Working Papers

Hockey Beaten by Someone Else

Joe Hockey finds that populism isn’t popular:

VOTERS have rated Tony Abbott marginally better than Malcolm Turnbull to take the Coalition to the next election.

An Essential Media online survey of 1844 people taken last week found 23 per cent of voters backed Mr Abbott, while 22 per cent said Mr Turnbull would be a better person to take the Liberals to the next election.

Opposition treasury spokesman Joe Hockey (14 per cent) rated fifth behind “don’t know” (19 per cent) and “someone else” (15 per cent).

posted on 01 November 2010 by skirchner in Opinion Polls, Politics

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Peter Costello Feels their Pain

If Peter Costello is to be believed, some former Liberal MPs are unemployable:

The point was whether he did the right thing by those MPs who would go on to lose their seats in the 2007 election. Some of them have never had a job since.

I have no idea which former MPs Costello might be referring to, but perhaps the fact that they are seemingly unemployable after three years had something to do with them losing their seat. Then there is this:

[Howard] had done nothing except politics all his adult life, and at his age there was little prospect of another career.

A little bit rich coming from someone who doesn’t have age as an excuse.

posted on 28 October 2010 by skirchner in Politics

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The Irrelevance of Modern Political Science

Steven Hayward on why nobody notices political scientists:

Ask yourself this question: Among policy makers in Washington, are you more likely to find academic economic journals in their offices, or academic political science journals? Why do economists not face the same kind of worry about their “relevance,” even though their mathematical approaches to the subject matter can be even more esoteric and forbidding?...

As my late friend Tom Silver once wrote: “Imagine yourself marooned on a desert island with only ten books to read, but in this case ten books not of your choosing. Suppose them all to be books written by behavior political scientists during the past twenty years. Question: Do you think that you would die first of boredom, or of self-inflicted wounds?”

posted on 15 September 2010 by skirchner in Economics, Politics

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Probability Australia Will Hold Another Election in 2010

16.8%, according to iPredict.

posted on 03 September 2010 by skirchner in Financial Markets, Politics

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Political Insiders and Anti-Gaming Wowsers

There are calls to ban political insiders from election betting markets. Apart from the usual anti-gaming wowsers like Nick Xenophon, I suspect this is motivated by the same mistaken notion of fairness that supports anti-insider trading laws in relation to equity securities. As Henry Manne’s work has shown, anti-insider trading laws are based on a fundamental misunderstanding of the role of markets. Simon Jackman notes that a ban on political insiders would be impractical, but this is no less true of anti-insider trading laws in general.

It is interesting to note that for all the reports of trading by political insiders, prediction markets got the election outcome ‘wrong’ in an ex post sense. While the betting market odds bounced around with the polls, they consistently gave a strong probability to a Labor win, while the polls suggested a tighter contest.

This is not necessarily anomalous, because they measure different things. Polls measure vote shares, but these translate only very loosely into seats won and the ability to form government, so betting markets can quite reasonably imply results that are not obviously supported by the polls. Still, the polls were a better guide to the overall result than the prediction markets on this occasion (have not looked at individual seat markets).

My guess is that political insiders are little better than noise traders. We should be happy to let the market professionals milk them for all their worth.

posted on 26 August 2010 by skirchner in Economics, Financial Markets, Politics

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Low Expectations: Why Financial Markets Didn’t Care About the Election Result

Financial markets usually take federal election outcomes in their stride, an indication that the result is either not a surprise or makes very little difference to expected economic and financial outcomes.

The fact that markets have been just as sanguine when faced with the prospect of a hung parliament for the first time since 1940 implies that markets do not expect public policy outcomes to be appreciably worse under the various options for a minority or (small ‘c’) coalition government than under a majority government. One can only conclude that markets had very low expectations for the public policy outcomes from any majority government and those expectations have not in any way been disappointed by a hung parliament.

posted on 24 August 2010 by skirchner in Economics, Financial Markets, Politics

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Bonfire of Kevin Rudd’s Vanity

Whoever forms government in the wake of Saturday’s federal election, the result is as comprehensive a repudiation of Kevin Rudd and his legacy as one could reasonably hope for. Any suggestion that Kevin Rudd’s liquidation as Prime Minister in June was a net negative for the ALP withstands little scrutiny. It is ill-advised for members of the conservative side of politics to suggest otherwise or confect sympathy over the manner of Rudd’s demise. We should always be thankful to the ALP caucus for taking the action they did in removing a dysfunctional central planner from office. Perhaps the highlight of last night’s election coverage was the ABC’s decision to cut Kevin Rudd off mid-speech as the producers realised that amid the usual profusion of words coming out of his mouth, he had nothing to say. Rudd suffered a 9% primary swing against him in his own seat.

