Saturday, December 18, 2010

Houdini act couldn't save Victorian Labor

LABOR performed a Houdini act in the state election, winning eight of the 10 closest seats to keep the new Baillieu government to a majority of just two.

The final election results show the outcome was closer in seats than in votes. The Coalition harvested more than 1.4 million primary votes, 270,000 more than Labor, but in most of the close seats, Labor got votes where it mattered.

After preferences, 1.633 million Victorians, or 51.6 per cent, voted for a Baillieu government, while 1.533 million, or 48.4 per cent voted to re-elect the Brumby government.

Labor won 14 or a third of its 43 seats with margins of less than 3 per cent, eight by less than 2 per cent, and 19, or almost half its seats, by less than 5 per cent. By contrast, the Coalition won 36 of its 45 seats by more than 5 per cent, and 43 by more than 2 per cent.

Of the 13 seats it gained, only two were really close: Bentleigh, the closest contest, which the Liberals won by 0.75 per cent, and Seymour, won by 1.2 per cent.

But Greens preferences gave Labor seat after seat by narrow margins: Eltham (0.8 per cent), Ballarat West (1.1), Macedon (1.3), Bellarine (1.4), Ballarat East (1.5), Ivanhoe (1.7), Cranbourne (1.9), Monbulk (1.9), Albert Park (2.0) and Geelong (2.1).

All this will change before Victoria goes to the polls again in 2014. A redistribution in 2012 could create two new seats in the outer northern and western suburbs. That means northern Victoria, the eastern suburbs and the south-eastern suburbs are all at risk of losing a seat.

One of the biggest swings was in Essendon, where former planning minister Justin Madden's plan to parachute into the lower house almost failed, with the Liberals gaining a swing of 9.3 per cent and the preferences of one in three Greens voters.

In truth, there were big swings against Labor in most of the western suburbs: 12.4 per cent in Steve Bracks's old seat of Williamstown, 10.9 per cent in Thomastown and John Brumby's seat of Broadmeadows, 10 per cent in Derrimut, and outsize swings in Keilor (9.1 per cent), Footscray (8.4) and Altona (8.3). But only in Essendon was the result close.

Overall, the two-party swing against Labor was 6 per cent. The median swing was higher still, because in most of the Nationals' heartland, there was little or no swing and in two seats, a swing to Labor.

In Mildura, first-term Nationals MP Peter Crisp suffered a massive 7.9 per cent swing to Labor. In Murray Valley, where veteran Nationals MP Ken Jasper retired, Labor's vote rose 2.7 per cent, while in the Wimmera seat of Lowan, there was no swing at all.

By contrast, Gippsland saw the biggest swing to the Coalition. In Gippsland East, the Nationals unseated independent Craig Ingram with a swing of 20.5 per cent against him.

With some exceptions, the swing against Labor was smaller in the country than in Melbourne. But overall the swing in its marginal seats was no more than the swing statewide. The bush held, but the city fell.



Bentleigh* 0.8 Eltham 0.8

Ballarat West 1.1

Seymour* 1.2 Macedon 1.3

Bellarine 1.4

Ballarat East 1.5

Ivanhoe 1.7

Cranbourne 1.9

Monbulk 1.9

Carrum* 2.0 Albert Park 2.0

Mordialloc* 2.1 Geelong 2.1

Frankston* 2.1 Essendon 2.4

Mitcham* 2.8 Ripon 2.7

Bendigo West 2.9

Narre Wn Nth 3.0

Forest Hill* 3.2 Brunswick (#G) 3.3

South Barwon* 3.9 Bendigo East 3.8

Albert Park (#G) 3.9

Prahran* 4.3 Yan Yean 4.1

Oakleigh 4.7

Plus 36 seats with Plus 24 seats with

majorities over 5% majorities over 5%





% % (88) LOSS

Liberals 38.0 3.6 35 12

Nationals 6.8 1.6 10 1

Coalition 44.8 5.2 45 13

Labor 36.3 6.8 43 12

Greens 11.2 1.2 0 -

Others 7.8 0.5 0 1


Coalition 51.6 6.0

Labor 48.4 6.0



Morwell 14.2

Williamstown 12.4

Ferntree Gully 12.0

Gippsland East 11.5*

Broadmeadows 10.9

Thomastown 10.9

Evelyn 10.7

Kilsyth 10.1

Derrimut 10.0


Burwood 9.6*

Carrum 8.7*

Seymour 7.9*

Mount Waverley 7.8*

Prahran 7.8*

Gembrook 7.4*

Bentleigh 7.0*

South Barwon 6.2*

Mordialloc 5.6*

Frankston 4.8*

Mitcham 4.7*

Forest Hill 4.0*


Melton 0.8

Shepparton 1.3

Mill Park 1.3

Tarneit 1.3

Rodney 1.4

Bendigo East 1.5

Ripon 1.6


Mildura 7.9

Murray Valley 2.7

Lowan 0




Tuesday, December 14, 2010

Battling the big banks

THE public response to Treasurer Wayne Swan's banking reforms seems to be a growl of disappointment. Australians are fed up with being ripped off by bank bosses who are paid several hundred times more than them. They are angry that banks are able to charge us what they like, and get away with it. They want tough action to hit banks where it hurts and these reforms don't do it.

They're right. These reforms won't lower your mortgage rate. They won't stop the big banks jacking it up even higher if they can get away with it. And so long as we ask them for three out of every four home loans we borrow, they will get away with it.

But why didn't Swan go further? Were there tougher reforms that he and his colleagues were just chicken to take on? Or was it that there is no simple way to reduce the market power of the banking cartel and that some of the solutions proposed could end up being worse than the problem?

Let's start by looking at where we are, and how we got here. And we'll start with the positives, because they are big positives.

First, unlike most in the West, Australia's banking system did not collapse in the global financial crisis. That's partly because the Australian Prudential Regulation Authority did an outstanding job as our watchdog before the crisis. It's partly because the government moved in the heart of the crisis to guarantee the banks' debts and deposits. But it's also because our banks were prudent and sensible lenders, when their overseas counterparts were not.

That matters for us, because the banks emerged in good shape to finance the recovery. Mortgage lending alone has grown by $162 billion in the past two years. The banks are greedy, yes, but they're good at their job and that's good for us.

Second, interest rates and bank margins have soared over the past year, but with mortgage rates now typically 7.15 per cent after discounts, it's not crippling. If we're in trouble with rates at that level, then we've borrowed too much.

But there is also a big negative. The banks' margins were driven down in the 1990s and early 2000s by competition from new lenders, who derived much of their funding from securitisation: selling bundles of our mortgages to investors, and reinvesting the proceeds in new loans.

The global financial crisis began when this market was poisoned by American banks filling their securitised bundles with bad mortgages. As they went bad, the market for securitisation collapsed even for Australian lenders, whose bundles remain good. And as it collapsed, so did the new lenders.

The big banks swooped, bought up their weakened rivals, and regained their lost market power. The four big banks now hold 80 per cent of all loans. The other banks have 17 per cent, and all credit unions and building societies, just 3 per cent. They're to be our fifth pillar? This will be a long wait.

We got here partly because the GFC wiped out securitisation and the new lenders, but also because in good times and bad, governments and competition regulators have allowed the big banks to gobble up their rivals.

Consider this list: since 1990, the competition watchdogs have allowed the Commonwealth Bank to take over the State Bank of Victoria, the State Bank of NSW, BankWest, Colonial State Bank and Wizard Home Loans. They allowed Westpac to take over Bank of Melbourne, RAMS home loans and St George (in addition to its earlier acquisitions: the Challenge Bank, Advance Bank and Bank SA).

Three times, the regulators allowed one of the big four to swallow up the next biggest bank: first, the State Bank of Victoria, then the Bank of Melbourne, then St George. The result is a cartel that, by and large, does not compete on price.

What could the government do? The most effective way to boost competition would be to set up its own bank, using the post offices as retail outlets. But that would need to be a big venture, with outlays rivalling the national broadband network. It's not surprising Swan turned that down.

It could require the banks to offer loans with margins fixed over the Reserve Bank's cash rate. University of Melbourne finance guru Kevin Davis points out that Australia's variable loans are unusual in requiring borrowers to bear all the risk of rising interest costs. But wouldn't it be better to try to fire up the competitive pressures that will bring those margins down?

That's essentially what Swan's reforms aim to do. One stream of changes would make it easier for us to change lenders by banning exit fees on new loans, and possibly by giving us portable account numbers and thus put pressure on all lenders to compete on price.

A second stream aims to widen the funding sources for potential competitors: by continuing and publicising heavily the government guarantee of their deposits, which was due to expire next October, and by the government buying up another $4 billion of mortgage securities.

The third stream of reforms is aimed at a separate problem: stemming the foreign debt. It will allow banks and credit unions to issue covered bonds a variant of securitisation in which the risks lie with the institution rather than the investor to attract the super funds to invest at home. And the government will try to set up an Australian bond market, to increase options for investors and lenders.

