I put it down to three factors: the Americans’ distorted voting system, their highly polarised party system where many Republicans knew how bad Trump was but voted for him anyway, and the large number of less-educated white voters, particularly men formerly employed in factories, who felt they’d been cheated by the market economy and alienated from those of us who’d done well from the technological advance and globalisation that had greatly reduced the cost of many manufactured goods.

So alienated are many Americans that they voted for Trump not because they believed his promises – they don’t believe any politician’s promises – but because they wanted to see him give the capitalist system an almighty kick in the backside. This is just what he’s doing.

In the heat of their neoliberal fervour, the Americans didn’t bother to look after the victims from their “reforms” – didn’t bother making sure they got decent unemployment benefits, let alone help to retrain and relocate in their search for employment.

If we don’t want to see the rise of our own Trump, we should follow Jesus’ advice to love our neighbour as ourselves.

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Whether you eat alone is a good predictor of happiness

By MILLIE MUROI, Economics Writer

If you’re sharing a meal with someone this Easter, chances are you’re happier.

In fact, it’s as strong an indicator of how happy you are as the amount of money you’re raking in and whether you’re holding down a job.

That’s according to this year’s World Happiness Report, which examined data from a survey across 142 countries and 150,000 people, finding the link between meal-sharing and happiness holds regardless of age, gender, country or culture.

There are well-established links between income, employment and happiness: someone holding down a job is more likely to be happy than someone who is unemployed. And the more money a person makes (at least until a certain point), the happier they tend to be.

You won’t see the rate of meal-sharing cited by many politicians or economists, but it’s a great indicator of happiness – and in some ways, more so than income.

How much you’re paid and whether you have a job is a stronger indicator of the level of negative emotions you experience, but how often you share meals has a stronger link both to the level of positive emotions you experience and how highly you rank your life satisfaction.

It’s the places where residents share more meals that tend to report greater average life satisfaction.

And while Latin America and the Caribbean are the global leaders in meal-sharing frequency, the link to happiness is stronger in Australia, North America and New Zealand than for any other region in the world. Starting to share most of our meals – meaning eight or more a week – can boost our wellbeing by the same amount as doubling our income.

We’re also a lot more likely to eat dinner with other people than we are to share lunches in Australia, sitting around the dining table with others for five dinners a week on average. Levels of meal-sharing generally are low in south and east Asian countries such as Japan, India and South Korea, where people share less than one meal out of three on average.

But wherever you look, it’s the places where residents share more meals that tend to report greater average life satisfaction.

Part of what makes the rate of meal-sharing such a good measure is that it’s relatively objective. It’s easy to ask and answer, it’s not something people are likely to hide or lie about (like they might for income), and it can be easily compared across countries, cultures, individuals and across time.

Of course, it has its limitations. For instance, how do we know whether sharing meals makes people happier, or if people share more meals when they’re happy to begin with?

We can’t say for certain, but chances are it goes both ways, at least to some extent.

Other factors can muddy the water. For example, are people more likely to share a meal if they have the money to go out and meet people at a restaurant?

These factors, at least, can be accounted for, and researchers found the relationship between meal-sharing and happiness held even after considering income, education, employment and a buffet of other indicators. The more meals you share, the happier you tend to be.

Those who shared 13 meals with others in the previous week reported the highest average life satisfaction. That tumbles the fewer meals respondents shared in the past week. But the biggest jump is between those who ate all meals alone and those who ate at least one meal with someone else.

While the relationship holds across demographics, there are some differences in the ways meal-sharing tendencies affect different cohorts.

Both men and women who eat more frequently with others report higher life satisfaction and feeling more positive emotions, but when we look at the negative impact of dining alone, it tends to hit women harder.

By age, both young and old people report higher levels of negative emotions if they dine alone. But there are much bigger gaps in life satisfaction and the level of positive emotions reported for young people dining alone compared with older adults. The good news is that young people tend to share more meals than their elders.

One strong explanation for why meal-sharing might be linked with happiness is that eating with other people is a way of strengthening social connections.

Decades of research has shown social connectedness is key to our happiness, mental and physical health. People with stronger social connections are also more likely to be promoted, less likely to commit crimes and tend to live longer lives, while those who are socially isolated or lonely tend to experience more negative life outcomes.

This is good news for policymakers who might be looking for new, cost-effective and practical ways to boost happiness. Funding for initiatives or new programs centred around meal-sharing could be a realistic way to help strengthen social ties and well-being.

As a bonus, the research also found that sharing meals was linked to higher enjoyment of the food consumed or prepared. Put simply, eating your food with other people probably makes your food taste better.

While the findings certainly have implications for high-up decision-makers, it’s also something which individuals can think about in their everyday lives. If sharing meals is linked to higher life satisfaction and happiness, it could be worth finding ways to increase the number of meals you share with those around you.

