The curious case of poll-driven political reporting.

The Guardian published a report yesterday about Bill Shorten. The author set out to repent for calling  Bill Shorten a “tired accountant”. The impetus for the story was the turn around in the polls.

“Shorten is still leading the Labor party in the wake of this latest credibility disaster for the Coalition, after last week’s credibility disaster (blocking a free vote on marriage equality) and the preceding week’s credibility disaster (chopper-friendly Bronwyn Bishop). He’s now sitting atop polls from both Ipsos and Morgan that have the Coalition facing a loss of between 36 and 44 seats.

Is it time for a rethink?”

I’ve seen this kind of thing before, and I don’t like it.

Interpreting what a political leader does through the polls is intellectually vacuous. It’s easy to write. There is no need to have a view on tough questions about policy effectiveness or priorities, the merits of intriguing questions about whether the head of the AWU should be matey with big business, or the management and composition of their front bench.

The author of yesterday’s piece is not especially guilty. She has written about policy more than polls. But overall, allowing poll numbers to drive judgment of politicians’ merits is now commonplace. [1, 2, 3, 4, 5, 6, 7, 8, 9].

The rise of this sort of reporting means a swing in the polls does double business.

Not only does a poll bump get the leader kudos in their party, but it changes the tone of reporting about them. The new, glowing stories therefore amplify swings in popularity. That may be responsible for the increasingly binary popularity positions we see among our political leaders (They’re often wildly popular like Baird or old Abbott, or wildly unpopular, like Gillard and new Abbott).

This kind of reporting validates the paradigm that political hacks of the most cynical kind push inside their parties: We can do good once we’re in power. For now let’s focus on winning. It sidelines those inside a political party who think they should focus on making the country better, not just making the polls better.

Here’s a choice example of the kind of reporting I’m talking about.

The Sydney Morning Herald's Peter Hartcher thinks parties should use poll numbers not policy ideas to choose their leader. Is he right?
The Sydney Morning Herald’s Peter Hartcher thinks parties should use poll numbers to choose their leader. Is he right?

I can only imagine the cognitive dissonance some reporters must experience when they write articles demanding more policy substance and less poll-driven rubbish.

Of course, we do need some political reporting. It’s helpful to peek behind the curtain from time to time and see the way the magician performs his tricks. You feel like an insider.

But it can’t be all we have, most of what we have, or even a substantial minority of it. It’s a sometimes food.

Our meat and veg must be stories about policy.

Rising house prices: not a wealth fountain. A money-go-round.

RBA deputy governor Phillip Lowe gave a great speech last night. Lowe is the guy most likely to replace Glenn Stevens when Stevens quits as Governor and it is worth paying attention to what he says.

Last night’s speech was pretty radical. In the guise of a dry discussion of Australia’s balance sheet, Lowe single-handedly deflated arguments for rising house prices.

That puts him in direct opposition to noone other than Prime Minister Tony Abbott. Abbott, of course, said in June “I do hope our house prices are increasing.”

The argument Lowe makes is so smart and so obvious it’s amazing we don’t hear it more often. He starts out by showing that the rise in “house prices” is really a rise in land prices.

Screen Shot 2015-08-13 at 10.33.46 am“[T]he figures that I have presented invite the conclusion that our national wealth has risen largely because of higher land prices. But is such a conclusion really warranted? Have we really become wealthier as a nation simply because the value of our land has increased?

“The answer would clearly be yes if this increase was because we had discovered more land. To my knowledge, though, this has not happened.[7]”

Lowe argues that the rise in house prices is not a nice neat story about the returns to city life increasing. He says prices rose because of financial deregulation and supply constraints.

This creates not a wealth fountain but a money-go-round, he explains.

“from the perspective of society as a whole, much of what is gained on the one hand is lost on the other: there are windfall gains from higher land prices but then everyone pays more for housing services.”