None of this will reduce your mortgage rate next year. But bit by bit, it will build competition, and that will lower rates.

If you're paying too much for your mortgage, you'd better find your own solution: tightening your belt to pay down your debt, refinancing with a credit union, whatever. Best of luck.


Monday, December 13, 2010

Treasurer's sensible attempt to drive change

WAYNE Swan's banking reform package is a persuasive read. But what difference will it really make to borrowers' ability to get a better deal?

We might have to be patient. Most of these reforms are sensible and small-scale: giving consumers more information, giving lenders more funding options. But there are two things on Swan's list that, in time, could make a difference.

The first is his plan to ban exit fees for new mortgage loans from July 1 next year. It will apply only to new loans. It won't cover almost $1 trillion we owe already on existing mortgages. Nor will it apply to small business loans .

Is that a copout? No. Think ahead.

Including refinancing, we take out 600,000 mortgages a year. Two of the four big banks have scrapped exit fees already; the rest will follow.

That might not make us better off. There are real costs to banks when customers break off loans early and banks have ways to get that money from us.

But in future, they won't be able to do it by locking us in to a lousy rate when the credit union over the road offers cheaper deals. We will be free to move.

The second potentially significant reform is the review by Bernie Fraser of the feasibility of giving each of us a personal account number that we take with us if we change our bank.

It's subtle, and it's not certain to happen. But if it does and it probably will that too would slightly shift the balance of power between the bank and you in your favour.

I can't believe the Australian Competition and Consumer Commission will ever succeed in prosecuting a bank for "anti-competitive price signalling", but it won't hurt to give it that power.

And when so many vulnerable people get into serious strife over credit card debt, Swan's changes to tighten the rules are reforms that matter.

But where will the competition come from? New Zealand's Labour government set up Postbank in its post offices. Swan prefers to help credit unions and building societies become a "fifth pillar" to challenge the banking cartel.

It's a big ask. Swan's package would widen their sources of funding. But his biggest step is to pledge that the government's guarantee of deposits will continue in some form after it is due to expire next October.

And as the guarantee will apply equally to credit unions and building societies, they will be free to advertise "government-protected deposits".

These are changes at the margin. They won't put banks at risk. If they work, it will be over time. But they are a serious bid to drive change.


Friday, December 10, 2010

20 Labor seats courtesy of Victorian Greens

LABOR relied on Greens preferences to win 20 of its 43 seats in the new Legislative Assembly raising real doubts about whether it could afford to follow the Coalition in putting the Greens last.

Final election results suggest rather that Labor and the Greens may be doomed to live in a love-hate relationship competing fiercely for a widening circle of inner-suburban seats, yet teaming up against the Coalition elsewhere.

While the Coalition rode the protest vote to power, the battle between Labor and the Greens widened to a second arc of seats from Williamstown to Ivanhoe, and south to Albert Park. Despite that, Greens voters came to Labor's rescue in seat after seat. Across the state, 75 per cent of Greens preferences went to Labor, just 25 per cent to the Coalition. And in 11 of the state's 88 seats, they swung the result Labor's way.

Before Greens preferences, the Coalition was leading in 56 seats, and Labor in just 32. But Greens preferences changed that to a 45-43 result, lifting Labor above the Coalition to snatch narrow victories in seat after seat two seats in Ballarat, two in Geelong, in Macedon, and in six city seats, from Essendon to Monbulk.

Former education minister Bronwyn Pike this week called for Labor to consider putting the Greens last. But while the Greens were her enemy in Melbourne, half her colleagues in the caucus room owe their seats at least partly to Greens voters and might not want a fight.

The final results show that:

While Coalition preferences gave Labor all four seats in the inner north Brunswick, Melbourne, Northcote and Richmond the voters rebelled, delivering a landslide swing against Labor to the Greens and Liberals.

On average, at the three-party stage, the swing against Labor in the four seats was a massive 8.5 per cent, with 5 per cent going to the Greens, and 3.5 per cent to the Liberals. In Brunswick, Greens candidate Cyndi Dawes held an 18-vote lead over Labor until Liberal preferences swung the seat back.

Liberal voters staged a different kind of rebellion. One in three Liberal voters in the four seats defied their party's how-to-vote cards, and directed their preferences to the Greens ahead of Labor.

The Greens also made big gains from Labor in the next ring of seats further out. At the three-party stage, the Greens polled 25 per cent in Albert Park, 21 per cent in Williamstown, 27 per cent in Footscray and 20 per cent in Essendon, Preston and Ivanhoe.

This suggests the next Labor v Greens battle will be over a much wider field.

In the outer suburbs and regional Victoria, by contrast, the Greens went backwards from their high-water mark at the federal election, when they won 12.6 per cent of the vote in Victoria. This time they won just 11.2 per cent of votes, up from 10 per cent in 2006, but well short of their hopes.

Greens how-to-vote cards appeared to have no influence on the way their voters voted. In city seats where they directed preferences to Labor, 75 per cent of Greens voters did so. Yet in three seats where they issued an open ticket, 76 per cent of their voters gave preferences to Labor.

But in two seats, many Greens voters also rebelled against directives to give preferences to the Liberals. In Cranbourne, 41 per cent gave their second vote to former Hawthorn star Geoff Ablett. And in Essendon, 35 per cent preferred the Liberals to former planning minister Justin Madden.


Coalition (45) Labor (43)

Absolute majority 31 13

On preferences

after leading 14 19

after trailing - 11

Greens preferences reversed the outcome in:

Albert Park, Ballarat East, Ballarat West, Bellarine, Eltham, Essendon, Geelong, Ivanhoe, Macedon, Monbulk, Oakleigh.

Greens preferences helped Labor over the line in: Bendigo East, Bendigo West, Bundoora, Cranbourne, Footscray, Narre Warren North, Ripon, Williamstown, Yan Yean.

Victorian Electoral Commission


Thursday, December 9, 2010

All power to Baillieu as upper house win looms

THE Baillieu government appears set to control both houses of Parliament, after a late surge in voting for the Greens knocked maverick independent Stephen Mayne out of the race in the Northern Metro region.

With almost all votes counted, the Liberals appear set to squeeze home in all three of the close races for the new Legislative Council. This would give the Coalition a bare majority of 21 seats in the 40-member chamber a gain of four seats from the 17 it held in the old Council.

Labor looks set to end up with just 16 seats, down from 19 in the old chamber.

The Greens have retained their three seats in the Council but lost the balance of power. And the Democratic Labor Party (DLP) has lost its one seat, that of its leader, Peter Kavanagh.

The final result will be known for certain on Monday, when the Victorian Electoral Commission will feed all 3.2 million votes to its computer to allocate the preferences.

But there is now only an outside chance of an upset.

Ironically, a massive late surge in the Greens' vote has ended their hopes of retaining the balance of power.

Big gains in counting of absentee and postal votes lifted the Greens' vote to 12 per cent statewide, and 19.1 per cent in Northern Metro.

That not only re-elected their de facto leader Greg Barber, but lifted his running mate Alex Bhathal well above Mr Mayne, who polled just 1 per cent, knocking him out of the race.

The Liberals' Craig Ondarchie will end with the final seat, held by retired Labor minister Theo Theophanous.

Sex Party leader Fiona Patten also fell short of sneaking an upset win in the same race.

The late surge to the Greens also saw their Member of the Legislative Council, Colleen Hartland, win her battle with the President of the Council, Labor's Bob Smith, for the final seat in Western Metro.

Mr Smith, most famous for taking 10 overseas trips in his four years as Council President, will be replaced by Andrew Elsbury of the Liberals.

The closest race of all is in the vast electorate of Northern Victoria, where Liberal MLC Donna Petrovich has narrowly rolled back a strong challenge by Steve Threlfall of the Country Alliance.

The Country Alliance polled 20 per cent of the vote in Shepparton, where they beat Labor into third place, but ran out of puff in the Mallee.

David O'Brien of the Nationals took the final seat in Western Victoria from DLP leader Peter Kavanagh, the first seat the Nationals have won in the west for 40 years.

And in Southern Metro, the Liberals' Georgie Crozier unseated Labor MLC Jennifer Huppert.

Mr Mayne's loss maintains his record as Australia's most unsuccessful candidate for Parliament and the boards of top 100 companies a record blemished only by him win-ning election to Manningham Council.




Eastern 3 2 No change

Northern 2 2 1 Libs gain from ALP

South Eastern 2 3 No change

Southern 3 1 1 Libs gain from ALP

Western 2 2 1 Libs gain from ALP


Eastern 3 2 No change

Northern 3 2 No change

Western 3 2 Nat gain from DLP

TOTAL 21 16 3


Wednesday, December 8, 2010

Power bills a shocker. Why?

N THE three years to September, the price of electricity for the typical Melbourne home rose 54 per cent. The price of water rose 62 per cent, the price of gas rose 28 per cent. It was one of the key reasons the Brumby government lost office.

