I’ve proposed a theory of political momentum on Troppo before – somewhere . . . don’t ask me for the link (actually I’ve just thought of one). But it goes like this. The really good politician is not focused on the next election, but rather trying to strategise a way of getting over the line it the next election with enough gas in the tank to win the one after. It may be unfair, because the ALP Government was in a pretty bad state when he managed to pull an election victory out of the hat, but Paul Keating’s LAW tax cuts might have won the next election but severely compromised the one after.
Now I’ve seen an aphoristic summary of this theory from Bernard Keane in Crikey!
Political capital must be spent. It cant be hoarded. Eventually it dissipates if unused.
I agree with this and share his fears that, at least so far, we’ve not seen the hard headedness, the preparedness to take hard decisions in their own (ultimate) interest from the Government that is necessary for it to maximise its chances of long term survival and success. But I admit we haven’t really had our first real test which is the Budget. So I may revise my suspicion at that stage.
I have my own ideas, but I thought I’d throw this open to Troppodillians. How should the Rudd Government spend its (considerable) political capital. Remember, I’m not asking about how you would like them to sacrifice some popularity for something you hold dear. Rather I’m suggesting that some pain they take early can convert into political momentum in the future, a sense of achievement – and in this sense political capital spent, or invested, rather than hoarded and dissipated. Actually I’ve already implicitly suggested what it could be from my perspective, a really really tight budget, with some pain all round (I don’t think you need to break promises to do this) to limit the risk of interest rate rises having to do more work and to give the Government more breathing space on the budget into the future.
Any other suggestions?
What have we learned from Howard’s time? He made significant changes – but these were done behind the scenes, making systemic alterations to better position for long term LNP gain. Publicly, what did he do; I think really only gun reform in the first term from a beautifully-developing vague memory of it.
Rudd’s a different animal altogether. It might be simply that the presentation of his particular style is enough to draw down on that political equity.
Should he spook the horses in the first term? Will the combination of all the ‘little’ things he’s doing or outlined for doing in the first term be enough? Does he need any major reform?
Federation obviously comes to mind, but would this be better as a second term upheaval, softening the path in the first?
Unquestionably, tough budget pain with the right decisions would pay off later.
..Public ownership of the Wallabies via a share issue?
I can’t help thinking Rudd’s decision to wait till 2010 for a tax or cap (or other) on carbon is out of whack with (a) electoral cycles and (b) public sentiment as expressed at 2010 summit. Assuming the economic impications will be unpopular – whatever the sentiment – why potentially cripple or handicap (depending on timing) a re-election strategy? My guess is that momentum on climate change – a few big storms/huge insurance payouts – will jolt Rudd whichever way to move before political capital stalls and threatens to nosedive.
This might be slight off topic so I’m not sure whether to ask it.
Often when a party has its support in opinion polls increase over time people claim that that party “has momentum” and this is seen as particularly important as an election approaches. Is there any statistician or other expert that has shown that “momentum” really exists (in polls) or whether it is just something read back into past opinion polls? I’m not sure how it could be tested, but maybe a person could see whether a party that has its figures increase over two (or three or four) successive periods is more likely to see it increase in the third (or fourth or five) period i.e. it has “momentum.” It’s such a common claim I just wonder whether it has ever been tested.
(I understand that you’re using the term momentum in a different sense which is why I wasn’t sure whether to ask or not).
Dust off the Switkowski review and remove the ban on nuclear power in Australia…
forego the cash cow which is the fuel excise, for the benefit of all Australians who’ve not had an income increase in ten years.
Why would dusting off the Switkowski review help the Rudd Govt. There’s no clamouring to build nuclear power assets here, so can’t it wait till there conceivably could be?
I also think that you don’t get much long run political momentum from immediately reneging on election promises.
I actually think that all governments should spend their first year (here) or eighteen months (in eg France with 5 year Presidential terms) combining caring and sharing speak with sharp cuts to structural barriers such as minimum wages, tariffs, entitlements, union rights, etc, and then spend the rest of the time cutting taxes and increasing welfare.