The election result is one that Malcolm Turnbull said could never happen if the Coalition failed to join a bipartisan policy cartel behind Kevin Rudd’s ETS. Malcolm’s stand undoubtedly helped him in Wentworth, where he now sits on a massive 60% of the primary vote. What Malcolm never understood and what Tony Abbott demonstrated was that public opinion on the ETS was not independent of the opposition’s stand on the issue. Ironically, Rudd dropped the ETS for the same reason Malcolm supported it: neither of them wanted to fight an election on the issue.

Any new government will now be hostage to some combination of Greens and rural protectionists. Unfortunately, both have a common interest in frustrating economic and other reforms. While there is now little prospect of good legislation coming out of any new government, it will also be difficult to push bad legislation through such a finely balanced legislative process. Legislative and policy paralysis are underrated as political outcomes and could even set the stage for new elections in which real policy issues might actually be at stake.

posted on 22 August 2010 by skirchner in Politics

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Rudd’s Way: Working with Australia’s Most Dysfunctional Central Planner

Graeme Dobell reviews Rudd’s Way:

While this column needed a three-part series last year to grapple with the dysfunctional nature of the Rudd experience, Stuart nails it in one paragraph:

‘Rudd appeared unable to delegate. His office was nicknamed the ‘black hole’, because briefs would vanish and nothing would emerge. The government’s agenda appeared to swing suddenly and wildly. One moment there would be frenzied progress on an issue until, if it seemed intractable, it would simply be left in limbo.’

As a columnist for The Canberra Times and author of two previous books on The Kevin, Nick Stuart is an experienced journalist who is a known part of the Canberra milieu. Thus, he could quietly gather the quotes and insights that light up Rudd’s Way. Here’s the acid judgement of a senior public servant on Rudd’s mode of operation:

‘The man’s output is negligible. He gets wound up around the detail, and loses the plot. You’d be concerned if a dep sec (deputy secretary) was working like this, but because he’s PM, he can get away with it.’

Or consider this from a Labor minister, not long after taking office, as the polls were still soaring. The minister complained that Rudd was ‘a bloody perfectionist micro-manager’ who, more seriously, ‘couldn’t give a rat’s about what the party’s policy actually is.’ Then the minister paused for a long moment before concluding: ‘Thank goodness he’s no good at it; otherwise we’d really be up the creek.’…

Consider this line last Friday from Verona Burgess, who has spent more years than she wants to remember writing on the machinations and machinery of the Canberra public service: ‘It is difficult to explain to people outside the capital just how loathed Kevin Rudd had become among large sections of the Australian Public Service (let alone the caucus) and why.’


posted on 18 August 2010 by skirchner in Politics

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Below-the-Line Senate Voting Tool

For those who like to make the major parties work for their vote, here is a handy web site that lets you create customised below-the-line Senate voting tickets that you can print-out and take with you on polling day (just don’t use it as a ballot paper, it won’t count!)

posted on 04 August 2010 by skirchner in Politics

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Federal Election Betting Market Probabilities

Simon Jackman provides a handy update on federal election outcome probabilities derived from Centrebet and updated daily at 9am AEST. Along with iPredict, Centrebet is showing a sharp decline in the probability of a Labor win, reflecting recent opinion polls, but also (perfectly legal) inside information:

SENIOR Labor figures have placed significant bets on the outcome of the federal election, with some punting against their own party. A major betting agency said bets had been placed on members of the opposing team to win marginal seats in NSW and Queensland.

Centrebet primary analyst Neil Evans said: ‘‘I can’t tell you who but I can tell you this: these are people very high up betting on some of the critical seats and I can tell you they don’t always stay faithful to their party - they swap sides.