The Bureau of Statistics reports that over the three years, these price rises were the highest of any capital city. In just two years, the St Vincent de Paul Society estimates, "Victorian households' annual energy costs have typically increased by more than $300".

But why? We all know why water prices have risen: the desalination plant, which the Auditor-General says will cost $5.7 billion to build and operate until 2040, plus Melbourne residents paying for a pipeline they will not be allowed to use, except in emergencies. For rising water bills, blame the government.

Electricity is another matter. Victoria's electricity market is the most open and competitive in Australia. Since it was privatised by the Kennett government, the state owns none of it, and now has little control over it. State policies had a part in our rising power bills, but only a part.

Our generators are all privately owned, and free to charge what they like. The transmission network, as in other states, is owned by the government in our case, the government of Singapore. So are three of our five electricity distributors, in whole or part, while the other two are owned by a Hong Kong company.

The state government used to regulate the prices of transmission (the high-voltage lines) and distribution (the poles and wires taking electricity to your home and workplace). But now they are controlled by the Commonwealth, through the Australian Energy Regulator. And the 13 electricity retailers who handle your accounts are no longer regulated by anyone, after the Brumby government decided in 2008 to end price control.

All have played a role in pushing up your power bills as have policies to lift use of renewable energy, especially solar, and the Brumby government's decision to require every home to have a smart meter.

Start with the generators. A decade ago, Australia had a glut of power, so their prices were cheap. Not now. Generation prices have risen a lot: in part, because demand has caught up with supply, and in part because our new plants run on gas or wind, and that costs more than coal.

Transmission prices jumped in 2008 to pay for old high-voltage lines to be replaced by new ones. And distribution prices have risen sharply, and are set to keep rising.

In October, the Australian Energy Regulator gave the five distributors a green light to raise prices on average by 34 per cent over the next five years. While it told us this would raise future retail prices by just 3 per cent a year from 2012 to 2015, that's because distributors' charges make up just 40 per cent of your power bill.

The regulator estimates by 2015, these price rises will increase the typical household's annual bill by $220. If generators and retailers lift their charges at the same rate, the typical household will be paying $550 more by 2015.

Why? Even after the regulator cut $1 billion off the distributors' bids, they will increase investment by 45 per cent over the five years, to cope with rapid population growth, to replace old poles and wires, to meet new post-bushfire standards and to pay for smart meters.

The Department of Primary Industries concedes that the rollout has added $68 to the typical household's power bill this year, but says this will be outweighed over time by the benefits. Maybe, for some, but right now the costs seem more certain than benefits.

Then there's the retailers. Origin has just flagged a 6.8 per cent rise next year for customers on its standard offer that is, those who don't threaten to switch retailers. Most homes by now, however, are on contracts, paying prices called market offers.

The state requires each retailer to publish its market offers on the YourChoice website ( But there's a big catch: there is no law that requires them to offer you the price on that website.

A review for the commission in October 2009, by the Wallis consulting group, found 11 of the (then) 14 retailers quoted households higher peak and off-peak charges than those published on the website. The average peak rate on the website was 16 per kilowatt hour, but most quoted customers at least 17, and some more than 20.

For small business, the gap was even worse. And retailers often refused to provide written confirmation of a quoted price, even if the law requires it.

OK, Ted, we have a problem. What do we do about it?

The Baillieu government has pledged to pay 17.5 per cent of the power bills of pensioners and others on concession cards. It will also consider suspending the rollout of smart meters, pending a new cost-benefit analysis and a separate review by Treasury, aiming to make it better value for money.

St Vincent de Paul policy manager and electricity watchdog Gavin Dufty applauds the Coalition for its "well-targeted" subsidy to concession card holders, and for seeking a pause on smart meters.

But he argues for wider reforms to reduce energy bills by reducing energy use: charging higher tariffs as energy use rises, redesigning renewable energy schemes to minimise costs to the poor, and weatherproofing low-income rental housing.

But retail price monitoring needs to be re-thought, and resourced properly. Retailers should be required to offer customers the prices they advertise. And prices should be monitored more often, more publicly, and in more user-friendly ways. Then the price hikes might slow.


Monday, December 6, 2010

Sex Party close to winning first seat

SEX industry lobbyist Fiona Patten could be catapulted into the Legislative Council to share the balance of power with the Greens, after a surprise twist in the re-check of votes put her within a breath of taking the final Northern Metro region seat.

With a third of votes re-checked, the Greens were polling almost 20 per cent in the seat, well over a quota. If sustained, this would knock out independent Stephen Mayne, but open the door for Ms Patten, leader of the Sex Party.

She now trails Labor by just 0.1 per cent at the point where one or other must be eliminated. If she can overtake Labor, she will defeat the Liberals on Labor preferences.

The re-check has put the Country Alliance back on track to win in Northern Victoria from the Coalition, although it is still too close to call, while Greens MLC Colleen Hartland looks likely to narrowly lose her Western Metro seat in a three-way contest with the Liberals and Labor.

The Coalition is on track to win 20 seats in the 40-member council, Labor 17, the Greens two and the Country Alliance one. If Ms Patten wins, the Coalition will drop to 19.


Thursday, December 2, 2010

Reserve rises may have missed the point

If yesterday’s GDP figures are right, then the Reserve Bank has misread the economy, and given us interest rate rises we don’t read.

If the figures are wrong — and their startling revisions to 2009-10 data don’t inspire confidence — then they are just a bit of static we can disregard. But don’t assume it.

For once, Wayne Swan did not come out yesterday with graphs showing how Australia is leaving the ‘‘major advanced economies’’ for dead. And no wonder. All except France and Italy are now growing faster than we are.

With growth of 2.7 per cent, we are now being left for dead by Germany (3.9 per cent), Japan (4.1) and Korea (4.5).

But The real bottom line is growth in GDP per head. The Bureau of Statistics estimates it rose just 0.8 per cent in the year to September. It is still below 2008 levels.

How can that be when we’ve seen so much growth in jobs, our mineral exports are booming, and even after yesterday’s revisions, the Bureau of Statistics estimates that real national income grew 7.2 per cent in the past year?

Surely that makes us richer? Which means we spend more?

Well, some of us. The key to the puzzle lies near the back of the book, where the Bureau examines the sources of household income.

Over the past two years of crisis and rebound, it estimates, total wage income grew by just 7 per cent - including inflation, including all those 400,000 extra jobs.

Average income per employee grew just 3.6 per cent. Inflation grew 4.1 per cent. That means that on average, households depending on wage income are now marginally worse off.

Household income is growing: but the part of it that is really growing is the income of households who invest. Our income from profits, dividends, rent and interest shot up 16 per cent in the same two years. So households with significant investment income are much better off.

But investor households are more likely to reinvest their windfalls than spend them. That’s reflected in the Bureau’s stunning revision of its story on what happened in the last year. It has cut its estimate of household spending in 2009-10 by a cool $27 billion, and trebled its estimate of household saving from $23 billion to $68 billion.

Its picture of Australia’s growth now is extremely patchy. In the past year, almost half of all non-farm growth was in mining, mineral processing and construction. Most of the rest was in the finance sector and professional services (lawyers, accountants etc). The other two-thirds of the economy is growing little, if at all.

Many economists, inside government and outside, don’t believe this. They point to the stunning jobs growth of the past year, to the Bureau’s record of revising up past data, and dismiss yesterday’s figures as at most a ‘‘speed bump’’ on our road to the boom the Reserve predicts.

They may be right. But in my mind, these figures add to concerns that, as in early 2008, the Reserve may have misread the game. It has focussed on the needs of one industry in one state — mining in WA — when its job is to set interest rates for the entire economy. There is a risk that it has done too much, too soon.


Tuesday, November 30, 2010

Baillieu the hunter to become Baillieu the provider

THE Bracks/Brumby government has fallen after 11 years in office. The Kennett government fell after seven years. The Cain/Kirner governments lasted 11 years, taking over from the Hamer/Thompson governments, which ruled for almost 10 years. It's a consistent pattern.

The days when we had a natural party of government are over.

What is natural now is to stay in power for a decade or so, two or three terms, before being overwhelmed by the accumulation of frustrations, disappointments and anger by voters at this or that.

That's the central lesson of the unexpected electoral landslide that has swept Labor from office. On most tests, it was not a bad government. Victoria is widely seen by the rest of Australia as being one of the better-run states: pro-business, socially progressive, strong in education, a national leader in jobs creation and housing activity, and generally humming with growth.

But since Labor took power, Victoria's population has grown by almost a million, close to 20 per cent. For those living in Victoria, hospital wards became overloaded, trains overcrowded, roads clogged. Assault rates rose, for several reasons, and people felt less secure. The cost of electricity, gas and water soared, mostly for reasons unrelated to state government. Labor made some mistaken choices that proved expensive. And it developed a habit of being less than honest with Victorians, and trying to manipulate, hide and spin its way out of trouble rather than being upfront about problems. In the end, they all hurt.

