No way back?

The news this morning is that the Federal Labor primary vote (according to the Nielsen poll) is back down to under 30%, with two party preferred at 43/57.

As far as I can tell there is no obvious reason for the large 7% (!) slump between this poll and the last. I guess there might have been some Queenslanders in the sample who felt they were on a roll and decided to punish Federal as well as State Labor, but who knows? I don't recall anything at the Federal level in the last month (apart from lingering resentment from the Rudd/Gillard fight?) which should cause this, and in fact most commentators seem to think Gillard looked more confident since winning that stoush.

Anyway, everyone seems to agree that Labor federally is facing a bit of a perfect storm. When the carbon "tax" is introduced and electricity prices go up, people will blame the government and ignore the compensatory measures. (Some of those are pretty significant though, so maybe the commentators are too pessimistic about that?)

And before that, the talk is of the government having to savagely cut back "middle class welfare" to get the budget back to surplus. This is, of course, something that conservative commentators, not mainstream economists, have been urging as a matter of utmost necessity. Yet what's the bet that cuts that are too deep will heighten the complaints that the two speed economy is causing middle class suffering, and the government will be perceived as causing more. I expect a huge amount of cynical posturing from the Coalition along these lines.

In fact, I'm not entirely sure I've ever heard what the government can do about this two speed economy issue. In some sectors, particularly tourism and parts of manufacturing, the high Australian dollar seems to be at the heart of the woes, and there's nothing to be done about that.

I guess that a world wide retreat from the threat of another financial crisis would help improve confidence generally, and signs of improvement in the US economy will too. The things the West does not need right now, I would guess, is an exploding Middle East (due to an ineffective attack on Iran by Israel with US support) or for China to undergo some uncontrolled economic crisis.

Anyway, the fact remains that with its budget, it seems the Labor government is at risk of both losing some support of mainstream economists for cutting too harshly and consolidating its incredibly low primary vote with the electorate.

Yet, it still seems to me that mainstream economists, both in the private sector and academically, have not thought this government has not done anywhere near a terrible job on the economy, and consider it to have been more a victim of circumstances beyond its control, contrary to the perceived views of the electorate. (Who, puzzlingly, still - in the face of all evidence to the contrary - seem to view Kevin Rudd as a saint who was knifed by the witch Gillard.)

It's a very strange time in politics, and while Federal Labor certainly has had its significant mistakes and mis-steps in the last few years (mostly under Rudd), it is being treated much worse by the public than it actually deserves.

By the way - I agree with Barrie Cassidy: Julia Gillard could have dealt with the carbon tax "lie" allegation much better than she did. She did not want to be branded as "tricky", and so said she would not quibble about whether a fixed carbon price leading to a carbon trading scheme is properly called a "tax". But given the huge amount of confusion in the public about this issue, she may as well have argued the point.

As an example of this confusion - Robert Manne last week in a lengthy critique of Labor said twice that Gillard had promised "not to introduce carbon pricing" during this term. This is just wrong, or at the very least very misleading, yet few people in the comments section following that article pulled him up on this.

Here is what was reported in The Australian on election eve:

In an election-eve interview with The Australian, the Prime Minister revealed she would view victory tomorrow as a mandate for a carbon price, provided the community was ready for this step.

"I don't rule out the possibility of legislating a Carbon Pollution Reduction Scheme, a market-based mechanism," she said of the next parliament. "I rule out a carbon tax."

This is the strongest message Ms Gillard has sent about action on carbon pricing.

While any carbon price would not be triggered until after the 2013 election, Ms Gillard would have two potential legislative partners next term - the Coalition or the Greens.

She would legislate the carbon price next term if sufficient consensus existed.

Now, she obviously started a scheme earlier than indicated by the story, there is no doubt about that, and the quibbling about what is and isn't a carbon tax can be had, but it is still extremely careless and wrong of Manne to represent the story this way:

.....having promised the electorate that her government had no intention of introducing a price on carbon, having scrambled back to government as the leader of a minority government - Prime Minister Gillard now signed an agreement with Greens for the creation of a parliamentary committee to broker the outlines of a carbon tax/emissions trading scheme.

So add that to the swirling mass of confusion and resentment that is the Australian electorate at the moment, and this situation does look pretty crook.