Date created:27/8/04
Last modified:27/8/04
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John Quiggin

Health, education the key

Australian Financial Review

26 February 2004.

For the first time in years, this year's Federal election looks set to be fought out on the bread-and-butter question that dominates modern politics, the balance between taxing and spending. The 1993 and 1998 elections were dominated by the third-order distraction of the GST, the 1996 election was a referendum on Paul Keating and the 2001 election was dominated by terrorism and panic about refugees.

Barring a big foreign policy shock, the question dominating the 2004 election will be whether any budget surplus accruing to the government should be returned in the form of tax cuts or as higher spending on services such as health and education (there's third option, keeping the surplus and paying off debt, but neither party seems likely to propose this).

A Newspoll recently reported by The Australian this week suggests that, as far as the Australian public is concerned, this issue has already been decided. When asked to choose between allocating a large surplus between tax cuts and spending on health and education, 72 per cent of respondents preferred allocating it mainly to health and education, 16 per cent favoured an equal division, and only 9 per cent preferred allocating it mainly to personal tax cuts.

It's hard to recall such an overwhelming expression of preference on an issue of current political controversy. The most recent example was in relation to Pauline Hanson's three-year prison sentence.

Presented with such a scoop, The Australian could have made a big splash. In fact, however, the news was not only played down, but was accompanied by an editorial headed, amazingly, Cutting income tax is a political winner.

The basis for this claim was a second Newspoll question, about the top marginal rate of taxation. Of the respondents, 27 per cent said it was much too high, 23 per cent a little too high, 34 per cent about right and 8 per cent too low. The Australian's report of the Newspoll ran with this finding, under the headline Top rate too high, say half of voters.

There is no contradiction between these two results. As any economics student knows, meeting a budget is a matter of trade-offs. Someone who thinks the top marginal rate is 'a little too high', but that health and education services are severely underfunded, is likely to prefer allocating scarce public funds to the more urgent problems first. The poll results suggest, reasonably enough, that only those who think that the top marginal rate is 'much too high' favour allocating part or all of any surplus to reducing it.

But how did The Australian manage to dismiss the overwhelming majority of voters who preferred better health and education to tax cuts? Quoting pollster Sol Lebovic, it suggested that voters were giving the 'socially acceptable' answer. According to the editorialist, the 'gut instincts' of voters were for tax cuts, and politicians would disregard this at their peril. How the contents of our guts were determined is a question that is perhaps best left alone.

The point attributed to Lebovic is an interesting one. It's well known that (naively designed) readership surveys will show many more households taking the National Geographic than the National Enquirer, even though audited circulation figures show the opposite. Still, it's unusual for a pollster to trash his own product by suggesting it is flawed in this way.

More importantly, if expressing a preference for tax cuts over health and education spending is as socially unacceptable as a taste for supermarket scandal sheets, it would seem that the public debate is already over.

In reality, there's little support for such a condescending view. If the question is changed to make 'social services' rather than 'health and education' the alternative, a plurality of voters prefer tax cuts. The term is ambiguous but most commonly refers to social welfare benefits and services directed at the poor, unemployed and single mothers. In preferring health and education to social services or tax cuts, voters are not giving 'altruistic' answer that might make them look good. Rather they want a government that does something for them and their children, and are willing to give up tax cuts if they can get it.

There is a standard political response to unfavorable poll results - election day is the only poll that counts. A string of state election results in the last five years have confirmed that, when voters say they want better health and education, they mean it. In an election fought on domestic policy issues, the party that gives them what they want will win.

John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.

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