Now it is Ted Baillieu's turn. Today he and his frontbench will be transformed from poachers to gamekeepers, from fanning voters' discontent with state government services to trying to dampen it, from making them think services are bad to making them think services are good.

When a train derails or an ambulance fails to arrive, when an emergency ward leaves patients waiting, or when power prices rise, it will now be his government in the firing line. It will be a challenging transformation.

But Baillieu has got there by meeting tough challenges. It is no mean feat to end five years in the unenviable job of Opposition Leader with the public approving of your performance and electing you to a landslide win. He has shown discipline and good sense in judging what issues to focus on, a progressive streak that defines him as a leader from the political centre, and a combination of careful planning and a willingness to take risks.

He will need all of that now. From today, he will confront the underlying reality that drove Saturday's result: the central problem facing any state government is that it simply does not have the resources to provide services at the level its citizens expect.

A government can get by for a while by blaming the inadequacies on its predecessors, and creating a sense that the problems are being tackled. But in the end, that gap between its funding sources and the expectations of the public will defeat it.

It's a global problem, but it's particularly severe in Australia because we insist that taxes be low and see public debt as an evil to be avoided.

All government services must be paid for by taxes or equivalent charges. All government infrastructure must be paid for by taxes, or by borrowings to be serviced and repaid by taxes. If you want low taxes, if you want low or no government debt, then you have to accept worse government services and infrastructure than you would if we paid our governments more.

Public private partnerships allow governments to avoid debt, but not liability; they too have to be paid for and serviced, either by taxpayers or consumers. If you want Victoria to have better schools, better public transport, better hospitals, Victoria's government has to invest more and ultimately, raise taxes and charges to deliver them.

Brumby as treasurer invested too little to improve services, focusing instead on debt reduction. As premier, to his credit, he changed tack, and embarked on a five-year plan to borrow about $25 billion and invest it in tackling Victoria's infrastructure backlog: new roads, schools, hospitals, public transport, water projects and so on. He lost office too soon to reap the benefit.

One of the challenges for Team Baillieu will be to decide whether it sustains investment at that level, or reduces it to avoid threatening Victoria's AAA rating. It will be criticised whichever it does. But it knows that simply changing the state's managers does not solve the problems they have campaigned on for a decade. They have to do things differently and in many areas, they will have to invest more, and spend more on maintenance to get rundown assets such as Melbourne and Victoria's rail systems into reliable working order.

It also needs to take care on what it commits to. In the campaign, it pledged

to investigate new rail lines to Tullamarine airport, Doncaster, and connecting Geelong, Ballarat and Bendigo. Yet it committed to build one new line: of all things, a $250 million rail link to Avalon Airport.

OK, as white elephants go, it's only a mid-sized one. But when there are so many urgent needs in public transport, why waste taxpayers' money on this one?

Shadow Treasurer Kim Wells declared during the campaign that a Coalition government would require all large new infrastructure projects to have their business case assessed by the Department of Treasury and Finance, with the assessment made public. That's an excellent idea, and one that would help protect a Baillieu government from its own desal disasters.

John Brumby can leave politics proud of what he achieved. Ted Baillieu can enter the great challenge of his career with quiet pride in what he has achieved to get there.

He will need all that self-discipline, understanding, wary intelligence and a streak of boldness.

Wish him luck.

Activist poised to control upper house with record low vote

JOURNALIST and shareholder activist Stephen Mayne could hold the balance of power in the new Legislative Council, with new counting showing he could block the Baillieu government from having a majority in both houses.

When counting ended last night, Mr Mayne was on track to set a new Victorian record by winning a seat in Parliament with just 1.04 per cent of the vote.

The founder and former publisher of online newspaper, Mr Mayne stood as an independent in the Northern Metro electorate the latest in many tilts at company boards, federal and state Parliament, and even Manningham council (his only success).

So far he has won just 3064 of the 295,831 votes cast in Northern Metro, which runs from Flinders Street station to the Great Divide.

But an astonishing series of preference deals could see him climb into the upper house on the back of preferences from another independent, the Greens, Family First, the DLP, the Sex Party and Labor.

With only 69 per cent of votes counted, he still could be upended if the Greens' vote continues its rise in late counting. Greens de facto leader Greg Barber has a quota in his own right, with 17.9 per cent of the vote.

If that lifts to 18.2 per cent, Mr Milne would lose out to the Greens' second candidate, and the Liberals or Labor would take the seat.

A second maverick candidate also has a narrow lead in upper house counting, but it is fast dwindling.

Shepparton hunting shop owner Steve Threlfall, of the Country Alliance, still leads in the race for the last seat in northern Victoria. But Liberals MLC Donna Petrovich is catching up, and likely to hold her seat.

If she does, the Coalition would probably have 20 seats in the new 40-member council. Labor looks like winning 17, with two Greens and Mr Mayne sharing the balance of power.

If so, a Baillieu government is likely to look to him to provide it with crucial support. Mr Mayne was press secretary to former Treasurer Alan Stockdale in the early years of the Kennett government, before having a spectacular falling out with Mr Kennett over the explosion of gambling in the state. His many causes include greater transparency in government, reducing gambling and reducing government debt.

In Western Metro, Greens MLC Colleen Hartland lost ground yesterday, and now looks likely to be the loser in a three-way contest for two seats against upper house president Bob Smith (Labor) and Andrew Elsbury (Liberal).

Hundreds of thousands of votes were counted yesterday in lower house electorates mostly for the Coalition but without changing the status of any seats.

Ballarat East is now the closest contest, with Labor MP Geoff Howard holding off Liberal challenger Ben Taylor by just 166 votes or 0.26 per cent.

In Bentleigh, Liberal candidate Elizabeth Miller has extended her lead over Labor MP Rob Hudson to 460 votes, and has clearly won the seat. But in Macedon, Labor MP Joanne Duncan appears set to withstand the tide, maintaining a decisive lead of 498 votes.

In the only other seat in doubt, Labor MP Steve Herbert maintained a lead in 245 votes in Eltham, and appears likely to hold on.

If Labor holds both Eltham and Ballarat East, it will have 43 seats in the new 88-member Assembly, and the Coalition 45.


Monday, November 29, 2010

Victoria's landslide could give Coalition both houses

THE Coalition last night was on the verge of pulling off an improbable quinella not only winning government, but winning control of both houses of Parliament.

The electoral landslide that swept across Victoria could give the Liberals and Nationals up to four new seats in the 40-member Legislative Council, mostly at Labor's expense. Only one seat has clearly changed hands.

As expected, the Liberals won a third seat in their heartland of Southern Metro, with Georgie Crozier unseating Labor's Jennifer Huppert.

But Coalition candidates were also well placed to pick up three other seats, although final results could be weeks away. The Coalition needs to win all three to give it a majority of 21 seats in the new upper house. But if its vote climbs slightly as pre-poll, postal and absentee votes are counted, it could do just that.

Labor took a battering, with the party at risk of losing four of its 19 seats in the upper house. The Greens failed to make any gains, and have an outside chance of losing Western Metro MLC Colleen Hartland.

The DLP lost its sole representative, Western Victoria MLC Peter Kavanagh, who polled just 2.6 per cent to come last this time.

But as we have seen so often before, bizarre preference deals could land several other unlikely politicians in the red velvet chamber.

Journalist Stephen Mayne, an insatiable candidate for parliaments and company boardrooms, might just pull it off this time, despite winning only 1 per cent of the vote in Northern Metro.

On Saturday night's figures, Mr Mayne would take the final seat thanks to preferences from everyone from the Greens to Family First, the DLP, the Sex Party, and ultimately Labor.

But it would take only a small change in late voting to tip him out early, with the Liberals' Craig Ondarchie more likely to claim the seat from Labor's Nathan Murphy.

The fishing and shooting party, the Country Alliance, could cause an upset in any of the three regions outside Melbourne, although on last night's counting it was more likely to lose the lot. Despite averaging just 4.5 per cent of the regional vote, preference deals will see it fight out the last seat with Labor in Eastern Victoria, the Liberals in Northern Victoria, and the Nationals in Western Victoria.

Legislative Council president Bob Smith is likely to lose out in a three-way fight for the last two seats in Western Metro, with the Liberals and Greens edging him out. The most likely outcome is: Liberals 18, Nationals 3, Labor 16, Greens 3.




After two unsuccessful attempts trying to win Northcote, the small business owner tried his hand in the mortgage belt and returned a formerjewel to the Liberal crown.


Stensholts 11 years in Parliament is essentially the story of Labors reign. He won Jeff Kennetts seat of Burwood at a byelection after the former premier resigned in 1999 and suffered a massive 9.5 per cent swing at Saturdays election.



After falling agonisingly close in his first attempt to unseat Labor from the eastern suburbs seat in 2006, the accountant has added Forest Hill to the swath of electorates now painted Liberal blue on the electoral map.


The loss of the marginal seat leaves just one celebrity Labor sports star in Parliament former footballer Justin Madden. Marshall, a former Olympic skier, suffered a cost of livingfuelled swing of around 3.8 per cent.



