This week I celebrate my 60th birthday. Therefore, I feel intitled to take liberties and reflect on some history, as well as my thoughts on the Wentworth bi-election. I hope that you can accept my indulgence.
I was born in Randwick, raised in Rose Bay and educated at Rose Bay Public and Vaucluse Boys High Schools. From there, I returned to Randwick to study Commerce and Law at the University of NSW. Thus, I do have form in the Wentworth electorate. The above reads like a privileged upbringing – but it wasn’t.
My parents served in the Second World War, married and rented in Rose Bay from the late 1940s. They paid ‘key money’ to secure a two-bedroom apartment. Back then, key money was charged by landlords to renters to secure a property. There was an extreme shortage of accommodation after the war and this was used (and sometimes abused) by property owners to extract maximum value from renters. My parents borrowed and scraped together 1,000 pounds to secure a key. A massive amount of money in those days.
In the mid 1960’s, my parents bought a 2-bedroom unit in O’Sullivan Road, which was where my two brothers, one sister and I were brought up. Yes, our family of six were housed in this unit with one bathroom!
Rose Bay Public School still exists today, but Vaucluse Boys High School has been demolished to make way for a retirement home with expansive views over Vaucluse Cemetery and east to the Pacific Ocean. The facilities of both schools were adequate, but outrageously inferior to the offers of Cranbrook or the Scots College in the area. However, the schools were harmonious places, bringing together students from diverse backgrounds and we all benefited greatly from passionate and committed teachers.
When I was about 12 years old, my mother saw an opportunity to gain a bursary from Cranbrook and arranged for me to sit exams. I recall sitting in a room with maybe a dozen other applicants and staring into an exam paper that required answers far beyond my capacity. At that point, and early in my life, I realized that the system was “gamed” and that Cranbrook was seeking out geniuses. I remember sitting at the desk and deduced that the questions were constructed so that academically exceptional students could be identified to bolster the performance of the school. Today I reflect that the exam could have driven me to think that I was a fool and unworthy – but it didn’t.
Forty years ago, Wentworth was a diverse electorate in terms of socioeconomic spread. It housed both the very wealthy and the not so wealthy. It was an area many aspired to live in and still is today. Its reach encapsulates both high end homes in Point Piper and high-density rental areas like Kings Cross.
Those reflections bring me to the Wentworth by-election which saw a massive swing to the independent candidate – Kerryn Phelps. The following table summarises the result
On a two-party preferred basis, the result was as follows.
While the swing against the Government candidate Dave Sharma was large, there were other big swings that haven’t received much attention.
For instance, the Australian Labor Party primary vote was appalling with just 11.5% of the vote and a swing of 6.5% against them. The Greens vote also dropped by about 6.3%, and combined, the ALP/Greens suffered a 13% negative swing. That was better than the 18% swing against the Government but not by much as clearly the independent drew votes from everywhere.
There is the claim that Labor ran dead – whatever that means – but candidate Phelps, among other initiatives, produced a significant policy a week out from the polling day when she directly challenged Labour policy on franking credits.
The AFR reported the policy statement as follows:
“Leading independent Kerryn Phelps will use a win in Saturday's Wentworth byelection to secure a five-year freeze on changes to superannuation and oppose Labor’s abolition of franking credit refunds in Parliament… She said parliament should block dividend imputation changes until proper economic assessment and consultation was completed...” "I think we have to address fairness, sustainability and certainty concerns that are in the current superannuation system so all Australians are protected in retirement," former Australian Medical Association boss Dr Phelps said”.
"People are telling me they are really sick of constant changes. We've had a major change to super every year for the past 25 years and people can't make lasting plans for their retirement. … A five-year moratorium on any further reform would restore confidence and allow the government to address the gender imbalance in retirement savings – as Australian women retire with 47 per cent less saved than men.”
The above statement and the overall result in Wentworth lead me to three conclusions.
First, the proposed franking changes are an issue which will drive affected voters away from the ALP. Wentworth was a litmus test on many levels and the low vote for the ALP, when a significant anti-government vote was clear to see, is most telling. Maybe the 6% swing against the ALP is an indication of the franking swing.
Second, a groundswell against all mainstream political parties may be developing in Australia. Therefore elegant, well qualified and intelligent independent candidates could be strongly supported in the next election and more so if they prosecute policy agendas which are meaningful and significant to the electorate; and
Third, the next parliament, and particularly the Senate, is likely to be greatly influenced or controlled by independents. If there is a change in government, the Wentworth bi-election would suggest that the Senate will swing further to minority parties. Thus, the chance of significant changes in franking taxation laws is low in my opinion.
With state elections set for Victoria (in late November) and NSW (in March), it is hard to imagine the ALP, Greens and independents forcing an early Federal Election. The campaigns would be confused, and a proper debate would be lost.
So, if the ALP continues with their (unadjusted) franking policy, they will run the real risk of a backlash from an important sector of the electorate, the selffunded retirees, that will bolster the disenchanted middle that was starkly on display in Wentworth
The stupidity is that the pot of gold expected by Bowen, simply will not be there. SMSF's can easily switch for eg from CBA to CSL and it goes in a puff of smoke!
