Why Labor needs to do badly in WA

By April 5, Australia will likely be blue, very blue. It looks certain that after the Tasmanian and South Australian elections this weekend, that every state plus the Northern Territory will have a Coalition government.

Bluer still, in the West Australian Senate re-run Tony Abbott is likely to gain enough Senate seats to make good his central promise to the electorate: repeal of the carbon and mining taxes.

And strangely enough, all that blue across the nation will leave opposition leader Bill Shorten in the pink.

Indeed, the last thing the Labor leader needs is the ability to block and frustrate Abbott’s plans in the Senate with the begrudging help of South Australian independent senator Nick Xenophon, and Victorian DLP senator John Madigan.

So Shorten has to appear to want to win two quotas in WA, when truth be told he’d probably feel safer with one. That’s because if the Greens manage to be smart with their preference deals and secure a quota for Scott Ludlam, there’s a risk that Labor’s newly spurned lover will come back and insist, loudly, that Shorten block the carbon tax repeal.

It is clear as day that a better outcome for Labor would be to see an unholy alliance between Clive Palmer and the federal Coalition that can repeal the carbon tax, no matter how Labor votes.

The Palmer United Party has made it clear that it wants to repeal the tax, but with some ugly, ugly conditions -- essentially insisting that Clive be let off his carbon liabilities, and others around the nation be reimbursed for carbon tax they’ve paid. That's not likely, but if it happened it would be funded by blowing the budget deficit out even further.

In such a scenario, Labor could vote against much of the Abbott agenda and take the moral high-ground on issues such as the carbon tax and Fair Work Act tweaking, but still allow the Abbott agenda to unfold as the Coalition would wish (except for all the horse-trading with Palmer).

Towards 2016, that would give Shorten a powerful narrative -- ‘Abbott’s been in cahoots with Palmer, look at the mess they’ve created!’

What mess? Well the obvious one is that neither the carbon tax nor the mining tax will have a material effect on the Australian economy in the years ahead. No credible evidence has been advanced to show that either had more impact than the Treasury modelling that accompanied their release under Labor.

Instead, the Coalition has repeatedly used ‘raw numbers’ to ‘prove’ the devastating effect of these twin evils. And with those numbers they have convinced the voting public that the ‘wrecking ball’ is real.

A real argument involving something other than raw numbers (that is, numbers that are not directly compared to other relevant data sets) has not been advanced even once -- and the simple reason is that such an argument does not exist.

The Qantas fiasco last week was the supreme example. The raw number of $106 million, rising to $118m, was bandied about by first the airline and then by the Coalition. But as explained last week (No, Treasurer, this is what’s holding us back, March 6), that fraction of Qantas’ cost base (around three-quarters of one percentage point) would equate -- for a company heavily dependent on burning fossil fuels -- to around $3 or $4 on the price of a flight across Australia. That’s virtually irrelevant.

The point, for Labor, is that allowing Abbott to do a stinker of a deal with Palmer, and then remove the ‘wrecking ball’ taxes, will have no material effect on the economy. Unemployment will continue to edge up, federal tax receipts will track down, and GDP growth will come predominantly from large iron ore and coal exports, albeit at depressed prices.

Yesterday’s consumer confidence figures revealed a likely advantage for Abbott in the senate re-run: people who voted Labor last September have become more pessimistic, while people who voted Coalition have become more optimistic about the economy. It seems, on that basis, that swing voters who voted Coalition last time won’t run into Shorten’s arms in WA.

And that, I suspect, is just how he’ll like it. It is the only way voters will realise that all the hullabaloo over the carbon tax in the 43rd parliament was a con. It didn’t matter nearly as much as bigger issues such as housing industry supply constraints, the structural deficits now built into the budget or the decline and fall of manufacturing due to an artificially inflated dollar.

It is in Shorten’s interests to let the full weight of that con be felt by Australian voters -- indeed, it’s hard to see how Labor can get that message across any other way.

Labor needs to do badly in WA to do well in the longer term.