‘‘They are well-known Labor figures and associates that are punting on these seats. A lot of Labor-connected money has been backing a Coalition win in marginal seats and, to a lesser extent, the Coalition has been doing the reverse.’‘

The Sun-Herald understands the figures include parliamentary staffers, advisers and senior party officials.

posted on 01 August 2010 by skirchner in Financial Markets, Politics

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Bryan Pape, Senate Candidate for NSW

UNE law lecturer Bryan Pape is an independent Senate candidate for New South Wales in this year’s federal election. He is perhaps best known for his High Court challenge to the constitutional validity of some of the Rudd government’s stimulus spending in Pape v The Commissioner of Taxation. The case was described by George Williams, another law academic and would-be ALP candidate as ‘a major victory for the states in the reasoning, it’s one of those very rare High Court decisions you get that’s going to change the way government operates.’

An opportunity to vote for a federalist and champion of states’ rights in the Senate.

posted on 31 July 2010 by skirchner in Politics

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The Perfect Job for Kevin Rudd

It keeps him out of the country, it costs us next to nothing, he speaks perfectly impenetrable international bureaucratese and based on experience at Copenhagen he will put the cause of an international agreement on climate change back years if not decades.  What’s not to like about Kevin Rudd as UN adviser on climate change?

posted on 22 July 2010 by skirchner in Politics

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Labor Voters More Confident Following the Demise of Kevin Rudd

The 11.1% surge in consumer confidence between June and July shows a clear partisan divide, with confidence on the part of Coalition voters up 19.8% compared to a more modest 3.9% for ALP voters, but this is still a big surge in confidence among Labor voters for a series that has an historical standard deviation of 5.1%. The ~75-80% probability of a Labor victory being priced in betting and prediction markets suggests that Rudd’s demise has significantly improved Labor’s election prospects.

Meanwhile, Frank Brennan thinks we should give Rudd credit just for showing up to work:

Having resigned as prime minister, Rudd had the good grace to turn up to question time, taking his place on the backbench.


posted on 16 July 2010 by skirchner in Economics, Financial Markets, Opinion Polls, Politics

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Consumer Sentiment Surges on the Demise of Kevin Rudd

Consumer confidence surged 11.1% in July, the ‘strongest monthly increase in the Index from a base above the 100 level since records began in the mid–1970s’ according to Westpac.  The press release is far too polite to point to the most obvious reason for the surge in confidence, but we can all read between the lines:

Interest rates do not appear to have been the most significant driver of the July result. The confidence of those folks with a mortgage actually rose a little less than tenants or others. As we noted last month the 5.7% fall in the Index in June seemed to be partly driven by concerns about the Budget and tax policy.

Consumer sentiment doesn’t have much independent explanatory power for economic activity once you control for other variables, suggesting that causality runs from activity to sentiment and not the other way around. But that’s just the average effect observable to the econometrician. It does not preclude one off exogenous shifts in sentiment having a significant economic impact. Assuming the new Prime Minister can sustain the boost in confidence, dumping Kevin Rudd may prove to be something close to an economic free lunch. I have not yet seen the break-down by voting intention, but my guess is that it argues against the view that dumping Rudd was a negative from the standpoint of Labor voters.

Arthur Sinodinos notes that Kevin Rudd could destabilise a future Gillard cabinet, arguing against his inclusion in a future government.

posted on 15 July 2010 by skirchner in Economics, Financial Markets, Opinion Polls, Politics

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Ken Henry, Then and Now

Niki Sava on the Ken Henry speeches of yore:

KEEP checking the Treasury website. Any day now a speech by Ken Henry, meant to be private, will appear. In it, he will distance himself from the Gillard government, condemn it for its profligacy, for its weakness, for ignoring Treasury advice and for poor policy formulation in the run-up to an election.

It should say something like this: “[Treasury] will be under pressure to respond to the growing number of policy proposals leading up to the calling of an election, and once the election is called.

“At this time, there is a greater than usual risk of the development of policy proposals that are, frankly, bad.”

And: “There is a temptation to think that all problems can be solved by government spending.”

If previous practice is observed, that is what would happen, followed swiftly by the appearance of those supposedly private observations to staff, on the front pages of newspapers.

Then again, maybe not.

But that is what happened in 2007. The quotes above are taken from a speech by Henry in March that year, a few weeks after prime minister John Howard released the $10 billion water security plan to save the Murray Darling Basin.

Here is another Ken Henry speech that time forgot.

posted on 06 July 2010 by skirchner in Economics, Politics

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