A former police senior constable, Battin was able to push the law and order button in the outerurban seat that takes in parts of Berwick and Pakenham. Gembrook goes to the Liberals for the first time since it was created in 2002 with a 7 per cent swing.


The outspoken Labor MP has frustrated her party with her stances on genetically modified crops and logging, but they hoped her strong local support would put the seat in the ALPs retain column.




The City of Casey councillor swaps her mayoral robes for a comfortable green leather lower house seat. With a swing of over 5 per cent, Wreford looks to have claimed almost 47 per cent of the primary vote.


With Mordialloc another of the mortgage belt seats, cost of living issues like stamp duty and utilities bills ended-up costing Munt. The parliamentary secretary loses the seat she held since 2002.




It was a case of second time lucky for the lawyer, businessman and former deputy lord mayor Newton-Brown. In 2006, he won the primary vote but couldnt win the seat. This time around, he collected both.


The lawyer and Brumby government cabinet secretary came in with the Bracks-slide of 2002 that decimated the Liberals. On Saturday, he suffered a likely swing of 8.3 per cent swing and couldnt hold the Labor line.



The 43-year-old former journalist becomes a Nationals hero for being the man who finally sandblasted off the barnacle that was Craig Ingram to the country party.


There was a symmetry to Ingrams departure. In 1999, he was one of the independents who delivered Steve Bracks power. One Saturday he went out with the Labor tide.



The current deputy ayor of Kingston has been given a political promotion by bayside residents. Bauer did it easily smashing the ALP with a huge 10.3 per cent swing to her she only needed to secure 6.8 per cent.


The 33rd speaker of the house first won Carrum in the 1999 landslide that ousted Jeff Kennett from Spring Street. Eleven years later she is on the wrong side of the political avalanche.



In his first attempt to win the crucial bayside seat, Shaw succeeded in making up 3.3 per cent to topple Labor. Shaw is textbook Liberal, he runs a small financial planning business.


Former Steve Bracks electorate office staffer, Harkness was true-blue Labor. Born and raised in Frankston with a PhD in political science, he departs after two terms in Parliament.



Ryalls win is significant for Teds chance of being Premier. The bellwether seat has always, with one exception, been held by the government of the day and is part of the mortgage belt targeted heavily by the Coalitions campaign.


The Gaming Minister was always going to be a longshot Let to retain his seat when the Coalition gained Momentum. Robinson won Mitcham at a byelection in 1997, the first sign Kennetts regime was faltering. On Saturday he was defending just 2 per cent and in the end suffered a 5.3 per cent swing.



In 2006, Gidley fell agonisingly short of entering Victorian Parliament, going down by less than 250 votes. There was no question over the result this time with the former tax accountant steaming into Spring Street with a swing of 7.1 per cent.


The Minister for Womens Affairs was unable to defend Labors narrowest margin. Even with Greens preferences, they backed her because of her pro same-sex marriage stance, Ms Morand farewells Parliament after eight years.



In 1999, Seymour turned on Kennett. In 2010, Seymour turned on Brumby. It was a rocky road for the Libs with McLeish joining late after Mike Laker controversially quit his candidacy. McLeishs vote was boosted on the back of preferences from anti-North-South pipeline campaigner Jan Beer.


Like many of his ALP colleagues that have lost their seats, Hardman came to government in 1999 when voters turned on Kennett and now he has fallen victim to a similar fate.



Katos is another local councillor joining the ranks of state politics. The managing director of a fish supply company, has regained the seat that had been in Liberal hands for decades after eight years of ALP rule.


Parliamentary secretary for Environment, Water and Climate Change was meant to be one of a swag of regional Labor members to go. ALP managed to hold on Bendigo and Ballarat but could not stem the tide in South Barwon.


The landslide that no one saw coming

LABOR'S fortress had two walls to defend. On one front were the eight seats it has held since 1999 in Geelong, Ballarat, Bendigo, along with rural Ripon and semi-rural Macedon and Seymour. On the other were the wide arc of seats extending south of the Yarra, from the eastern foothills to the southern bayside sandbelt.

For 11 years as Treasurer and Premier, John Brumby has nursed with great care the regional seats that put Labor into power. In the campaign he seemed to be there every second day, announcing a new hospital here, a footy ground upgrade there, and a road duplication over yonder. And it worked.

Amid all the onslaught of what is likely to end up as a 7 per cent swing to the Coalition in two-party terms, Brumby's regional wall largely held. South Barwon crumbled away at one end, Seymour at the other, but the core of the structure remained intact.

But while Labor was defending on one wall, the Liberals were climbing over the other. Of Labor's 18 seats south of the Yarra, no fewer than 10 were taken by Ted Baillieu's men.

It was a mirror image of the 1999 poll that brought Labor to power. That day, Jeff Kennett was focussed on retaining his marginal seats south of the Yarra, and did so but was felled by Labor and the independents storming regional and rural ramparts.

Did Brumby fall because he turned his back on his urban ramparts to defend his regional wall? A week ago, few would have suspected that Labor would end up losing Carrum in a swing of 9.2 per cent. Bendigo East, Ballarat West and Bellarine were all seen as frontline seats, but not Bentleigh. No one tipped Eltham to end up as the state's tightest race.

In the real world, landslides are always unexpected. Until the final polls, few insiders saw this one coming. Its impact was felt virtually all over the state: of the 81 seats where reliable two-party results have been calculated, 71 recorded swings to the Coalition of at least 3 per cent, and the median swing was 6.6 per cent. That is likely to rise even higher as pre-poll votes are counted.

Geographically, it's hard to see much of a pattern. Neighbouring seats recorded very different results. John Brumby suffered a 10.4 per cent swing against him in Broadmeadows, his new neighbour Bronwyn Halfpenny dropped 9.8 per cent in Thomastown, yet her neighbour in Mill Park, Lily D'Ambrosio, felt hardly a tremor, losing just 0.6 per cent.

In Bendigo East, the Minister for Skills and all that, Jacinta Allen, held on easily against a swing of just 0.8 per cent, yet across the road in Swan Hill, Labor's vote plunged to just over 20 per cent, shedding a quarter of what support it had in the seat.

In city and country, after 11 years of rule, the grievances erupted almost everywhere. Even in the inner city seats made safe by Liberal preferences, Labor's primary vote fell by 8 per cent. The biggest eruption saw East Gippsland reject favourite son Craig Ingram in a 21.6 per cent swing.

The best thing for Labor in Saturday's defeat is that so many survived it. Of the 43 seats where it leads, 16 held on with margins of 1, 2 or 3 per cent. Of the Liberals' 45, only seven were that close. It could easily have been far more damaging.

Where it happened is simple: everywhere. Why it happened is another matter.


Sunday, November 28, 2010

Coalition on the verge of upper house control

THE Coalition is on the edge of an unexpected majority in both houses of state Parliament, with the landslide swing in yesterday's election seeing it gain up to four seats in the new Legislative Council.

On last night's counting, the Coalition appeared likely to just full short of winning the 21 seats needed to control the 40-member upper house, which is elected by proportional representation.

The final result might not be known for weeks, with several contests too close to call on the figures available last night.

But the big swing against Labor, coupled with the Greens' failure to match the numbers given them in the opinion polls, appears to have given the Liberals a majority of seats in at least four of Victoria's upper house regions.

The outcome could hang on the outcome in the final seat in Western Victoria, a vast region stretching from Melton to the South Australian border, and from Point Lonsdale to Mildura.

Grovedale farrier Miles Hodge, of the hunters' and shooters' party, the Country Alliance, appears poised to take the seat of DLP leader Peter Kavanagh, thanks to a swag of preference deals despite gaining just 2.9 per cent of the vote.

With tens of thousands of votes still to be counted, the Coalition's third candidate David O'Brien could still pick up enough votes to win the seat. Mr Kavanagh's 2.2 per cent of the vote looked too small to retain the seat he himself won in 2006 in the same way.

Mr Hodge had just 8000 votes last night, but a series of preference swaps with other parties looked likely to see him overhaul the Coalition and deny it a majority in the new council.

The Country Alliance could win a second seat in northern Victoria. Shepparton hunting and fishing shop owner Steve Threlfall was polling 7.6 per cent of the vote, and with the same preference deals, could unseat Labor MLC Kaye Darveniza.

But sex industry lobbyist Fiona Patten failed in her bid to put the Australian Sex Party in the upper house, polling just 3.5 per cent of the vote in the Northern Metro region.

The Liberals lifted their vote significantly, and with preferences from the DLP and other right-wing parties, looked likely to take the seat from Labor. Greens de facto leader Greg Barber was polling close to a quota in his own right, to give a 2-2-1 result in the big northern suburbs electorate, which runs from Flinders Street to Whittlesea.

The Greens polled just 11.2 per cent of votes acorss Victoria, only slightly higher than in 2006. At the close of counting last night, they appeared likely to pick only one seat, and that was from Labor.