Lowe also reveals that the “baby boomers are ripping off the kids” narrative has some credibility even in that palest of economic ivory towers, the RBA.

“For an older person who owns their own home and has no children, the capital gain from the higher land prices more than offsets the expected higher future housing costs. Such a household is better off. The same is true for owners of investment properties, since they own multiple dwellings on which they earn a capital gain. In contrast, for young homeowners with multiple children, the calculation can look quite different. If they care about the future housing costs of their children, then, in some circumstances, it is possible that the higher future expected housing costs could exceed the capital gain on their dwelling. In a welfare sense, the increase in land prices could make them worse off, even though they own land. The same is obviously true for renters as they do not have any capital gain to offset the higher future housing costs.”

“I think many Australians have an innate understanding of the concept and share the concern. Many parents around the country look at the high housing (really land) prices and worry that their children will not be able to afford the type of property that they themselves have been able to live in, even if their children were to have the same life-time income profile as they have had.”

“So it is arguable that the main impact of higher land prices is not really to increase our national wealth, but to change the distribution of that wealth.”

He goes on to argue that if parents help their kids buy houses, high house prices are perpetuated. But their wealth effect is diminished because the people that have expensive assets are using them as collateral for buying more expensive assets. That is to say the high prices bring no benefit.

If, however, parents don’t help their kids buy houses, and instead spend up big (say on trips overseas) then house prices are more likely to moderate.

This latter scenario, as unpleasant as it may seem to some, is actually the better one for social stability. Because with Australia’s strong immigration profile, not everyone has parents who own property in Australia. The divide between new migrants and established citizens will only grow larger if property wealth is transmitted across generations.

Who is to blame for the state of the labour market?

Last week unemployment was up. This week wages growth was down.

Screen Shot 2015-08-12 at 4.41.18 pm

chart
Worst annual growth on record (since 1978)

These two series measure the most important and relevant determinants of Australia’s economic well-being. Both are deteriorating.

Forget interest rates. Forget house prices. Forget the dollar. Forget petrol prices and forget the share market.

How much money people make is the single biggest determinant of how well off they are. And we’re not doing well at all on that score.

This is a failure of economic policy. No government should be complacent in the face of a weak labour market.

The Government is silent on this and to its credit the opposition is squawking at them.

But it is to no avail. No decent policy is evident.

There’s a Productivity Commission report on our workplace relations policies, but nobody really thinks that will make a lick of difference, even if the government had the political capital to implement it.

These days it seems like some on the left actually relish a bit of weak wages growth. They use that to bash the government for hypocrisy over a wages breakout and guard against workplace reform.

I wouldn’t mind seeing a wages break-out. Isn’t that what good economic policy would produce? Wealth shared widely?

The failure of our labour market to do very much in the last few years probably comes down to macroeconomic factors. The high dollar crimped output and hiring. So did weak federal spending.

Screen Shot 2015-08-06 at 12.08.47 pmThe high dollar was a result of US quantitative easing and there was little more we could do beyond slashing official interest rates. That policy front was maxed out. But fiscally, we pulled puches.

Esteemed labour market economist Jeff Borland argues our failure to remedy unemployment is due to a shortage of aggregate demand.

“•The rate of unemployment in Australia has increased from 4.0 to 6.4 percent since the GFC. Over that period it has shown little tendency to decline. The rate of unemployment in the US is now lower than in Australia.
• This increase in the rate of unemployment in Australia appears to be explained entirely by the cyclical downturn in aggregate demand.

How could the government have increased aggregate demand? Spending more would have been one answer.

The Swan Budgets in 2012 and 2013 and Hockey’s efforts in 2014 and 2015 were all deficit-obsessed. All were focused on “return to surplus.” None of them achieved it. Instead unemployment has risen from 5.2 per cent to 6.3 per cent.

That deficit obsession hurts us all.

The Wilting West

A high-vis vest slowly buried in the blowing sands of the Great Sandy desert.

