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With support for the Government at a record low, Consumer Confidence low, real unemployment high, the Australian $ low, and an economy stalled on the GST, we have been asked to comment today on the Federal Government's re-election strategy and the effect the Budget will have on the Coalition's re-election chances.

Our opinions are based on our experiences gained as public opinion pollsters. Public opinion polls have been an important contributor to Australia's democracy in the past century.

The questions are, of course:

• What do Australian people want and/or expect from the Budget?

• Do Budgets ever make a difference?

• What is the context of this Budget?

• If the Budget is not the issue - what is?

What do Australian people want and/or expect from the Budget?

Education and health remain the most important issues Australian electors want the Federal Government to act on in 2001, according to the Morgan Poll, followed by social welfare and the aged, and unemployment.

But those who say the Federal Government should do something about the economy have doubled since November 1999. Furthermore when electors were asked what the Federal Government could do that would most benefit them and their families, as with previous years, taxation was well up on top. (See www.roymorgan.com - Morgan Poll Finding No: 3398.)

But what about the Budget? Last week's Morgan Poll qualitative research on key subgroups' expectations of the Budget supported these issues but also revealed a conundrum for the Government. Apart from increased spending on education (but not private schools), health and hospitals and employment:

• Self-funded retirees say get rid of the GST and increase interest rates (or at least don't reduce interest rates any further) and increase taxes;

• People on incomes over $70,000 p.a. say reduce taxes, and they want lower interest rates to stimulate the economy;

• Unemployed people say fix or review the GST and give tax cuts to the underpriveleged, but increase tax on high income earners;

• Small business owners and self-employed say get rid of the GST, cut fuel prices and help small business.

Perhaps as one respondent put it in Morgan Poll qualitative research about the Howard Government and upcoming Budget: "People aren't getting what they want, but they don't really know what they want. This Government is not leading us".

We are reminded of the responses to the recent Victorian State Budget.

"Dissidents will claim that John Brumby has sold the poor short on much needed welfare" says John Ferguson (State Political reporter - see The Herald Sun, May 16, 2001, page 21 "Easy days of ruling are over").

"Too cautious" say unions. "The $509 million surplus should have been spent on education and community services" (See The Herald Sun, May 16, 2001, page 14 "Too cautious, says unions").

"Fiscally responsible" says Neil Coulson (CEO - Victorian Employees Chamber of Commerce and Industry), also saying "the promised cuts to business tax worth $774 million were a key feature" (See The Herald Sun, May 16, 2001, page 14 "Too cautious, says unions").

"Business tax cuts have not gone far enough. More needs to be done to ease the tax burden on Victorian business, by further reductions in payroll tax" says Ian Mayer (Victorian Director - Certified Practicing Accountants Australia - see The Herald Sun, May 16, 2001, page 14 "Too cautious, says unions").

John Ferguson in his article "Easy days of ruling are over" says the Victorian Budget "Does what Kennett should have done years before - gives some of the people's money back to the people", but in the same column points out that with a Budget surplus around $500 million, "Any dramatic drop in growth - beyond the forecasts - would spell disaster for the Bracks Government".

This brings us to the next question:

Do Budgets ever make a difference?

It is 60 years since Roy Morgan conducted Australia's very first public opinion poll in September 1941 on equal pay for men and women doing the same work - favor 59%, against 33% and undecided 8%.

In July 1973 the Morgan Poll (published weekly in The Bulletin) introduced into Australia continuous public opinion polls on voting preferences covering Federal politics (measured weekly - published fortnightly) and State politics (published monthly for NSW and Victoria, less often for other States) - and illustrated how public opinion polls could accurately predict political situations and trends.

Since continuously measuring voting preference we have never seen a Government's political support change dramatically because of a Budget!

An analysis of Morgan Poll voting trends before and after Federal Budgets in each election year during the past two decades reveals that the biggest increase in support of the Government has been 3.5%, achieved by the Howard Government in 1998.

However this figure - and even a leap of 5% - would not save this Howard Government.

In fact public opinion tends not to shift dramatically and enduringly.