So that by the time the election rolls around, the benefits of the ‘tough’ decisions are starting to come home and the electorate has had two (or more) years of ‘caring’ budgets and policies.
So broadly, I think Rudd should do about that.
Early days of a government are where they really should still have a vision and the courage that comes from their victory. A root and branch review of taxation laws would be a good start but only if all of the tax laws are on the table.
But for a nice cheap one with major impact how about a treaty with Indigenous people that sets out the rights and responsibilities of each side?
?
That aphorism isn’t too far off of one of Machiavelli’s principles: cruelties should all be doled at once as a more severe set of cruelties up front will remain in the minds of the subjects for less time than a less severe set of cruelties spread out over time. Niceties are the reverse. The populace is more likely to remember a smaller set of niceties spread out over time than a larger set of niceties all paid out at once.
The underlying rationale seems to be that repetition is largely what burns ideas into people’s brains and that the strength/amount of the cruelty/nicety is less important than multiple repetitions with regards to how the public will view a ruler.
Nick: sorry if I misinterpreted the question, which I took to mean “what politically unpopular policies do you wish the Rudd Government would implement”.
As for nukes, it’s still my belief that both major parties are assuming that CCS technology will come to Australia’s rescue on greenhouse. For that to happen, it needs to a) be available for wide deployment soon, and b) cheaper than the alternatives, including renewables and nuclear.
We should further note that gas-fired power is only cheap on the Australian east coast because it’s not yet internationally traded. That is changing. Furthermore, if oil prices continue to rise, turning gas into liquid fuel will become increasingly financially appealing.
Given all that, I think that it’s around an even-money bet that industry will start getting seriously worried about Australia’s future energy supplies, and start putting serious pressure on the government of the day, a few years from now.
You make it hard with the stipulation that promises are not to be broken, Nicholas. Perhaps that means expending capital by announcing a set of unpopular plans now and taking them to the next election — a Rudd version of Fightback. If they propose to, say, abolish the Medicare rebate and negative gearing, and overhaul the school funding formula, and then they win the election anyway, it might restore some integrity to the election process, and that in itself would be a great achievement.
James, I don’t think that makes it hard at all. I guess all the iconic things that get talked about a lot – negative gearing, the health care rebate – have been covered by election promises. But my impression is that the government hasn’t promised not to do lots of things. It could keep negative gearing and put a cap on it – say 10 or 20 or even 50 percent of income from an asset. It could cap CGT concessions on the family home at $1 mill and if that’s too hard, make it $2 mill. I expect there are lots of things of this kind they could do. They could means test family allowances more stringently etc etc. I don’t think they’ve got outstanding promises on any of those things. Of course they’d get some flak for them, but that’s the point, they would take some heat and then show how they’d delivered a better outcome in a couple of years time.
There’s a lot of demand about to feed into the economy come 1 July and they’ll be stuffed if they can’t unwind some of that (if the global downturn doesn’t save them in the same way that the Tech wreck turned out to make Howard’s compensation package for the GST quite surprisingly well suited to the macroeconomic times.
Fix up negative gearing. If the younger generation feel that home ownership is unaffordable then sooner or later they will blame Rudd’s government. This will be an increasing problem over time and something that will take a long time to fix. Rudd should take a hit on negative gearing now so that he doesn’t take a hit on home ownership levels in five years.
Applying a 50% cap on the income from renting out *existing* properties to negative gearing might work. I don’t see a problem with 100% negative gearing for new properties (including substantial refurbishments of existing properties that add rooms etc.).
A cute political play, provided it got results, would be a concerted attack against spam. Not knowing how spammers work – are they ahead of attempts to catch them? Or is it a response area undeveloped – it might be too risky to announce and fail.
At present, Rudd is threatening to appear very progressive. It was mentioned this would be the case here, once he got in, but the electorate didn’t vote him on this basis. His budget will surely bring back that conservative element, but socially, too, he could benefit from some down home results, away from the rhetoric.
