Labor targets financially stressed voters

Labor will try to win over financially stressed voters in states where inflation has run well ahead of income growth during the Coalition’s third term in office.

Labor leader Anthony Albanese addressing a business summit in Sydney on Wednesday. Picture NCA Newswire / Gaye Gerard

Labor will try to win over financially stressed voters in states where inflation has run well ahead of income growth during the Coalition’s third term in office.

Party insiders say the surge in living costs, particularly petrol and health care, and stagnant wages will be the focus of campaigning in two dozen government-held marginal seats.

Since May 2019, consumer prices have increased by 5.6 per cent while wages grew by 4.8 per cent, meaning so-called “real wages” have slipped by 0.8 per cent.

But the slide in real wages has been most acute in Western Australia (2.1 per cent), Queensland (1.6 per cent), and Tasmania (1.3 per cent), where the Morrison government is defending 10 seats on margins of 6 per cent or less, and where electoral swings can be way beyond national averages.

Over the term, real wages have fallen by 0.3 per cent in Victoria, where the Coalition holds six seats with buffers below 6 per cent, but after-inflation pay has increased by 0.3 per cent in NSW, where three government seats are vulnerable.

On Wednesday, Reserve Bank governor Philip Lowe said higher petrol prices from the oil shock due to Russia’s invasion of Ukraine “will eat into household budgets, push up costs for many businesses and crimp spending in some areas”.

Speaking at the same business summit in Sydney, Anthony Albanese said “Australians see the evidence of flat wage growth every time they go through a supermarket checkout or watch the bowser as they fill their fuel tanks”. “It’s like a chill up the spine,” the Opposition Leader said. “People keep working hard, playing by the rules, but are going backwards.”

The latest Newspoll shows a two-party-preferred split in Labor’s favour of 55-45 per cent, a swing of 6.5 points against the government since the last election. There are 22 seats held by Liberal or Nationals MPs with margins less than this.

Cost of living is the alpha and omega of electoral politics and is an amalgam of voter perceptions about housing affordability, taxes, incomes and the price of essentials.

With an election due in May, the major parties are treating kitchen-table metrics as the key performance indicators for economic management.

Surveys show surging fuel prices and fears of a rise in rents, home mortgage, electricity and consumer durable costs are front of mind for voters as Australia reopens after two years of economic hibernation.

“This is the first time in a very long time that cost of living pressures are genuine,” Deloitte Access Economics partner Chris Richardson said, noting the huge effect of runaway petrol prices on the consumer psyche.

“But there’s not a lot that governments can do, though the extension of the Low and Middle Income Tax Offset could be dressed up as a response.

“That would be poor policy, but smart politics.

“Don’t forget that, even though real wages are down, punters have still saved about $240bn more than they’d usually have in their pockets. That’s a massive amount of money.”

Headline inflation has crept up to 3.5 per cent, but petrol prices jumped by 50 per cent from mid-2020 pandemic lows.

The cost of non-discretionary items, essentials such as food, automotive fuel, housing and health, increased by 4.5 per cent over the past year, while discretionary inflation rose by 1.9 per cent.

Politicians cannot do much about inflation due to geopolitics and supply-chain calamities, but they always promise to “ease the squeeze” on family budgets and invariably run scares about the other side’s culpability.

On the campaign trail with candidates, Scott Morrison’s message has been: “Labor is about higher taxes, higher interest rates and higher power costs.”

Josh Frydenberg points to an almost 12 per cent rise in household disposable income over the past two years and “the largest tax cuts in more than two decades”.

The March 29 budget is expected to feature an extension to the LMITO, introduced by the Treasurer in 2018-19 as a temporary fix.

Cost of living issues expose incumbents. The Coalition has been in office since 2013, so must bear responsibility for administered costs, and those where it has policy levers such as social subsidies and fuel excises.

But senior Labor figures, who have visited marginal seats to lift the profile of candidates, believe the bill shock at the bowser and at the supermarket checkout provide an electoral opportunity.

“Under this government costs of living are skyrocketing, real wages are falling, and working families are going backwards,” Opposition Treasury spokesman Jim Chalmers said.

“Talk of an economic recovery rings hollow in real communities, when a decade of stagnant wages and insecure work collided with the realities of family budgets consumed by rising prices for petrol, health care, childcare and rent.”

So far, Labor is offering to raise childcare subsidies, claims its green-energy policy will cut power bills, and promises to accelerate the uptake of electric vehicles.

Dr Chalmers said Labor would announce more measures to ease cost of living pressures before the election.

Pollster John Scales says that in politics hip-pocket perceptions matter more than statistical reality, and voters are increasingly telling his field agents that cost of living is a concern.

“Voters are highly susceptible to political messaging about the cost of living,” the founder of JWS Research said.

“Policy differences between the major parties can be quite small, but how they actually play out with voters can differ quite significantly if they are both running serious negative attacks.

“The issues are both macro and micro, and don’t play out as only one thing, such as tax cuts or energy prices, but the campaign messages become very targeted to different demographics.”

Mr Scales says cost of living is particularly salient for families, with men and women aged 35 to 54, and those on fixed incomes, especially pensioners, who are watching every dollar and have the time to scan the specials in supermarket brochures to maximise their spending.

MPs from the major parties say the sleeper issue is interest rates, with the major banks expecting the Reserve Bank to begin lifting its cash rate at the first opportunity after the federal poll.

Underlying inflation is elevated, and within the Reserve Bank’s target range of 2 to 3 per cent, but monetary officials are not convinced it is entrenched.

Mr Richardson points out the rise in petrol prices will not force the RBA to lift rates but will do the opposite as fuel increases act like a brake on the economy.

Political insiders say expectations of mortgage rate rises after the election may not work against the Coalition now, but the economic fallout will be the main challenge for the side that forms government.