Has the flood levy damaged the carbon price?

The unknown extent of altruism in the hearts and pockets of Australian voters must be playing heavily on the minds of major political players right now.

They will carefully be examining taxpayers’ response to the flood levy to assess whether individuals truly are willing to pay more for the collective good.

This willingness has implications much broader than flood reconstruction – it goes directly to public acceptance of the carbon price that is now at the heart of the government’s climate change response.

Australian governments have been watching taxpayers for quite some time to gauge their willingness to take a little monetary pain for a broader public gain.

Evidence so far suggests that Australians are generally prepared to be altruistic when they can see tangible benefits delivered within a relatively short space of time.

Australians were happy enough to pay a levy to buy back guns or assist East Timor* because the “results” were depicted often and compellingly on our television screens. The twinge in our hip pocket nerve was ameliorated by the images of guns being turned into scrap and Diggers playing footy with smiling East Timorese children. In fact, we took pleasure from bearing a small cost which contributed to the mitigation of a much bigger problem.

The challenge facing Julia Gillard is that there is no similar way to depict how climate action costs which affect individuals will deliver community benefits. There is no tangible way to show how paying more for carbon-based goods and services today will reduce the effects of climate change in the future.

The Prime Minister needs to find a compelling analogue to help Australians feel directly connected with climate change solutions in order to be prepared to pay for them.

State governments have over the past decade been exploring this concept with their water restriction regimes.

Despite households consuming only one sixth (11%) of the water used by agriculture, the introduction of domestic water restrictions created the impression that individual members of the public were directly responsible for the success of their state’s response to the nation’s seven-year drought.

By drawing a link between climate change, the drought and dwindling water resources, state governments gave their constituents a way to see the tangible benefits of their water parsimony; whether they changed their water consumption behaviour, paid to install water tanks, or let their turf die.

The altruistic “payback” for these actions was the daily progress reports on roadside electronic billboards showing the results of the previous day’s efforts in terms of water used, targets reached and dam levels achieved.

Australians were happy enough to comply with water restrictions because they felt they were doing their bit for the collective good, and in reality the required change in behavior was not overly costly or inconvenient.

Compare the relatively benign stance on sharing this burden with that taken by the very same Australians on the flood levy. The levy is much less of an impost than water restrictions, the community benefit that it will deliver is undoubtedly tangible and compelling, but still barely half the Australian community supports it.

How can this be? Is it because we resent being forced to pay more when so much has already been given voluntarily? Or is it because the levy is seen as another tax grab that will be subsumed into consolidated revenue and never seen again? A poll taken by The Drum suggests it is a combination of these two complaints.

Let’s shift focus then to the carbon price. Australia’s economy is built upon an electricity supply system that is around 80% coal-fuelled. As a consequence, households and businesses currently enjoy some of the cheapest electricity prices in the world. A carbon price will increase the price of electricity as well as those goods and services that require electricity to be produced.

Will Australians resent being forced to pay more when they have already invested time and money in taking voluntary greenhouse actions? Or will they see the carbon price as another tax grab that will be subsumed into consolidated revenue and never seen again? Perhaps, yet again, it will be a combination of the two.

This is the conundrum facing the Prime Minister and her government right now.

If they don’t get the sales pitch right for the carbon price, if they don’t counteract the “I’ve already given at the office” mentality and dispel concerns about fiscal prudence, then the carbon price will sound the death knell for Gillard just as the scrapping of the carbon tax did for her predecessor.

*The East Timor levy was never actually imposed, being scrapped just before it came into effect.

An updated version of this post was written for Crikey.com

Mirror, mirror on the wall: what do flood speeches say about us all?

Julia Gillard and Tony Abbott have said much about the floods in the past week. Both were pilloried and praised for their words, depending upon the critics’ points of view.

Gillard has variously been described as patronising, prime ministerial, prudent, or ruthless and a risk-taker. Abbott has been even more polarising, having earlier inflamed some observers (including me) with pointed questions about the budget surplus while the flood waters continued to surge and our screens were still filled with graphic signs of death and destruction.

But putting aside the perceived callousness, less than empathetic delivery or poor political wisdom of the leaders’ utterances this past week, there is an important element of their communications that has been overlooked.

We’ve been so busy judging the qualities of Gillard and Abbott that we haven’t noticed that both leaders told us a lot about ourselves when they delivered their keynote speeches. Their words held a mirror to the Australian community and reflected our current state of mind through the phrases, illustrations and analogies that they used.

I say this because no important political speech is drafted these days without the inclusion of market-researched elements to maximise the speaker’s chances of making a positive connection with their audiences. For Gillard and Abbott, these target audiences are concerned party members, disaffected supporters and those who have no firm party allegiances.

By using language or imagery similar to that used by these audiences, or which recognises their feelings or concerns, each leader can not only catch that audience’s attention, but also be seen by them as genuine, well-intentioned and persuasive.

That’s why so much money and effort is put into finding out what key voting groups think, and then reflecting these views back in high profile political speeches.

In accordance with the political calendar, both leaders would have been planning to make scene-setting speeches in late January in an attempt to take the upper hand before parliament resumes in the second week of February.

Consequently, both Gillard’s speech this week to the National Press Club and Tony Abbott’s to the Young Liberals would have been considered important speeches by their respective party machines, and work on them would have been underway for some time.