The gun thing helped Howard settle into the electoral mindset; cutting into the home conversation. Especially so, viewed against the Keating big picture backdrop. It was in many ways a master stroke, regardless of how effective it was or wasn’t, and is still talked about today, even by him, as a major achievement. It was certainly moreso a major achievement politically, because, once insinuated (as a PM)into that mindset, serving also to remove that Keating backdrop, he could on with his own agenda with greater political freedom and massively enhanced public regard.
So yes, while Rudd has some capital [though, again, this could be used up in the first term simply by his so very different narrative], ie, that capital may well be illusory because the public don’t really know him, he has to get back home with something people talk about with gratitude and warmth in kitchen conversations.
Spam; water, that sort of thing first term.
You could remove tax deductibility for interest paid on the land portion of an investment property. This would force people sitting on large blocks of land with relatively little construction on it to build something, preferably something big to get the tax advantages of owning investment property rather than just sitting on it, claiming the interest and waiting for the land to go up in value.
To go with that I would accelerate the depreciation allowance on buildings and use the declining balance method to calculate it. This would increase incentives to invest in new buildings with plenty of depreciation in them rather than older existing housing.
Hopefully these two measures would shift the balance of investors from buying up existing stocks of housing and sitting on them and istead having them put their money into new developments that will actually create new housing. And then when they’re done with the depreciation they can flip them onto the owner/occupier market and move their money into even more developments.
SWIO,
I think there is no deductibility on residential land without a building because it’s not an income earning asset.
And houses are still very expensive. If we release more land we should get more buildings.
But in areas where there is lots of land available, houses aren’t all that expensive – not surprisingly, most people don’t want to live out in the sticks, with 2+ hour commutes etc., and there are lots of good reasons that government policy shouldn’t be encouraging it. There’s plenty of scope for increasing the housing capacity of our city’s suburbs without releasing more land – the average population density is very very low by international standards, but a mix of government regulation (height restrictions, zoning rules), NIMBYism and some amount of rent-seeking has held back the natural tendency of our cities towards higher density living. I’d also suggest that government bodies should be prepared to look at existing areas of urban parkland that aren’t particularly well-utilised as possible locations for higher density developments.
Nicholas, that depends. If it is leased (or available and marketed for lease) then it certainly is income-producing, and the interest is deductible.
You are not really right on the broader point either – the land value is generally the far bigger chunk of the value. Amongst other things it doesn’t depreciate (ie at any given time, barring exceptional circumstances, the land is increasing in worth relative to the building).
NPOV, you are about one-tenth right. There is another factor, called people. They are a factor because a hell of a lot of them don’t want to live in high-density housing, especially not once they start to have families.
In addition the last thing I think we should do is develop more urban parkland – it is one of the reasons I live in Melbourne and not Paris or London! It would be very shortsighted to attempt to increase population density by decreasing the ‘liveability’ of the place!!
“I think there is no deductibility on residential land without a building because its not an income earning asset.”
That is true, but in practice it doesn’t matter because the building need be little more than a shack. A tiny little fibro house renting out for a couple hundred a week on a multi-million dollar block of beach front property gives you income, and then you can claim all the interest on the multi-million dollar loan as tax deduction which is a bit absurd (but legal). That’s an extreme example. A more realistic one is the rows of 50 year old fibro houses on the other side of my street that are rented out. Its prime real estate that would be perfect to redevelop into flats as its close to public transport. But the current owner of that land doesn’t have a strong incentive to do that as its difficult, time consuming and expensive to build new apartments, where as sitting on existing land and waiting for it to go up is cheap, easy and tax deductible.
Patrick,
It looks like we agree.
Land must be income producing to be deductible, and vacant residential land is typically not income producing. And at the house prices we have, greater land release would see a lot more building.
Patrick, I dispute that. If “people” really didn’t want higher-density living, then why is property in higher-density areas so much more expensive?
FWIW, I specifically refrained from suggesting we want “high” density housing (a la high-rise apartments). Looking at property prices, I’d suggest areas like the inner-suburbs of Melbourne, where there’s lots of terrace and duplex housing, at a population density something like 1.5 or 2x the density of further-out suburbs, is the level of density that would occur naturally on a much greater scale if it weren’t for existing regulations/NIMBYism/rent-seeking. And importantly, it should be mixed commercial/retail/residential development, again, what I believe would occur naturally without existing restrictions.