So when your parents drag you to the table for dinner, or when you’re deciding whether to go eat your lunch alone or with colleagues, there’s a good argument for why you should step away from your room or desk and break bread together. It could just make you happier.

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Home truths: housing policies are mainly for show

If you think this sounds twisted, it is. The best thing about the two sides’ various promises to help young people afford to buy their first home is the way it has provoked the nation’s economists to rise in condemnation of those schemes’ wrongheadedness. They look like they’ll help, but most of them are more likely to end up making homes less affordable rather than more.

And the parties know it. They know it because their economic advisers wouldn’t fail to make sure they knew. All economists know it, but this is the first time so many have come out and said it, joining independent economist Saul Eslake, who’s been saying it at every opportunity for decades.

You can say housing affordability comes up at every election, but not like it has this time. This time, both sides are giving it top billing. They know they can’t hope to win the election without having promises that seem to be helping would-be home owners. It’s just a pity they aren’t more sincere about it.

So what’s changed? The voting population. For years, the pollies have known that the number of home owners far exceeded the number of people hoping to become home owners. So the number of voters who love seeing the price of homes continually rise far exceeds the number who hate it.

But now, for the first time, the great lump of Baby Boomers is outnumbered by the Millennials and Generation Z. The Boomers are probably the last generation where most were able to clamber aboard the homeownership merry-go-round. And they did that a long time ago.

It’s the younger generations who’ve had the least success in dreaming the Great Australian dream. And guess what? They’re pretty peed off about it.

A recent survey by money.com.au found that housing affordability and rental stress were the dominant concerns for Australians under 40.

And my guess is that their encounter with the bank of mum and dad has helped the older generation see that ever-rising house prices is a two-edged sword. Actually, this intergenerational recycling has been one of the factors helping to keep house prices high and rising.

Why? Because by helping young people afford otherwise unaffordable prices, it’s helping keep them high, rather than falling until they became affordable. And when some new government scheme helps many people afford the unaffordable price, that tends to bid the price up, too.

If prices do rise, the beneficiaries of the scheme end up being not the buyer of the home, but the seller. And that’s been the great attraction of such schemes: they look like they’re helping first home buyers while they are actually benefiting existing home owners. Just what the politicians want.

Most people view such schemes purely from their own perspective: if the government gives me a leg-up, I’ll be able to afford this high price. That would be true if you were the only person helped. But when many people like you are helped at the same time, only the highest bidder wins.

Just about all the schemes proposed by the two parties have this effect. The Coalition’s earlier announced scheme, to let first home buyers take up to $50,000 out of their super and use it towards a deposit, also helps many rival bidders.

If there were lots of similar houses available at that price, then everyone could buy one without affecting the price. But that’s the point: the reason the price is so high is that there aren’t many available relative to the demand.

The Coalition’s new scheme is to grant eligible first home buyers a tax deduction on the interest they pay on their home loan for the first five years, provided they buy a newly built home. This may allow people to borrow more – provided the banks allow it – but just making the monthly mortgage payments easier to afford will add to the demand for homes.

And this is the scheme that frightens economists the most. It could be much more costly to the budget than expected if many more people take it up. It could be hard politically for a Dutton government to chop it off after five years. And it heavily favours high income-earners.

Labor’s huge expansion of a scheme that allows people to buy a place with a deposit of only 5 per cent because the government gives them free “lenders mortgage insurance” is a kind of negative gearing for owner-occupiers rather than investors. But it, too, would add to the demand for homes.

It boils down to this: when the demand for homes exceeds the supply of them, rising prices are inevitable. The only way to slow the rise is either to reduce demand (say, by removing the tax breaks for investors), or to increase the supply of homes by building more of them.

Labor’s scheme to spend $10 billion building 100,000 new homes across the country in a joint arrangement with the state governments on a non-profit basis and with purchases restricted to first-home buyers, is the only scheme that would increase supply and put some downward pressure on prices.

The Coalition claims its interest-deductibility scheme would add to supply because it’s limited to people buying new homes. Sorry, not true. If increasing the demand for housing quickly and easily led to an increased supply of them, house prices would not have risen to the heights they’re at today.

No, our very problem is that state government zoning requirements and an inefficient housing industry stop supply from increasing much in response to increased demand.

Labor’s scheme with the states should overcome the zoning problem, but our years of neglecting to train enough building apprentices will need a lot of fixing and could yet greatly limit the building of more homes.

There’s no quick and easy solution to our housing affordability crisis. And almost all the schemes the two sides are waving about are just for show.

But Labor does get the need to free up the supply of homes. Unfortunately, that message is yet to get through to the Coalition.

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