Screen Shot 2015-07-17 at 9.58.41 amA small business owner awake at 2am, wondering if they should talk first to their bank manager or their spouse.

Screen Shot 2015-07-17 at 10.00.44 am Fridges, clothes, tables and chairs all packed into boxes, in a freight train chugging east across the Nullarbor.

Screen Shot 2015-07-17 at 9.57.58 am

Two crazy ideas for the asylum seeker problem

Asylum seeker boat arrivals – fairly inconsequential in real terms – are a major political problem.

Last night on QandA a Labor minister indicated that the “journey” would not be “re-opened” for asylum seekers, indicating a maniacal desire to “stop the boats” is a bipartisan ambition.Screen Shot 2015-07-07 at 11.13.20 am

The racist pandering to Western Sydney inherent in “stopping the boats” was always called out as the bullshit it was. Until the video of the drownings of asylum seekers on the coast of Christmas Island in 2010. Suddenly it was possible to say preventing asylum seekers from arriving in Australia by boat was a moral imperative.

That’s an extreme idea, requiring the sort of broad view of morality that would also support fencing off Australia’s surf beaches to prevent drownings. Most people would say imperative #1 is to not harm people with your actions.

One year ago I wrote about how powerless and ineffective I feel when faced with asylum seeker policy. What’s changed is that the extreme nature of the “solution” – including laws preventing reporting of child abuse – permits a broader range of alternatives that might previously also have been seen as “extreme.”

So is it possible to solve the boat arrivals “problem” without spending billions and becoming a police state? It must be. Lets think outside the box.

1. Make a queue

People are always fighting about queue jumpers, and whether there is a queue. What if we made an actual queue on the shores of Indonesia, where the boats are leaving from?

Asylum seekers get on a boat because that’s how they imagine they can get into Australia. What if we let them get into Australia without getting on a boat?

Could we rent some space from the Indonesians, bring it inside the migration exclusion zone and process refugee claims up there?

Budget impact score: 9/10. No more detention centres, less need to police the seas for boat arrivals, etc.

Political acceptability score: 5/10. Should diminish boat arrivals so long as the applications are processed swiftly.

Direct morality score: 8/10. Assuming they are able to live in the community in Indonesia, there need be no imprisonment.

Indirect morality score: 9/10. No more drownings between Indonesia and Christmas Island.

2. Open slather.

Embrace boat arrivals. Stop turnbacks, Close off-shore detention; close on-shore detention; visas to live in the community while refugee applications processed.

This is about stopping boat arrivals from being a political problem. If you wanted to change the narrative on boat arrivals, you’d have to own the arrival of each boat. Get a video crew, translators and a government minister onto each boat as it arrives, so we can see them shaking hands with the asylum seekers, chatting and smiling. Interview the people, find out their stories and their names. Publish lists of asylum seekers, their smiling photos, and key quotes from them. Humanise not dehumanise. Let’s hear about their desire to live in Australia, their interest in what they’ve heard about us, their qualifications and jobs in their home countries, what they’re fleeing, what skills they bring, etc. This would absolutely freak everyone out for a while but the rate of repetition and the volume of boat arrival footage might eventually make boat arrivals very very boring.

(I think this approach could be helped along by some sort of non-government work to try to humanise asylum seekers. Greenpeace made us care about whales by having little inflatable boats out there and video cameras showing what was happening. Can we do the same with Asylum seekers? Could Sea Shepherd open up a northern Australia branch, for caring about humans? )

Budget impact score: 10/10. This is cheap.

Political acceptability score: 2/10 in the short-term as boat arrivals will go up up up.

Direct morality score: 10/10 (No more taxpayer-funded imprisoning of innocent people)

Indirect morality score: 5/10. (Some drownings still likely).

I’d be very interested to hear any other crazy ideas people have. Please share them below!

Speech – Prime Minister Wyatt Roy. January 26 2038.

