Sunday Herald Sun - - Finance -

THIS is clearly an elec­tion Bud­get. There are no spend­ing cuts — since Tues­day night we’ve heard hardly a bleat of com­plaint — and big and get­ting big­ger tax cuts are promised. But an elec­tion, when? When the nor­mal elec­toral clock runs out some time in the sec­ond half of next year or early, and per­haps very early, like this Septem­ber?

There’s been a lot of spec­u­la­tion that it’s the lat­ter: a com­bi­na­tion of “strike while the (Bud­get) iron is hot” and “just don’t push your luck”; who knows what (most likely to be bad) might turn up.

How­ever, the cen­tral fea­ture of the Bud­get — those tax cuts — ar­gues against an early elec­tion, and in­deed most specif­i­cally for one in Septem­ber not this year but next.

Be­cause the way the tax cuts are be­ing given — at least, that is, the up­front ones as op­posed to the mañana ones, promised some time af­ter the next two elec­tions — is that no money ac­tu­ally makes its way into tax­pay­ers’ pock­ets through the en­tire course of the next fi­nan­cial year.

It all comes in a lump sum — get­ting $500 or so dol­lars in one hit as op­posed to a $10-aweek drib­ble is far more likely to get some­one’s at­ten­tion and maybe also their vote — right about smack in the mid­dle of Septem­ber next year.

The money comes to vot­ers — sorry, tax­pay­ers — in a tax re­fund for the 2018-19 year, af­ter, of course, they have put in their tax re­turns.

The pol­i­tics aside, there is a very good rea­son for this — it turns on what was the sin­gle great­est act of fis­cal van­dal­ism by La­bor and its trea­surer Wayne Swan.

But first, the pol­i­tics. There are three stages and they all cen­tre on polls, start­ing to­mor­row morn­ing with the Newspoll in our sister news­pa­per The Aus­tralian.

Mal­colm Turn­bull will pre­sum­ably be watch­ing it with great per­sonal in­ter­est. He’s al­ready passed his pre­de­ces­sor’s “30 neg­a­tive polls in a row”, cur­rently sit­ting at


This is one of the best-run com­pa­nies on the ASX — a mar­ket leader and a strong brand. Its shares are fly­ing, al­though four-wheel drive sales have fallen for the first time since early 2017. 31 negs. The last neg though was very in­ter­est­ing — at 49-51 on the TPP (two-party pre­ferred).

This is be­cause the ac­cepted wis­dom “in­side the belt­way” — in Canberra, among the politi­cians, me­dia and as­sorted hang­ers-on — is that a gov­ern­ment go­ing into an elec­tion at 49 per cent TPP is head­ing for vic­tory: the so­called “ad­van­tage of in­cum­bency”.

As I’ve been try­ing to ex­plain for over a year, the na­tional TPP is sec­ondary to the spe­cial cir­cum­stance in Queens­land where Pauline Han­son is go­ing to get 15-20 per cent of the vote.

Un­less the gov­ern­ment for­mally gets her pref­er­ences — some­thing the Prime Min­is­ter thinks is be­neath him — it will lose up to a dozen seats and al­most cer­tainly the elec­tion.

Now if it did, it would prob­a­bly take out the PM’s most po­tent chal­lenger, the “new Tony Ab­bott”, Peter Dut­ton.

But while that might be a great com­fort for a by-then ex-PM, it wouldn’t be great for the Lib­eral Party or, quite frankly, the coun­try, given the prom­ises that Op­po­si­tion Leader Bill Shorten recom­mit­ted to on Thurs­day.

Queens­land and Han­son aside, if to­mor­row’s postBud­get Newspoll comes in at 49-51 again, an early elec­tion comes very firmly into fo­cus.

If it comes Ram­say is trad­ing at ap­peal­ing val­u­a­tions rel­a­tive to his­toric lev­els. Its re­cent equally owned joint ven­ture with As­cen­sion is a pos­i­tive one. in bet­ter, the early elec­tion be­comes favourite. If it came in at, say, 52-48, the PM could very likely move to turn next month’s “mini-elec­tion” of five by-elec­tions into a full-on gen­eral. Al­though, that would take some sort­ing out.

If in­stead, it went in the other di­rec­tion, sug­gest­ing that at best the last 49-51 was a rogue pos­i­tive for the PM and/ or the Bud­get had not been well re­ceived (or Shorten’s big­ger tax cuts had been per­sua­sive), we’d be on the way to late 2019.

They would give the gov­ern­ment at least the op­por­tu­nity of try­ing to find a Plan B in the 2019 Bud­get.

Ahead of that would be next month’s “mini-elec­tion”.

By-elec­tions are not gen­er­ally good for a gov­ern­ment — there’s too much op­por­tu­nity for a protest vote. But these ones are ob­vi­ously unique and there are a cou­ple of seats the gov­ern­ment could ac­tu­ally win. The out­comes would play into fu­ture Newspolls to de­ter­mine the tim­ing of the elec­tion. A sus­tained run of 49-51s could trig­ger an elec­tion; any sign of it go­ing sus­tain­ably to 50-50 or bet­ter would all but guar­an­tee an elec­tion.

Now to the cuts. Then worst thing (fis­cally) that La­bor did was to raise the taxfree thresh­old from $6000 to $19,000.

It seemed like a good idea at the time — given a big tax cut to low-in­come earn­ers.

But it fun­da­men­tally cor­rupted the tax scales.

Be­cause ev­ery­one got that cut and ev­ery­one would get any fu­ture (nor­mal) cuts.

Even some­one on an (tax­able) in­come of, say, $7 mil­lion, has that $19,000 tax-free thresh­old.

To get around that — to en­sure that his tax cut only went to low and mid­dlein­come earn­ers — Trea­surer Scott Mor­ri­son is do­ing it with a tax re­bate. So, not one cent of the $15 mil­lion handed back goes to higher in­come earn­ers.

It would have with a “nor­mal” tax cut. ASX is a qual­ity mo­nop­o­lis­tic as­set but it is trad­ing at a stretched val­u­a­tion. Ex­penses are ex­pected to rise and earn­ings per share are grow­ing by sin­gle dig­its. Aur­i­zon lacks op­er­a­tions flex­i­bil­ity. There could be fur­ther de­lays or a neg­a­tive de­ci­sion on the Queens­land In­ter­modal site. Bet­ter op­por­tu­ni­ties ex­ist else­where.

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