For the upper house, Victoria is divided into eight regions electing five members each: roughly speaking, five metro seats and three for the rest of the state. To be elected, a candidate has to win just 16.7 per cent of the vote after preferences; the last seat is usually decided by preference deals.

In the old Council, Labor had 19 seats, the Coalition 17, the Greens three and the DLP one.

Labor appeared to have three seats and possibly another two. The Liberals took its second seat in the Southern Metro region, and its third seat in northern Metro. It was also at risk iof losing a seat in eastern Victoria to the Greens.

As in the assembly, the council results will be affected by the electoral commission's decision to put off counting the 550,000 pre-poll votes until next week. At the Federal election, the pre-poll votes came disproportionately from voters for the Coalition and the Greens.


Eastern suburbs swing it for Liberals

A LIBERAL tide yesterday swept across Melbourne's crucial eastern suburban marginal seats and the south-eastern sandbelt, taking at least five seats from Labor, with up to six more in the balance.

It was a very different election in the equally crucial regional city seats that Labor has ruled since 1999. South Barwon has fallen to the Liberals, but midway through the count, Labor was hanging on to the rest of its territory albeit marginally.

The Greens' challenge to Labor in the inner city appeared to have been sunk by the Liberals' decision to give preferences to Labor, with only the seat of Melbourne still an outside chance.

With roughly half the votes counted, the election outcome remained in the balance with a massive 550,000 postal votes and up to 400,000 postal and absentee votes still to be counted over the next two weeks.

These votes are likely to shift the figures posted last night in favour of the Coalition and Greens candidates, altering the two-party preferred vote by as much as a percentage point in their favour.

But on early trends, the Liberals might not need them. Needing to gain 13 seats to win, they already had seven clear victories and a chance in up to 20 others.

In the biggest swing of the night, Gippsland East independent Craig Ingram was crushed by a 20 per cent swing to Nationals' candidate Tim Bull. Mr Ingram had held the seat since 1999.

As predicted, the Liberals swept to victory in most of Labor's eastern suburban marginal seats. Mount Waverley, Gembrook, Forest Hill, Mitcham and Burwood had all clearly fallen with the count at the half-way mark, returning to the Liberal Party that had held them for most of their life.

Some had a particular significance for Labor. Mitcham was the first gain, won in 1997 in a by-election under John Brumby's leadership. Burwood was Jeff Kennett's old seat, won after he quit politics in the wake of his 1999 election loss. Forest Hill, won in 2002 by former ski champion Kirstie Marshall, marked the high watermark of Labor's support.

In the south, the Liberals had won Carrum and were leading in Prahran, Bentleigh and Frankston.

But Labor was still holding on to the crucial battlegrounds in Geelong, Ballarat and Bendigo, which have been the other pillar of their ability to hold government.

It won clear victories in both Bendigo seats, with Employment Minister Jacinta Allan holding on to Bendigo East with only a 2 per cent swing against her. Agriculture Minister Joe Helper was also retaining a narrow but secure lead in Ripon.

But Seymour the scene of the Black Saturday bushfires and the north-south pipeline appeared to have fallen to last-minute Liberal candidate Cindy McLeish.

Labor held a 22-seat majority in the old Assembly. In 2006 it won 55 seats to the Coalition's 32, with Gippsland East independent Craig Ingram the lone cross-bencher.

It looks like no independent will be in the new Parliament. In Mildura, Nationals MP Peter Crisp held off a challenge from Mildura mayor Glenn Milne, and in Brunswick, former federal MP Phil Cleary won only 12 per cent of the vote.


Greens look likely to hold Victoria's balance of power

VICTORIA's new government will have to negotiate all its legislation through a hostile upper chamber, after early counting suggested the Greens will retain the balance of power in the new Legislative Council.

On early figures, neither Labor nor the Coalition looked likely to win the 21 seats needed to control the 40-member upper house, which is elected by proportional representation.

The final result might not be known for weeks, with several contests too close to call on the figures available last night.

But it was already clear that once again, any government legislation will need the support of at least two of three political forces Labor, Coalition and Greens to be passed by the Council and become law.

On early figures, the Greens were polling just 10.3 per cent of the Council votes, lower than expected, but they still looked likely to retain their three seats in the council and possibly add two more.

Several candidates from smaller parties were in contention to deliver upset results, including sex industry lobbyist Fiona Patten, who could win a seat in the Northern Metro region, despite polling just 3.6 per cent of the vote.

Labor, the Liberals and the Country Alliance are all directing preferences to Ms Patten, leader of the Australian Sex Party, in the big northern suburbs electorate, which extends from Flinders Street to Whittlesea.

The Liberals, however, were polling strongly with almost two quotas in their own right, and looked well placed to take the seat from Labor.

Greens de facto leader Greg Barber was polling a quota in his own right.

DLP leader Peter Kavanagh appeared to be another victim of the surge in Coalition support, with the Liberals on track to win three seats in Western Victoria and Labor two.

Mr Kavanagh's 2.2 per cent of the vote looked too small to retain the seat he won in 1006 with just 10,000 votes but 78,000 preferences from other parties.

In northern Victoria, hunting shop owner Steve Threlfall was poised to take another seat from Labor. Running for the hunters' and shooters' party, the Country Alliance, Mr Threlfall was polling 7.4 per cent of the vote, and stands to receive preferences from the Liberals and Nationals, Labor, the DLP and the Sex Party.

For the upper house, Victoria is divided into eight regions electing five members each: roughly speaking, five metro seats and three for the rest of the state. To be elected, a candidate has to win just 16.7 per cent of the vote after preferences and the last seat is usually decided by preference deals.

In the old Council, Labor had 19 seats, the Coalition 17, the Greens three and the DLP one.

Labor was in danger of losing up to four seats. The Liberals appeared likely to take its second seat in the Southern Metro region, and its third seat in northern Metro. On early counting, it was also at risk of losing seats in the western and south-eastern metro regions.

The Coalition looked set to retain all its seats, and win two more from Labor, giving it 19 of the 40 seats in the new council.

As in the assembly, the council results will be affected by the electoral commission's decision to put off counting the 550,000 pre-poll votes until next week. At the Federal election, the pre-poll votes came disproportionately from voters for the Coalition and the Greens.


Saturday, November 27, 2010

The city swings, the sexes splinter and the country digs in

IF THE numbers in today's Age/Nielsen poll are reflected in the tally room tonight, Victoria is headed for a change of government a change hardly anyone expected when the campaign began.

The poll implies a two-party swing to the Coalition of about 6.5 per cent. Technically, the Coalition needs a uniform swing of 6.6 per cent to win, but swings are never uniform. If it gets 52 per cent of the two-party vote, the seats will come somewhere. All the polls show a late swing to the Coalition. The Galaxy poll, taken early in the week, reported the two sides as 50-50. The Morgan poll, taken through the week, called it as 51-49 for the Coalition. And our poll, taken on Wednesday and Thursday, found it 52-48 to the Coalition.

The big question is: is this the trend it appears to be, with a late swing sweeping Team Baillieu to victory? Or is it rather that the luck of the draw means the 1533 voters in our survey were not a perfect sample of the voters of Victoria?

We'll know tonight. Nielsen pollster John Stirton points out that even his poll, the largest of the three, has a margin of error of 2.5 per cent.

Over the years, I've found the most reliable guide is the average of all the polls taken through the campaign. That won't be true if there is a late swing, but it usually works.

This time the three-poll Nielsen average shows voters split 50-50. That implies a swing to the Coalition of 4 to 4.5 per cent.

Given the resources Labor has put into sandbagging its marginal seats, that probably wouldn't be enough for the Coalition to win. Labor would lose seats, but get back with a narrow majority.

Yet it will be touch and go. The poll shows there are voters out there waiting with baseball bats to give the Brumby government a belting. We just don't know whether there are enough of them to belt it out of office.

Our polls reveal that most of them are men. Most of them are in Melbourne. And most of them are over 40, with the latest poll showing the Coalition ahead in the key demographic of people aged 40 to 54.

This is the generation of parents with mortgages, kids to educate and bills to pay. In Victoria, it usually votes Labor. But in the three Nielsen polls, it did so by just 51-49, with a 6 per cent swing to the Coalition.

The 55-and-overs as a group usually vote for the Coalition, but this time it's by an overwhelming 58-42 margin, also a 6 per cent swing.

By contrast, the only shift among voters under 40 has been from Labor to the Greens. The three polls found 22 per cent of them plan to vote for the Greens, with most of them then going to Labor, giving it a two-party vote of 57-43, a swing of just 1 per cent. As in the federal election, there is a widening gender gap. In 2006, men and women voted as one to re-elect Steve Bracks. But in 2010, our poll average shows men going to the Coalition by 52-48, while women favour Labor by 53-47.

Men have swung to the Coalition by 7 per cent, women by just 2 per cent. Let's hope no relationships break up over it. And the swing is strongest in Melbourne. At the federal election, Labor won almost 60 per cent of the city's two-party vote. But now it is heading for just 52 per cent, a 5 per cent swing from 2006.