Screen Shot 2015-07-02 at 11.07.33 amSpeech – Prime Minister Wyatt Roy.

January 26 2038.

[check against delivery]

My fellow Australians.

On this 250th anniversary of the arrival of the First Fleet on this continent, I want to make a few comments about our society and economy.

Arrival Day, as we’ve known it for several decades now, has become a day to look back on things we’ve done wrong. Dedicating a day to critical self-reflection is one of our nation’s finest achievements. We can’t undo our mistakes. But we can learn from them and use that to set the future on the right path.

That’s why it’s very important we think about house prices. How did we get to this point? When I travel across this country, I see three disappointed generations – one owning homes that have slumped in value; one owing giant debts on low-value homes, and one perhaps able to buy a home, if they were not wounded by the economic shrapnel that came from the explosion.

We were like butterflies. We thought our brief glimpse of the world told us everything we needed to know. House price crashes had never happened in our lifetimes, so while rates were low, we treated the banks like an all-you-can-eat salad bar.

Interest rates were low for so long that we began to think they’d never go back up either.

When the RBA raised rate in 2025, after so many years of inactivity, perhaps the house price upswing might have stopped. That was our chance.

But fate intervened.

We now know that China’s overstretched financial system was, at that exact moment, about to burst. The failure kept interest rates low, even as Chinese funds flowed out of China and found their way to Australia.

RBA Governor Stevens repeated his now infamous signature move and cut rates. The price of housing in Australia continued to rise. Median prices in all major capitals topped $1 million. Sydney’s average price rose over $2 million.

A first home loan of six figures was de rigeur. And why not? With rates at 1 per cent, young people around Australia could afford that sort of debt to obtain their own home.

Their parents, in most cases, had done likewise. Who would talk them out of it? I saw my own children – Morgan and Orbison – make the exact choices I had, and although I felt a tremor of unease, I didn’t want to dictate their lives to them. Personal freedom is one of the strands of philosophy that enlivens the Libor Party I lead, and I try to live it out in my own life too.

At home I bit my tongue. To my shame, I did the same from the opposition benches in Parliament.

Treasurer Bandt seemed to have a firm grip on the economy. House price appreciation was as Australian as a Golden Gaytime on a 45-degree day. Who was I to argue with a trend that had run my entire life?

Environment Minister Irwin read me a quote the other day that I knew I must use in this speech.

That men do not learn very much from the lessons of history is the most important of all the lessons of history,” she said. That’s from a science fiction writer from last century. He saw something of the future, Bindi told me, but only by paying careful attention to the past.

That’s our job, from hereon. To make sure we pay attention to the full sweep of history. We must not only be obsessed with what’s right under our noses. The more things change, the more they stay the same. The lessons of 5 years ago may glow more brightly than the lessons of 105 years ago, but they are not always more pertinent.

We should make sure our memory of the excesses of the mid 20th century inform our debates on government over-reach. Make sure our memories of the 18th and 19th centuries inform our debates on unchecked poverty. Make sure our memories of the rise and fall of civilisations long past informs our thinking about our permanence.

On this day, above all others, I commend the study of history to all of us.

So, should you spend a bit more to get a fancier car?

This story originally appeared over at The New Daily. (They’ve asked me to write a consumer-focused story each week, which I will also post here)

I recently looked up the cheapest new car and the most expensive new car being advertised in Australia. I was gobsmacked at both ends of the spectrum.

At the very bottom end was a Mitsubishi Mirage, 2014 model, with only 15km on the clock. It cost $9,880 before on-road charges.

Screen Shot 2015-06-28 at 2.52.40 pm

The most expensive was a new Rolls Royce Phantom. The only one of its kind in Australia. Price $994,000, drive away, no more to pay.

Screen Shot 2015-06-27 at 11.29.16 am

That’s 100 times more expensive! Obviously you get big differences depending on which car you choose.