Now let's look at the 1975 crisis when Malcolm Fraser and his colleagues blocked Supply.

At the time, blocking of Supply in 1975 caused a crisis. However this does not tell the whole story. The key for Fraser when he blocked Supply was knowing whether he could withstand the backlash from public opinion when he took the unpopular decision, and whether the Coalition's drop in support would return to its previous winning position once an election was called - it did!

The following table of Morgan Poll voting trends shows before and after the August 1975 Budget and before and after November 11, 1975 when the Whitlam Government was dismissed. It shows in mid 1975 the Coalition's support was in the fifties, even 60% in early July. It decreased consistently and dramatically while the Fraser Opposition blocked Supply - an unpopular position - until it bounced back after the dismissal to around the same as before the blocking of Supply. The Fraser Opposition, of course, won with a record 53% vote for the Coalition.

The exception to this is the current dramatic and enduring antagonism that the GST has managed to achieve.

Unfortunately for the Coalition nothing can save it from its poorly implemented GST - the GST is here whether we like it or loathe it - and most seem to loathe it. The electorate wants to punish the Coalition for what they believe was not necessary.

Morgan Poll qualitative research has consistently shown the GST and its associated problems as the main reason electors will not vote L-NP (See www.roymorgan.com - Morgan Poll Finding No: 3401). For instance, in answer to what the Howard Government should be trying to achieve with the Budget, or what could be done in the Budget to help, the people said:

"Get rid of the GST";
"Firstly address the GST";
"Fix up all their foul ups with the GST";
"Get rid of the GST, reduce fuel excise";
"The tax system has been a big problem for small business";
"Problems are mainly because of the GST stretching our wages a bit";
"I think the GST is crippling small business";
"Take the GST off basic needs/amenities like electricity, gas, phone";
"The GST is the main problem";
"Disadvantaged by the GST, so that should be rolled back";
"The GST is putting people out of business";
"Make the GST fairer";
"Less paper work in terms of accounting, BAS statements";
"Australia is going down the gurgler, especially small business, since the GST";
"People's resentment toward the GST will get rid of them"; and
"He brought the GST in and made it harder for people".

This brings us to the context in which this Budget is presented and received.

What is the context of this Budget?

We began by saying that support for the Government is at a record low, Consumer Confidence is low, real unemployment is high, the Australian $ is low, and the economy is stalled on the GST.

We need to point out here that we believe it is critical that the Government and the Australian people know the truth, and base their actions, policies and expectations on reality - not propaganda, wishful thinking or rubbery data (which can be pulled and pushed into any shape or ignored as too rubbery when it suits).

Roy Morgan saw his role and that of Public Opinion Polls as stopping journalists, and other reporters, claiming that "THE PUBLIC DEMANDS" or "PUBLIC OPINION SHOWS". While politicians PERCEIVE what the public believe, the Morgan Poll MEASURES what the public believe.

For an example of recognising the facts and acting upon them from an economic perspective, the Prime Minister and Treasurer need only look to the United States for inspiration. When Alan Greenspan and the US Federal Reserve realised the US economy had "hit the wall" and "overdone" their "fiscal" policy they immediately implemented significant cuts in interest rates.

In the US, like Australia, Consumer Confidence dropped. The University of Michigan Consumer Confidence Index was 109.2 in February 2001, up to 116.9 in March 2001, down to 109.2 in April 2001 - all significantly lower than measured in September 2000 when the Index was 142.5. US unemployment rose with massive job cuts in the automotive industry and technology industry still being the order of the day.

It is because of these low Consumer Confidence Index figures and concerns about unemployment that the US Federal Reserve cut interest rates and is still cutting. In addition, from the day President George W. Bush was installed as President, he presented to Congress a bill to slash the top income tax rate. Remember, unlike in Australia, there are significant death duties in the US!

In Australia, our leaders appear unwilling to accept the facts and deal with them, instead choosing to ignore, look for what might politely be called "alternative facts" or "make up their own". Looking for the bright side has its place in political campaigning, both for the sake of the leaders' morale and even in winning votes, but it has no place driving the country's fiscal and economic policy.