In regional Victoria, Labor trails the Coalition by 46 per cent to 54, but the swing has been just 2 per cent. And that could decide the outcome tonight.

Forget the inner suburbs: the battlegrounds that will decide who wins government today are the marginal seats of eastern and southern Melbourne, and the regional centres of Geelong, Ballarat and Bendigo.

On the poll figures, the Liberals will pick up a swag of marginals in the south and east: Mount Waverley (0.4), Gembrook (0.8), Forest Hill (0.8), Mitcham (2.0), Frankston (3.3), Mordialloc (3.6), Prahran (3.6) and Burwood (3.8) are all at risk.

But to win government, the Liberals need to win virtually all of them, plus some of Bentleigh (6.4), Monbulk (6.7) and Carrum (6.8), or the northern seats of Eltham (6.5) and Yan Yean (8.0) and the urban fringe seats of Seymour (6.7) and Macedon (8.2). They will need to pull in some of these because, if the poll is right, Labor will hold most of its eight seats in Geelong, Ballarat and Bendigo. South Barwon (2.3) is likely to fall, but the Liberals might struggle to win the tough asks: Bendigo East (5.4), Ballarat West (6.6), Ballarat East (6.7) or Bellarine (8.0).

But it's anyone's guess. The Liberals could cause a surprise by taking one of the seats in the outer south-east, like Narre Warren North (9.3). Labor could score an upset win in a Coalition marginal such as Kilsyth (0.4), Hastings (1.0) or Morwell (2.2). An independent candidate could bolt home in Brunswick or Mildura. And the Greens could win a seat or two even without Liberal preferences.

My tip? Labor back, with a majority of two.




0.4 Mount


0.8 Gembrook

0.8 Forest Hill

2.0 Mitcham

3.3 Frankston

3.6 Mordialloc

3.6 Prahran

3.8 Burwood

6.4 Bentleigh

6.7 Monbulk

6.8 Carrum

9.3 Narre




6.5 Eltham

6.7 Seymour

8.0 Yan Yean

8.2 Macedon

10.5 Ivanhoe


2.3 South Barwon

4.4 Ripon

5.4 Bendigo East

6.6 Ballarat West

6.7 Ballarat East

8.0 Bellarine

8.4 Geelong

10.6 Bendigo West


2.1 Melbourne

3.7 Brunswick

3.7 Richmond

8.6 Northcote


6.1 Mildura (Nats)

8.5 Gippsland East (Ind)


TV: ABC from 6.30 pm RADIO: 3AW 693 from 6 pm. 774 ABC from 6.30 pm.

LIVE: Tally Room is open to the public at Etihad Stadium, gate 9.


PRINT: Results, news and analysis in the Sunday Age.


Friday, November 26, 2010

Greens likely to hold upper house balance of power;

WHATEVER the fate of the Greens hopefuls in the four inner Melbourne seats in tomorrow's election, one thing looks almost certain: the Greens will hold the balance of power in the new upper house, whoever wins government.

At the federal election, the Greens won 14.6 per cent of the Senate vote in Victoria, with 471,000 first preferences. The opinion polls suggest that they are heading for a similar vote at the state election.

If so, they are odds-on to win five seats in the new 40-member Legislative Council, with neither Labor nor the Coalition winning enough seats to control the chamber. This would mean that any legislation in the new Parliament would require support from two of the three sides to get through the Legislative Council.

In the old council, Labor had 19 members, the Coalition 17, the Greens three and the DLP one the seat of Western Victoria, where its leader, Peter Kavanagh, won the final seat with just 2.6 per cent of the vote.

There is a chance that similar results could happen this time. For the council, Victoria is divided into eight electorates choosing five members each in a Senate-type election. To win a seat, a candidate needs just 16.7 per cent of the vote and the result can depend on the order in which candidates with small votes are eliminated.

In Western Victoria in 2006, Labor preferences ended up giving the seat to the DLP. But this time Labor is directing its preferences to Greens candidate Marcus Ward, who looks odds-on to take Mr Kavanagh's seat.

In both Northern Victoria and Eastern Victoria, the five seats are likely to divide 3-2 between the Coalition and Labor, as in 2006. But this time Labor, the Coalition, the Sex Party and the DLP are all directing preferences to the hunters and fishers of the Country Alliance. If it can win enough first preferences, it could take the Coalition's third seat in both.

In Melbourne, at least two seats appear likely to change hands, with Northern Melbourne an outside chance of seeing an upset.

The Liberal heartland of Southern Metropolitan last time saw a cliffhanger, with the ALP's Evan Thornley winning the last seat from the Liberals by just 1500 votes. But Labor will probably lose the seat this time, with the Coalition taking three and Labor and the Greens one each.

But the Coalition is likely to lose a seat to the Greens in Eastern Metro, while in Northern Metro Labor's third seat could go any of five ways.

In the most bizarre preference deal of the campaign, the Liberals, Labor and the Country Alliance are all directing preferences to Sex Party leader Fiona Patten. Journalist Stephen Mayne, an independent, has a chance, as does the DLP's John Kavanagh, brother of Peter. If none of them scores enough votes to matter, it will come down to Liberals versus Labor, with Greens de facto leader Greg Barber set to hold his seat and the balance of power.


Who might win seats on Saturday



Eastern 2 2 1 *Liberal v GREENS

Northern 3 1 1 *LABOR v Libs/Sex/Mayne

South-East 3 2 - *LABOR v Greens

Southern 1 3 1 *Labor v LIBERAL

Western 3 1 1 *LABOR v Libs/Greens


Eastern 2 3 - *LIB/NATS v Greens

Northern 2 3 - *LIB/NATS v Country Alliance

Western 2 2 1 *DLP v GREENS/Ctry Alliance

Total 18 (-1) 17 (-) 5 (+2)



Jump in Voictoria's jail population

VICTORIA is leading the nation in yet another area: it provided virtually the entire growth in Australia's prison population in the year to September.

As law and order became a key theme of the election campaign, the number of Victorians behind bars grew by 169 or 3.8 per cent in the year while in the rest of Australia, the number of prisoners grew by just four, or 0.02 per cent.

Victoria still had the lowest rate of imprisonment of any state, with 0.11 per cent of its adult population locked up, compared with a national average of 0.17 per cent, peaking at 0.66 per cent in the Northern Territory.

All told, 28,843 Australians were in jail on an average day in the September quarter, with 4578 of them in Victorian jails.

The most startling figure is that 7467 prisoners, or 26 per cent, are Aborigines who comprise roughly 2 per cent of the adult population.

The Bureau of Statistics estimates that 2.3 per cent of all Aboriginal adults were in jail in the September quarter: 4.2 per cent of all Aboriginal men in the nation, and 0.4 per cent of all Aboriginal women.

Western Australia has the highest rate of incarceration, with 7.3 per cent of its Aboriginal men in prison, and 0.8 per cent of Aboriginal women.

In Victoria, 2.4 per cent of Aboriginal men were behind bars in September, and 0.2 per cent of women. Aborigines made up a fifth of the growth in the state's prison population over the year.


Similarity at a price as rivals say surplus largely untouched

THE striking thing about the costings by Labor and the Coalition of their election promises is that with three exceptions they look so similar.

The Coalition plans a net $3.644 billion over five years in new recurrent spending, paid for by taking $3.794 billion from contingency and other funds. That would leave it with $150 million to spare.

Labor would spend a net $4.096 billion, paid for by taking $3.996 billion from contingency and other funds. That would trim $100 million over five years from budget surpluses.

Whoever is in government will be spending about $250 billion over those five years. On these costings, Labor plans to spend 0.1 per cent more than the Coalition. It's a virtual dead heat.

Difficult as it is to believe after the big spending plans of the past month, each says it has left the budget surplus more or less untouched: $800 million or so a year.

How? Many Coalition plans its $1 billion in funds for health infrastructure and regional growth, its 800 new hospital beds and 40 new trains are for eight or 10 years, not the next four. Other plans are back-ended, so that their full cost hits only in 2014. Most of the 500 prison cells promised in its law and order policy, for example, would not operate until 2014.

Both parties raid the hollow log of the contingency funds: on these figures, Labor has emptied out the log in which money was stored for future capital spending.

With the budget's wage and growth assumptions already precarious such as assuming wage rises of 2.5 per cent a year half the contingency funds have gone.

But there are three main differences:

Labor has pledged $3.9 billion of new infrastructure spending, the Coalition just $2.4 billion.

The difference is in schools. Labor would spend $1.8 billion to build 20 new schools in growth areas, renovate 90 others, and build technical education centres and classrooms. The Coalition would spend just $258 million, mostly for small works in marginal seats.

The difference may be more apparent than real. A Coalition government, too, would have to build new schools and fix old ones. There is still money in the log if it wanted to do so. But so far, it has not.

Labor plans to cut $600 million over the next five years through back-office economy measures, while the Coalition plans $1.569 billion of such savings. Its big saving plan is to cut departments' purchasing by 1 per cent.