Hope you are correct - Labor's policy would be a disaster for SFRs and reeks of class warfare. It raises all the old arguments such as federal money going to private schools - a debate that most of us thought had been won and lost in the 1960s.
Wentworth is a strange seat, with a high proportion of wealthier voters, gay voters, and public servants. Obviously, Turnbull did a lot of work in Wentworth and the voters were upset at the Liberals turfing him out of leadership. Turnbull's leftist attitudes were his downfall. The day he stood up celebrating the Gay Rights victory, left most liberal voters with a sour taste., as well as his leanings to renewables. The ABC commentator, Antony Green, has said that any govt that gets 49% of the 2PP vote, will almost for certain win that election. I expect Morrison to get that 49% in the coming months. Also ex ALP Senator,John Black says the ALP will need 53% of the 2PP vote, because most of it's electorates are concentric i.e.overloaded with ALP voters. Throw in Shorten's ongoing unpopularity, the ALP has a real problem insofar as he is a looser.
Robert Garnsworthy - If people switch from CBA to CSL then the Government won't be paying out excessive franking credits. This isn't a tax on dividends, it's removing a government payment to retirees. You're suggested change wouldn't change the impact on the budget.
The swing against labour is less to do with franking credits and more to do with the majority of populace just sick and tired of the same old politics and politicians who are out of touch and only care for themselves. We have plenty of examples around the globe of major changes to political landscapes.
Well written article John, I enjoyed the read. As a SFR I certainly hope that bill never passes, I for one would lose 30% of our income, as we are invested 100% in Australian shares,we are not eligible for the pension have worked hard & saved for our retirement. We have a comfortable living being able to do things that we saved for holidays ect, we would have to look at riskier investment options if this bill came to pass . There are some online petitions out there to protest about Bill Shortens plan. I urge all SFR to sign these online petitions. Eg. Wilsons asset management have one. Cheers Ali
I tried up in the same area same Age agree wholeheartedly.
Fascinated by Phil's comments on Turnbull's downfall. He should of course added 'within the liberal party'. Ironic that it was these same so called "leftist attitudes" that enabled the Libs to win the last federal election. Unfortunately it still seems that the Libs have yet to learn that most Australians (industry except mining included) are slowly, but surely, beginning to understand that issues like trashing the planet is not a moral, or even economic, option. John is right that the franking credits policy could be a vote loser for Labor based on the unintended affect of penalising some who are not that wealthy. Hopefully Labor will be more adept at reading the mood of the people that the Libs have been on more important issues.
I had a similar history, attending Bronte Public, Woollahra Dem and Sydney Boys High. I was very happy at SBH but it followed a crack at a scholarship at Grammar. In relation to about half the maths questions, I thought: 'This is not something that I have been taught but have forgotten. My maths education has never gone near this.' It was a waste of my time and their paper.
While probably true that SMSF holders will on average vote Liberal how many would have voted Labour anyway ? This policy may not cost many Labour votes while allowing Labour to put money into policies which will win them votes. I'm not so optimistic but lets see....
Phil writing on Turnbull "The day he stood up celebrating the Gay Rights victory, left most liberal voters with a sour taste., as well as his leanings to renewables. " Is that true ? I got the impression that there was strong support in Liberal seats for Gay Marriage and indeed Tony Abbotts electorate delivered close to a 70% Yes vote. I would also doubt whether supporting and moving to renewables is a vote loser for Liberals. As an individual we should be careful of projecting our opinion on to the electorate as if it's their opinion.
I certainly agree that the ALP (who I have previously supported) deserve to lose the next election if they persist with such rediculous policy. I can only surmise that the real intention is simply to move all SMSFs (which will be severely impacted) into industry super funds (which won't), as it's abundantly clear that the expected revenue will simply disappear through the massive loopholes. Such underhanded tactics which are clearly targeted against the SMSF sector in order to help their union mates deserve the full contempt of the electorate. I'm sure any independents who echo Kerryn Phelps call for a 5 year moratorium on changes to Super could expect to see similar increases in support!
Labor's original pitch on franking credits was that some 'very large balance' SMSFs in pension phase stood to receive many hundreds of thousands (or in some cases millions) of dollars) in franking credit refunds tax free. This was effectively negated by the Liberals introducing the Transfer Balance Cap of $1.6M, requiring balances in excess of this figure to be withdrawn or re-allocated to accumulation phase, attracting a tax of 15% on income. For retirees from a defined benefit super scheme (eg. Commonwealth Government CSS scheme like myself), my modest CSS pension multiplied by 16 counts towards the $1.6M cap. This further affects how much I can add to the pension phase of my SMSF from shares - a portfolio which I saved for over many years to fund my retirement. Loss of franking credit refunds will be a major factor in my retirement income and one that was never envisaged in my retirement planning.
Phil Crichton. Your prejudice is on display and your views not really relevant to the thrust of the article. Perhaps you should accept the juicy odds available for a coalition victory but I fear you will be the loser - or should that be looser?