In September 1999, Jeff Kennett was defeated in the Victorian State election. Looking on the bright side - believing only those polls that showed him in a strong winning position - instead of dealing with the reality of a divided electorate and a very close election which the Morgan Poll had shown for three months leading up to the election (See www.roymorgan.com - Morgan Poll Nos: 3233 and 3238).

Let's look at the facts. Our latest Morgan Poll (published in the May 22 Bulletin), was taken after the leaking of Shane Stone's "mean, tricky, out-of-touch and not listening" memo in Laurie Oakes' article. It shows the Federal L-NP facing an unwinnable election, with support languishing at less than a third of the electorate (L-NP - 31.5%, ALP - 43.5%, Australian Democrats - 9%, Greens - 4.5%, Pauline Hanson's One Nation - 6%, Independents/Other Parties - 5.5% with two-party preferred support ALP - 59.5% cf L-NP - 40.5%, see www.roymorgan.com - Morgan Poll Finding No: 3401.)

Unfortunately the press (except Hugh Mackay - see The Age, May 12, 2001) continually ignore the fact that the Morgan Poll has had the ALP as the Federal election winner with every poll conducted since the end of October 1999! Only once since that date was the outcome close - in August 2000 after the John Della Bosca statement criticising Kim Beazley during his interview with Maxine McKew. (See The Bulletin, January 9, 2001, an editor's cut of that interview "The Della Bosca Tapes - The Trouble with Beazley".)

Instead of recognising and dealing with the truth, our leaders and therefore the Australian people look to "alternative facts" such as inaccurate poll forecasts by other widely publicised public opinion polling organisations, or private party political poll results designed to re-set the political agenda.

One such deliverer of "alternative facts" Newspoll has, over the last 2 years since the Australian Democrats voted with the Government on the GST legislation, shown wildly fluctuating support for the L-NP - giving the false impression that the L-NP has been ahead at some times and could pull ahead again - almost by random chance (See The Australian, May 21, 2001 page 9).

It's important to remember that Newspoll forecasted an ALP vote of 58% for the recent Ryan by-election - the actual ALP vote 50.2%¹. Newspoll had the L-NP deadlocked in the February 10, 2001 WA State election with 38% - the actual L-NP vote was 34.4% - the ALP won with a record majority²!

Agenda-setting by political parties and other organisations, the second mechanism by which Australian people are provided with "alternative facts", is usually based on questionable poll reports with most technical details conveniently omitted. Unfortunately this deceptive practice of political agenda-setting has been used by all political parties for many years. Gary Morgan's paper "Now there's Democracy in Russia - Australia must be next" presented on July 11, 1990 to The National Press Club, Canberra explains all (See www.roymorgan.com - Paper No: 1990JL1).

Too many naive or unethical journalists³ work with political parties and report these poll driven stories (with the purpose of re-setting the political agenda) as fact, rather than political propaganda.

We have said consumer confidence is low. In Australia the Roy Morgan Consumer Confidence Rating has fallen from 119.1 in August 2000 (immediately after the introduction of the GST) to 107.4 in May 2001 (See www.roymorgan.com - Article No: 196).

Despite a significant fall in real consumer confidence, the Reserve Bank of Australia has not had the courage to slash interest rates to "kick-start" our failing economy because of inflation fears due to the GST, possibly relying on "alternative facts" such as the Westpac Consumer Confidence Index with its wildly fluctuating estimates of consumer confidence and trends which are unrelated to known facts.

We now come to unemployment. For the March 2001 quarter Roy Morgan Research estimates 10.5% of the workforce (See www.roymorgan.com - Morgan Poll Finding No: 3396) is seeking employment. This is up 0.9 points since the December quarter (9.6%), and up 0.8 points since the March 2000 quarter.