And no, I certainly don’t want to see Melbourne lose significant amounts of parkland. But I think we could afford to lose ~1% of it, adding significantly to the housing supply, helping satisfy demand, while not taking away anything from its liveability. In fact, I’d be willing to bet that if all land was privately owned and there were no government restrictions on building, that most of the parkland would be fully developed within a decade or so.
Because people want to live there. But is the density of Toorak, Balwyn, Brighton, Hawthorn, Malvern, Armadale, Canterbury, etc really that high?
NPOV, I don’t deny the existence of public goods! Parks are a locus classicus, IIRC.
I was talking more about East Melbourne, Richmond, Abbotsford, South Yarra etc. Though I’m fairly certain Armadale and Toorak have a higher than average density — I’m not sure where the stats are available though (I only found a council document claiming more than 50% of Toorak residents live in high density housing).
But I do know that small unrefurbished terrace house even in a less-attractive part of Armadale costs a good deal more than a large modern house on a decent size block of land in, say, Box Hill or Blackburn.
Melbourne’s population density: 479.6/km2 (from Google)
From http://www.id.com.au/stonnington/atlas/default.asp?id=249&pg=1:
Windsor (56.7 persons per hectare) = 5670/km2
Prahran (53.7 persons per hectare) = 5370/km2
South Yarra (51.2 persons per hectare) = 5120/km2
Armadale (38.3 persons per hectare) = 3830/km2
Malvern (32.2 persons per hectare) = 3220/km2
From http://www.id.com.au/whitehorse/atlas/default.asp?id=106&pg=1&prn=1&bhcp=1
Blackburn South (27.8 persons per hectare) = 2780/km2
Surrey Hills (27.6 persons per hectare) = 2760/km2
Box Hill North (25.6 persons per hectare) = 2560/km2
Mont Albert (25.3 persons per hectare) = 2530/km2
Forest Hill (24.6 persons per hectare) = 2460/km2
Compare, say, Greater London = 4761/km2.
So even if Melbourne’s average population density was increased to that of Box Hill or Blackburn (which I would think of as a pretty “typical” suburbs as far as density goes), we could fit in 3 times as many people without needing any more land.
(I should say though, that’s not really what I would personally prefer – I think Armadale and Malvern have a level of density that’s a good balance between the benefits of shorter distances and the benefits of enough land for everybody who wants a piece to call their own. If I was dictator for a year, I’d demolish the horribly late ’60s and ’70s houses that make up large parts of Box Hill and surrounding suburbs, rezone the blocks to be about 30% smaller, scrap any single-dwelling convenants, declare it all to be mixed-use zoning, and raise the maximum height restrictions, and place onerous taxes on undeveloped land!)
I would buy two blocks and build a large house. This happens, btw, perhaps more than before.
I stand corrected on density – I wonder whether that is because these are such desirable places to live that there are many more apartments than in eg Box Hill? And there are probably smaller shopping centres in those suburbs (although there are none in Surrey Hills).
I don’t know where apartments gets us – I think that there a finite number of people wanting to live in apartments (ie for whom location trumps size/garden). And I personally, for example, find considerable amenity in a garden (even if I don’t maintain it!).
And looking at those figures, ‘Melbourne’ must include eg Cranbourne and Frankston and Mernda, etc. Presumably these will become higher-density as they develop, so in part, things might be fine as they are.
Well, sure, some will do that. But I would highly surprised if the average density didn’t increase. And yes, obviously a lot of people do consider denser inner suburbs highly desirable places to live: some might argue that this is “despite” the higher density, but I’d argue it’s actually a significant factor in what makes the areas attractive: everything within easy distance, minimal car dependence, and the “buzz” that higher-density areas naturally develop.
I’m not a fan of apartments either, but townhouses and terrace houses are often just as roomy as stand-alone properties on large blocks of land, and a lot less gardening!
Health powers to the Commonwealth; education powers to the States.