From left field: demographic targetting and taxation for Labor

Labor’s announced roll-backs represent the epitome of modern day demographic targeting at work. The question now is, will Labor successfully hit the targets it needs to? Let’s try to answer this question.

To begin with, it’s important to remind everybody that the dynamics of single member electorates is that the objective is to win the majority of the two-party preferred vote in the majority of electorates (in this case, 76). And not the majority of the two-party preferred vote overall. This means that the election is always about what happens in the volatile seats - that is those that have the potential of changing hands. (Labor won over 51 per cent of the preferred vote nationwide in 1998, but only 46 per cent of the seats.)

As such, it’s not just about the margin from the last election, often seen in the form of the electoral pendulum, which can in fact be incredibly misleading. Seats with slim margins do not necessarily mean that they are more likely to change hands.

Because the issue is about volatility, the questions from a campaigning point of view are simply these:

• who are the volatile voters (that is, those most likely to ‘churn’ from one party to another);
• where are they located (that is, the distribution/concentration of the target demographic across the 150 electorates); and
• what makes these voters tick?

With its roll-back plan Labor is very conscious about the need to "target" the measures to maximise voter impact. In many respects, it’s exactly the mentality that underpinned its tax credits policy of 1998.

In 1998, however, Labor’s tax policy simply missed the mark. Demographic analysis published by former Labor Senator John Black in Electoral Snakes and Ladders (which can be downloaded from www.australiandevelopmentstrategies.com.au) shows very clearly the demographic-tax dynamics of the 1998 campaign. It’s worth reviewing Black’s research findings because they may give us a clue as to the potential electoral impact of the 2001 roll back targeting.

The demographic correlation analysis, summarised in Chart 1, shows that:

• the Labor Party was successful in gaining support amongst the individual income groups earning between $400-499 per week (1996 levels) including the welfare recipient group earning between $80 and $159. This group was a strongly pro-Labor group; and
• those earning between $200 and $500 per week were, on average, Coalition supporters. Labor received no swings among any income groups earning more than $500, and above $600 the swings were sharply anti-Labor among an already conservative group.

Chart 2 shows us where the swinging voters were located across marginal and safe seats.

This shows that:

• welfare recipients and low-income earners were strongly concentrated in safe Labor seats (columns 4, 5 and 6 from the left), a category in which Labor performed quite well. This success was replicated in the $200 to $299 and $400 to $499 income groups, which were located disproportionately in key marginal Liberal seats; and
• however, Labor did not gain swings in the $500 to $799 group, which are disproportionately located in marginal Liberal seats.

So, based on this we now know which income groups swung to the major parties. We also know where these groups are located, which answers our first 2 key questions when it comes to judging the success of a particular policy from a campaigning point of view. The last question is to see how the competing tax proposals impacted on the various income groups, which goes a long way to explaining why Labor won 51 per cent of the national vote but only 46 per cent of the seats in 1998.

We thus turn to Chart 3. This chart shows the impact of the two major Parties’ respective tax packages across income groups. The impact of the packages was extrapolated on the basis of a single income, two child family.

The red curve shows that families earning up to $599 per week would have been key beneficiaries of Labor’s tax package. Beneficiary groups dramatically decline as Labor’s proposals taper off, as families earn greater than $1,000.

According to Black:

"The dynamic between the tax package voter behaviour can best be understood by comparing this chart with [chart 1]. This shows that Labor gained support in the key income group earning up to $499. No swing was achieved in the $500 to $599 group, the equal top key group of swing voters. Labor lost support amongst income groups earning above $600, which are strongly represented in marginal Liberal and marginal Labor electorates [Chart 2].

Conversely, the Liberal’s tax package provided tax cuts to income groups earning above $800 which are strongly represented in marginal Liberal, marginal Labor and safe Liberal seats.

The moral of the tax-vote story is that Labor was several income groups short of the mark. Drawing the line at $50,000 per year excluded significant numbers of swinging voters in marginal electorates from tax relief. The irony is that the targeting strength of Labor’s tax credit proposal narrowed the catchment in a very tight way."

If the moral of the 1998 story is that Labor was several income groups short of the mark, one is left wondering whether or not they are repeating the same mistake this time around with a very narrow targeting of GST roll-backs.

According to Labor’s spin-doctors, the target beneficiaries of Labor’s narrow GST roll-back plan are low to medium income earners. This being the case, I have a sneaky suspicion that they are on the whole the very same people who would have benefited from Labor’s tax credits plan three years ago.

But the people Labor needs to win over are a different crowd altogether.

According to the demographic correlation analysis, Labor’s best bet this time around would have been to target its tax benefits towards the $1,000 per week and above group (1996 dollars), which is disproportionately concentrated in marginal Liberal electorates.

Whether Labor’s "gift" of a $2 a week reduction in electricity prices (redeemable in a couple of years time) matters much in the minds of these upper middle income earners is certainly debatable.

Cheaper electricity prices

Speaking of cheaper electricity prices, anyone serious about reducing the cost of electricity to the majority of Australians should be insisting on the full roll out of contestability in the electricity retail market.

Perhaps given Kim Beazley’s commitment to reduced electricity bills he’d show us what he’s made of and tell Queensland Premier Peter Beattie that competition in electricity will do more to reduce prices for most consumers than any GST roll-back could ever hope to achieve. And that GST-based revenues (which, incidentally, all State Premiers absolutely love) are plenty to cover the subsidies needed to maintain price equity in regional and remote Queensland.