For the March 2001 quarter the inaccurate Government statistical estimate (Australian Bureau of Statistics) put unemployment at 6.8%, some 3.7 points lower than real unemployment. This is significantly UNDERESTIMATING the true number of Australians unemployed. For example, people who have had one hour's paid employment in a given week but who would accept full-time employment if offered it are classified by the official ABS figures as employed even though they are, in reality, looking for work. The Australian Financial Review, May 4, 2001, in an article by Joyce Moullakis (see page 19) entitled "New ABS definitions brighten jobless data" describes how recent changes to the ABS questionnaire layout caused a downward revision of ABS employment data back until 1986. The article goes on to point out "It comes at a convenient time for the Howard Government in the lead-up to the Federal Budget in May, as a lower jobless rate will reflect well on the Government's economic credentials and Budget estimates". The new ABS definition resulted in a reduction in the official ABS March unemployment figure from 6.8% to 6.5%! The "adjusted" April unemployment estimate is now 6.7%, up 0.2% in a month!

And don't think people don't know. As one of our respondents said, "Howard says there is low unemployment but most of the jobs are part-time".

The Federal Government's own propaganda about the positive state of the economy is its own self-made problem. The fact is Australia has a STALLED ECONOMY - badly in need of "instant" boosting. With 10.5% real unemployment (NOT 6.8% or 6.5% as the ABS would like us to believe) a significant proportion of the Australian workforce is underproducing - not by desire but because of lack of demand. Unless a dramatic change in our economic policies, our low dollar must go LOWER over the next few years.

We recognise the Reserve Bank, even with the power to cut interest rates, cannot do it on their own - it needs leadership from Governments - both Federal and State. This brings us to the critical issue:

If the Budget is not the issue - what is?

With low consumer confidence (107.4), high real unemployment 10.5% and a stalled economy, only REAL leadership or a crisis can save the L-NP Coalition - not the Budget.

And we're not talking about the Shane Stone-type "crisis⁴" - which told the truth and, in our opinion, was obviously prepared from Liberal Party qualitative market research - a fact alluded to by Laurie Oakes in his May 8 Bulletin magazine article:

We're talking about a real crisis, like a WAR!

At the moment, according to the Australian people neither a war nor REAL LEADERSHIP from the Coalition appears likely. Now only 15% think the Liberal-National Party Coalition will win the next Federal Election (See www.roymorgan.com - Morgan Poll Finding No: 3401).

In the May 11 edition of Business Review Weekly (page 54) Gary Morgan advised readers not to view an election as a contest just between two leaders - too much emphasis is placed on them. Our Morgan Poll qualitative research shows very few electors voice concerns about John Howard.

Why?

"The Coalition is not in trouble because of perceptions of Howard's leadership, but because of the failure of:

• the GST;

• high petrol prices;

• the failure of tax cuts; and

• the decline of living standards with the fall of the dollar."

It may be too late for the Federal Government to employ the kind of leadership that would help it win the next election, but there is always time for the Federal Government to show leadership which can result in real change and real long term benefits.

Our decline in living standards shown by our low dollar is as much a function of our punitive high marginal tax rates (which limit incentives for both individuals and companies to invest and expand) as it is the "international" monetary moguls we, as a nation, are so quick to blame.

The GST was designed to be tax neutral for the honest taxpayer. It was to replace many State taxes (unfortunately for those looking for work, not payroll tax) and to be accompanied by substantial cuts in income tax including the top marginal rate (which hasn't eventuated) and company tax.

In practice the GST, even though it has not succeeded in eliminating the cash society, has generated significantly greater revenue than the electorate was led to expect - the promised tax cuts are therefore well overdue.

Another tax which incited almost as much anger as the GST amongst Australians in Morgan Poll qualitative research was petrol.

"The rise in petrol prices" (an example of why the country is going in the wrong direction);
"Cut fuel prices";
"Fix up all their stuff-ups - petrol prices, freight prices need to come down";
"Reduce the fuel excise";
"Balance the Budget and drop fuel prices and the rate of tax for medium income people";
"Fuel excises are still a concern and need to be countered";
"Petrol in rural areas";
"Take off the petrol excise tax";
"Look at petrol - that's the one thing they should be looking at"; and
"Stop raising the electricity and water prices, stop bank fee increases and lower fuel prices".