Only one of these cars has a 5-star ANCAP rating – the highest local standard for safety, and a 5-year warranty.

As you probably guessed, I’m talking about the Mirage. Yep. You can pay a million bucks for a car that has no official Aussie safety rating and a shorter (four-year) warranty.

The Mirage’s little motor also boasts far better fuel efficiency, at 4.6L/100km. That compares to 14.8L/100 km for the 12-cylinder engine beneath with the winged lady.

So the cheapest car is winning on some pretty important features. This made me wonder. What is the real difference between a cheap and expensive car?

Once upon a time it was reliability. Mercedes of old ran for hundreds of thousands of kilometres. Not so much any more.

The great industrialisation of Japan, from the middle of last century changed the game. The brilliant standardisation of quality pioneered by companies like Toyota made quality a starting point.

These days the car that endures that is likely to be a Honda or Subaru.

So luxury cars distinguished themselves with features. Leather seats. Sunroofs and electric windows. (Remember how exciting the smooth glide of an electric windows was when they first came in?) Cruise control and heated seats.

But it turned out that when you’re making millions of Camrys, it is possible to cheaply fit them all with an impressive swag of desirable features. So the game shifted again.

Now the luxury car distinguishes itself on some rather weird parameters.

The reviewers dwell on things like the noise the engine makes in a Porsche, or “a rather striking cherry wood inlay in the luggage area” in a new Mercedes.

Do these things matter to anyone who isn’t looking for a reason to buy an expensive car anyway? They remind me of the blueberry notes the labels are always so eloquent about in fancy bottles of wine. Important for an extremely refined few.

Most of us operate at a rather more prosaic level.

Let’s look at two vehicles in the fastest growing category around – “crossover” SUVS. Screen Shot 2015-07-01 at 1.37.05 pmScreen Shot 2015-07-01 at 1.37.34 pmA Ford Kuga costing around $26,000 and a Mercedes GLA costing around $55,000.

Here’s a comparison on some important features.

Screen Shot 2015-07-01 at 1.43.07 pm

Okay, I’m being facetious.

There are actual differences. For example, the Mercedes gives you 4.6L/100km, the Kuga 6.3L/100km. And there’s more:

Screen Shot 2015-07-01 at 1.43.14 pmThere are lots of other little differences too, in things that are probably good to have. But adding them up, are they worth an extra $30,000+?

The difference in comfort between a $25,000 car and $55,000 car is more slight than the difference between economy and business class on an aeroplane. If you sit in that car for an hour a day for ten years – 3650 hours – a $30,000 price difference means you’re paying a premium of $8 an hour.

Whether that $8 hourly rate looks like a worthwhile investment or a worthwhile saving depends on the person, and their income.

Interestingly, it seems income is a big factor.

Official statistics show the rich spend far more on cars than the poor. Households at the top of the income distribution spend eight times more on cars than the bottom of the distribution.

Maybe they can afford it. Maybe they value the small luxuries of life. But there’s another explanation possible too.

It is called signalling. On the African savannah, the male lion grows a mane which may actually harm its survival. Doing so and still managing to thrive shows it is super fit and healthy – and worth mating with.

Some experts think conspicuous consumption is similar in humans. Throwing money around announces to the world that you are special.

The larger and more frivolous the expenditure, the more effective the announcement. It makes sense – the person who buys that one-of-only-25-in-the-world Rolls Royce is far more likely to be someone trying to demonstrate something about themselves than a person with an extreme passion for fine wood inlays.

So when we see someone insisting they need electric lumbar support and alloy wheels, and the Mercedes is simply the best way to get that, we are probably justified to wonder whether they are falling into the trap of simply showing off.

Obviously, there’s a minimum price point –perhaps somewhere below $10,000 – where spending less on a car is a risk too big to take. And there’s a point – probably somewhere above $100,000 – where spending more is entirely silly. But where’s the tipping point? What’s too much to spend on a car? What’s too little? Please share your views below!