Great John! Wishing you a Happy 60th Birthday and welcome to the "60 PLUS CLUB" 👍🍰
Great summary -I also hope he is correct in his outlook. Un-franked dividends may be the way to go but no doubt Bowen will attempt to bring to bring these into play by some devious method David Dowling SA
Labor's policy affects more people than they realise. Both my parents worked two jobs to raise a family and pay off the house. My dear old mum, born in the depression, scrimped and saved to buy shares in the CBA, TLS and Coles Myer (now WES) floats. It was her opportunity to share in this country's wealth, support Aussie businesses, and put something aside for her retirement. Not in a fancy trust or SMSF, but just a few shares held in her own name. Now Labor want to penalise all the mum and dad investors out there. They are disenfranchising the low and middle classes struggling to make their lives better, and saying "only the rich can benefit from share ownership". That only the wealthy can participate in our growing economy. That ordinary Australians shouldn't bother saving for their retirement. My father, a lifelong Labor voter, was furious about this policy. Sadly he passed away this July. I'm thankful he won't have to see Shorten's betrayal of ordinary hard working Australians.
I wish you were right John, but I don't think you are. The Labour party seeks the younger voters who do not care an iota about FC's, in fact see the Labour policy as a p[us for them. Also, results from the three previous by-elections run contrary to your proposition .
Quite an indulgence John and am hoping you have no kids as this is the only reason you would vote for a so called "Liberal" party - A coalition that supports socialist agrarian policies and is seriously considering nationalising the energy industry due to pure ideology rather than science or even market forces! As someone that has lived in three blue ribbon coalition electorates Wentworth, Goldstein and Cowper, there is no way they would have voted for the ALP no matter how angry they were. To suggest that the 6% swing against the ALP is an indication of the franking swing is huge overreach. From a purely economic perspective we are more in need of independents as both major parties have let us down. People that are serious about policy and not just marketing types with woeful slogans. In relation to the franking policy I blame the laziest treasurer in Australian history Peter Costello and all treasurers after that! He's the one that decided you deserve a refund for tax you didn't pay.
1 $80000 tax free, 2 $18200 tax free from investments outside of super, $2062 SATO gives retirees $100,000 tax free AND they pay no Medicare (income is not taxable income). A couple could get $200,000 tax free and Medicare free at the expense of other tax payers
Hi John. I am another like you, although 10 years older. My parents both served in WWII and after got married and had me and we lived initially in a small flat in Coogee overlooking Randwick Oval. We later moved to our own home in Kingsgrove. I only went to public schools but ended up doing Engineering and Commerce at UNSW. I found it beguiling how Phelps with only 29% of the first pref votes could win. Our preferential system is too generous/ Maybe 2nd pref votes should only we worth 2/3 of a 1st pref, etc Yep I am also going to be hit for about 30% of my SMSF income by Labors Franking changes. It seems from what I have seen that most of those that are going to be impacted are like you, not rich but with SMSF's worth less than $1.6M. Mine is <<$1m. Its ironic but those with >$1.6M can offset some of their franking credits against taxed income from any accumulation funds they may have, with some financial management between accumulation and pensions accounts, and of course Industry and Retail Super funds seem to be able to pool everything and sharer franking credits. It certainly feels like an attack on the smaller SMSF funds.
A different perspective. I think the ALP changes to dividend imputation are stupid and should not go ahead. But.. You guys are living in a bubble. Seriously. Firstly Wentworth tell us noting about ALP votes nationally at the next election. They deliberately ran dead when Phelps appeared on the scene. Secondly the vast, overwhelming majority of voters don't know or care about this issue. And guess what? Those most affected are largely in safe conservative seat so the protest vote is largely wasted. Younger people I speak to just see this as a rich boomer issue, whining about anything that makes the system fairer for others. (Hint: find some younger people to help sell this issue. Old white multi-millionaires are not the greatest salespeople for this issue). Thirdly, most normal punters (which largely excludes people who write or respond on this site) have much bigger concerns on their plate. Like paying their mortgage (or rent), finding full-time jobs (rather than contract or casual work). Food banks are booming in suburbs in Melbourne once considered (lower) middle class. Tells you something? Anyway the next election will tell...
David Roberts comment yesterday suggesting that a couple can have $200000 per year tax free is of course correct in theory but almost impossible to achieve in practice. It comes from the Shorten/Bowen playbook which finds an outlier from the top 0.1% of retirees and extrapolates from that particular case to the general. In any event, two persons with average salaries would never achieve the $1.6M each without non concessional contributions, on which they would over the years have paid cumulative tax rates of 60-70%. William Jones
Thank you to everybody who have written following my article and thank you Livewire for publishing it. I note some of the comments question my view of the affect on the vote in Wentworth of Dr Phelps franking and superannuation policy. That's interesting and of course it is all conjecture. However, the fact remains that 11% of the vote shifted from the left to the middle in a bi-election dominated by a anti government vote. So these votes either shifted due to some policy announcements or as some replies noted - the electorate is simply protesting against the major political parties. It seems that a whole range of issues had an affect.