As a starting point, the Federal Government must cut taxes further - both business and personal - and slash Government waste. This will IGNITE the private sector, which has been on a decline since the GST was implemented in July last year.

The Victorian Government's recent Budget has not helped, with record new infrastructure spending. The Victorian Budget included $32.7 million capital and $12 million a year subsidy to restore passenger railway services to four country towns. This may be politically popular (the Liberals approve the initiative) but it is terrible policy.

With such high support and early in their term of Government, the Bracks ALP Government should have taken the opportunity to lead the way for Australia. Payroll tax should have been eliminated to boost private sector employment and ensure the needed growth in Victoria's industry comes to fruition. It's what we all need and want.

Of the high income earners among you, how many of you realise that the top marginal income tax rate is now well above 50% when you take into account the Medicare levy and the 10% GST paid from income after tax?

Governments should give the large surplus from the GST and other taxes back to all taxpayers and not spend it on vote-catching packages to special interest groups - never an effective way to show leadership and improve a Government's standing with an increasingly critical electorate.

While using the Budget to target special interest groups such as people in rural Australia or self-funded retirees may appear to be politically expedient, there are many more special interest groups who will be disenfranchised and annoyed. And it is not what the country needs.

"Political" spending is easily identified by Australia's rightly cynical electorate. For instance Morgan Poll qualitative research on what the Howard Government's Budget should be trying to achieve people said things like:

"An overall increase in the quality of life of all Australians, not just those in marginal electorates";
"I hope it's a genuine Budget and not too influenced by the election";
"And don't go overboard with promises";
"They keep changing their mind to get votes"; and
"The Budget won't make a difference because they're all there for their own ends".

Perhaps the most telling was the person who said "Stop trying to buy our vote by quick gifts. It's time to take a tough stand and do without the fancy bits and get down to business".

The GST, whether we like it or loathe it, is here to stay, even though the Howard Government is probably not. (We say "probably" because even a winning lead like the Beazley ALP Opposition is enjoying now can evaporate. Mr Beazley and the ALP must still campaign strongly to ensure they lead the country after the election.)

The key question is: Will Australia maintain its identity or will we become a subsidiary of global multi-nationals who are only interested in profits for their overseas shareholders? Right now we fear we are selling off the farm. And a lot more!

Michele Levine certainly has a view on this, as she outlined in her paper "Australia - the opportunity to lead the way" presented three years ago on March 3, 1998 at The Melbourne Convention - Federation: into the Future (See www.roymorgan.com - Paper No: 1998MR3).

She said:

Policies must be implemented which help our Australian industries compete in world markets - high-tech industries and service industries - particularly those involved in manufacturing, mining, tourism, health and education. While many of business's problems are self-inflicted by over-reliance on Federal, State and Local Governments, much could be done to remedy the situation. Indeed some of the most important changes are "relatively minor".

The private sector must do its bit, too. As a nation with a relatively small economy, we have depended on our rural and mining industries for far too long. Relying on our primary industries to shoulder the burden will not help us be competitive with international economies and markets - a challenge we cannot afford to ignore.

As for the public sector, there is barely an area of Government - Federal, State or Local - which doesn't need a total rethink. They are all too complacent, uncompetitive, with a powerfully enduring culture of being answerable to nobody.

There is too much effort and money wasted by all Governments on mediocrity. It may appear "politically" correct to spend taxpayers' money on activities relating to capital works, education, health and social welfare. But if the money is not achieving what is needed, then it's not morally right and it won't get the country going in the right direction.

For instance, Morgan Poll qualitative research shows that when it comes to education, people are concerned about class sizes and quality of teachers and teaching, not buildings and computers. They are also adamant that the focus should be on public, not private schools.

"I would like to see good education for children, ie. class sizes";
"Spend more money on public schools as opposed to private";
"Target education and give funding to public not private schools";
"Reverse policy on propping up private schools to the detriment of the public school system"; and
"Don't like money going to private schools and being taken away from public schools".

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