Gillard’s speech, out of sheer necessity, focused solely on her fiscally responsible approach to funding the flood recovery effort. Nevertheless, it contained key words and phrases that were designed to make a positive and assuring connection with anxious and disaffected Labor voters as well as those who have strayed to the Greens.

Abbott’s speech was modeled more on the headland speeches given by John Howard as Opposition Leader in the lead up to the 1996 election. While Abbott took every opportunity to cast Gillard and her government in a bad light, he also spelled out the principles that would guide his alternative government. Both sets of messages were crafted with words that would resonate with resurgent Liberal voters.

So what picture do we have of the Australian people based on these two speeches?

Firstly, both speeches confirm that we’re not sure whether Gillard is up to the job. She may well be the preferred PM in all the published polls, but the speeches show that both parties are detecting voter concerns about Gillard in their private research.

In Abbott’s speech you can see this doubt being reinforced in key phrases: “another Gillard decision that calls her judgment into serious question”, “only a prime minister who’s out of her depth would seek to exploit people’s generosity”, “a prime minister who’s unconvincing when responding to a natural disaster is unlikely to solve the much more politically and administratively complex problems that she had previously set herself to fix”, and the “Prime Minister [is] promoting lazy policy under the cover of sympathy for flood victims.”

However, Gillard’s speech is more telling on this point. She speaks in the first person, using “I” nearly 50 times to describe what she has done or what she will do. This is a clear attempt by the speech drafters to show that Gillard is in charge, in control and is making the hard decisions. This rhetorical tactic certainly seemed to convince at least one important observer, with Federal Press Gallery doyen Laurie Oakes tweeting and later writing that it was Gillard’s “most prime ministerial performance so far”.

The second thing we learn about ourselves from the speeches is that we want our government to put the national interest first, and if that means making hard decisions, that’s fine, as long as the strong economy (read, our quality of life) is protected.

The title of Gillard’s speech reflects these sentiments: “I see what needs to be done and I will do it.”

In sketching out what needs to be done to pay for the immense restoration bill, Gillard preaches economic prudence and reflects the growing conservatism with which households are now managing their money.

With our growing economy and rising national income, we can pay for rebuilding now. And if we can, we should. We should not leave the task of finding the money until future years. My experience in Government since 2007 tells me that while we must plan to sustain growth we must never take future growth for granted, so we should not put off to tomorrow what we are able to do today. 
Solely borrowing to rebuild Queensland is a soft option I am not prepared to consider.

Abbott reflects the same community sentiment, but from another direction, attempting to use it to cast more doubt on Gillard’s judgment and prudence:

The problem is not the government’s spending on flood relief which is urgent and unavoidable. The problem is the government’s unwillingness to take spending restraint seriously coupled with its instinctive resort to a new tax to meet new challenges.

He reinforces this by repeating the well-crafted, and now familiar, refrain:

There’s a world of difference between a levy to fund unavoidable extra spending when there’s no fat in the budget and the Gillard government’s latest raid on people’s wallets. There’s about $2 billion uncommitted in various funds such as the Building Australia Fund, about a half billion dollars that the government is committed to budgeting for the National Broadband Network (plus tens of billions in government guaranteed borrowing), at least a billion dollars left in the Building the Education Revolution and about a billion dollars to buy back water which is no longer in short supply. As the Prime Minister conceded at the National Press Club, there is certainly further spending that could have been reduced or deferred for flood reconstruction without the need for a new tax.

The battle between the leaders for the high ground on fiscal prudence seems to be well underway.

There are several other interesting reflections of community views in the two speeches. For example, Gillard’s carefully chosen words on the availability of jobs for unemployed Australians as well as skilled migrants flags a tension within this issue that usually only lurks beneath public discourse.

Equally, the dichotomous reference by both leaders to a carbon price (either as the only effective mechanism to reduce greenhouse gases, or simply another price hike) suggests that the community is not yet settled on this issue.

The carbon price question dovetails neatly with that of the flood levy. While it would be easy to conclude that Australians are willing to pay a little more through their weekly tax to fund the flood effort, both leaders’ speeches suggest the matter is not that clearcut and that such widespread willingness is a chimera.

While Gillard emphasised at the NPC that the levy would impose only a $1-5 weekly increase on the majority of income earners, complaints must have been anticipated because she also stressed the need for all Australians to share the load in the name of fiscal responsibility.

Interestingly, a contemporaneous poll of readers at the ABC online forum The Drum, while not statistically rigorous, has consistently shown only 53% of respondents are willing to pay the levy.

According to poll, another 34% of readers are concerned the money will be wasted and 9% are upset because they have already donated money to the flood restoration effort. It is a combination of these two concerns that the Liberals decided to press home in Abbott’s Young Liberals speech.

This was always our money, not the government’s. It was supposed to be used wisely, not squandered. The Prime Minister is pitching it as a “mateship” tax even though mateship is about helping people, not taxing them. Mates choose to help; they’re not coerced. Mateship comes from people, not from government. It’s not the money so much as the principle. People resent being ordered to pay what they’d gladly give of their own volition especially by a government so reckless with taxpayers’ money.

It is yet to be seen which levy message has more resonance with the Australian community.

And so we have a snapshot of what the major parties believe important groups of voters are thinking as their elected representatives embark on the new parliamentary year.

In giving us this glimpse, they have unveiled the key political battlefields for 2011: fitness for office, protecting the national interest with fiscal prudence, and the preparedness of Australians to pay more for the collective good. It will be another fascinating political year.

This post also appeared at The Drum – Unleashed.