John Brumby says this would mean cuts in public service jobs. No, it wouldn't. It's not costless, but it's a sensible way to save money.

The two costings come with very different imprimaturs. Labor as government had the advantage of having its policies costed by Treasury. The Coalition went just up the road to a small accounting firm, Yates Partners, not known as experienced policy costers. Its accountant, John Yates, ticked off the costings "based on the information, documentation, supporting assumptions and methodology provided to us by the Coalition".

That's an important qualification, but unavoidable under this system.

We need a better model. The Coalition's proposal for an independent Parliamentary Budget Office under the Auditor-General wins hands down.

Tuesday, November 23, 2010

Victoria's ballot box oveflowing with choice

AFTER the sheer awfulness of the federal election campaign, Victoria's campaign has been a breath of fresh air that almost restores your faith in politics. Two decent, intelligent and capable leaders. Policies that address real rather than image problems. Mostly positive messages rather than negative ones. We could almost be living in a different time.

I suspect that a lot of readers will instantly disagree. Our last Nielsen poll found only 53 per cent approved of John Brumby's performance as Premier, and 45 per cent approved of Ted Baillieu as Opposition Leader. Fellow columnist Shaun Carney (20/11) and I are in a small minority who are impressed by both. Let me explain why.

State government is about providing services, and the demands on it come from every quarter. Collectively, our expectations are unrealistic: we demand more services, better infrastructure, lower taxes and a budget surplus. And we just can't have all of that.

Australia is a high-wage, low-tax country. That means infrastructure projects are scarce and expensive. We don't tolerate governments going deep into debt as they did when most of our infrastructure was built. Public-private partnerships to provide infrastructure sometimes work well, sometimes don't.

It is difficult, verging on impossible, for any government in this political culture to provide us consistently with First World infrastructure. Yet if it doesn't, we don't forgive it.

Services are squeezed constantly to provide savings to finance new spending. Departments are asked to do more with less real resources. Maintenance work is put off; overworked staff leave for better jobs elsewhere; and governments face 10,000 urgent needs but can afford to fund only 1000.

The Brumby government's failures are well known. Myki was a fiasco. The desalination plant is a very expensive solution to the water shortage when cheaper options were on offer. Spending on hospitals has soared, yet demand and costs rose even more. And Labor has refused to run an open government.

Its strengths are less obvious. We remember projects that run over cost or over time. We forget those that are delivered early and at lower cost. Who remembers now that the channel deepening project was completed a month early, and $248 million under budget?

Compared with the policy paralysis of federal Labor, Brumby impresses me with his willingness to engage with alternative views, change his mind, make bold decisions, and get things done.

Initially, Labor was slow to respond to the drought, the implications of rapid population growth, and the dramatic shift back to public transport. But it has shifted tack dramatically, taking on debt to finance record levels of infrastructure spending to catch up the backlog. We may not like the debt, but we need the infrastructure.

It's 11 years since the Coalition was in office, and that means Baillieu's team must be taken on trust. But I don't see any reason to distrust them. Like all oppositions, they are not so much lazy as under-resourced. Baillieu is not the most natural politician, but is an intelligent, disciplined, tolerant and progressive leader who represents the broad church of the Liberal Party rather than the fundamentalist right.

He has led the way in important areas: advocating free kindergartens, tackling problem gambling, establishing an anti-corruption commission, cleaning up government advertising, restoring authority to principals in government schools, and tackling Victoria's high construction costs. These are issues that matter across the board.

The Age profile of Baillieu (6/11) included an insightful comment by his long-time colleague Robert Peck, national president of the Association of Consulting Architects and a former Melbourne city councillor. Asked if Baillieu would make a good premier, Peck paused, then responded: "He would make an excellent leader provided there is sufficient policy and team back-up in the cabinet and in the party."

I can't judge the quality of Baillieu's team. But, as with Labor, I have concerns about some of his policies, if not insuperable ones.

First, by last weekend the Liberals' website listed 244 policy announcements, nearly all involving new spending. Many were small, some big but long-term, and there was some duplication. But it is inescapable that the Coalition has pledged billions of dollars of new spending and far from clear that all of it can be afforded, even after its savings.

I don't buy Labor's line that the Coalition would drive Victoria into deficit. It is far more likely that if the money isn't there, a Baillieu government would junk some of the promises to keep the budget in surplus.

Second, the Coalition's planning policies imply that the solution for Melbourne's housing shortage is to keep widening the urban growth boundary. As the Victorian Council of Social Service points out, this year's widening alone released enough land to build more than 284,000 new homes. The problem is not the urban growth boundary, but the obstacles to redevelopment around the inner city, the activity centres and along rail and tram corridors. That's where prices are highest, and demand is most intense. Yet the Coalition's policy is virtually silent on this.

It has run an effective scare campaign on law and order, yet as The Sunday Age reports (21/11), crime rates have fallen almost 30 per cent in a decade. Victoria has always had fewer police than other states, and for one good reason: we have less crime.

But both sides have strengths and weaknesses. Labor has made a good case to be given a fourth term. The Coalition has made a good case for a change. Only you can judge.


Monday, November 22, 2010

Don't mention Victoria's deficit

JOHN Brumby must be really worried that election spending could end up sending Victoria into deficit. It's hard to see any other reason why he would risk losing office by offering such a small cut to his one big retail tax.

Ted Baillieu is not so constrained; maybe that should worry us more. The Coalition's spending promises are ambitious. Its pledge to cut stamp duty revenue by $750 million over four years must push it closer to, or even over, the line where, to keep the budget in surplus, it must decide which promises to break.

Labor's handout is highly targeted. First home buyers are at most 20 per cent of the market. Those buying outside Melbourne are at best 6 per cent. Even on Brumby's figures, those building new homes will average 4000 a year 2.5 per cent of all buyers.

The Coalition's cut is broader, but shallower. It will go to all first home buyers, whether in Melbourne or the regions, and whether they are building or just buying an existing home. It covers 20 per cent of buyers, but even at full strength from 2014, offering only half as much as Labor gives its smaller group.

Many economists will tell you this is bad policy. They argue that first home buyers bid whatever they can afford, so their tax cuts will just push up house prices, to no benefit. I respectfully disagree.

How can a handout to 20 per cent of home buyers change what the other 80 per cent would bid? Both policies would help cash-poor first home buyers compete with rental investors, who get tax breaks of $5 billion a year from Canberra.

One big strength of the Brumby government is that its own handouts to first home buyers are targeted to those building homes, so they add to housing supply rather than just demand. By contrast, Baillieu's cuts would add to demand only.

Labor's plan would push more building out of Melbourne into Geelong, Ballarat and Bendigo where it has eight marginal seats to defend. It would also add to the trend, as The Age reports today, for Melbourne's development to leapfrog the urban growth boundary into towns such as Bacchus Marsh, Gisborne and Wallan.

But surely first home buyers facing Melbourne prices need help as much as those further out. Labor's tax cuts would give back just 1 per cent of stamp duty revenue, the Coalition 5 per cent.

That is self-denying austerity. It suggests that the state's wallet must be almost empty.


Saturday, November 20, 2010

Melbourne's Growing Pains

ONE WEEK out from the Victorian election, Tim Colebatch reports on a city and state in the grip of a population boom that is squeezing infrastructure, services and affordability:

A NEW Melbourne is growing on the city's western fringe. And as Victorians head into next week's state election, in some ways it epitomises what has been an extraordinary decade in the state's history.

In 1993-94, after the Kennett government sacked 30,000 government employees, Victoria's population growth sank to as low as 12,680. Yet 15 years later, the population of a single municipality Wyndham, centred on Werribee grew by 10,758. Melbourne's growth in 2008-09, at first estimated at 93,478, now looks to have been closer to 100,000. And the latest estimate for Victoria's growth is 121,229.

No city in Australia has seen growth on the scale Melbourne has experienced in the past five years. In that time, the city's population has risen by 400,000 or more. And Victoria's population has grown by more than 500,000, or 10 per cent, twice as much as it did a decade earlier.

Since Labor was elected in 1999, the state's population has expanded by close to 20 per cent, from 4.7 million to 5.6 million. Is it any wonder that we are now seeing a state election campaign being fought largely on the failure of state government services to cope with surging demand?

The epicentre of Victoria's population growth is in Melbourne's outer-western suburbs. KPMG demographic guru Bernard Salt has declared it the fastest-growing region of Australia, outpacing even the Gold Coast. In 2008-09, for probably the first time since the 1800s, most of Melbourne's population growth occurred north and west of the Yarra.

But Salt highlights a crucial difference. The Gold Coast's population boom, he says, was based on lifestyle. "For Melbourne's west," he says, "this fundamental truth is affordability. But . . . affordability must be triangulated with job opportunities, and with quality-of-life issues that deliver social infrastructure such as schools, shops, a sense of community and public transport."

And that, so far, is a promise yet to be delivered.

Across the flat empty fields west of Laverton, you find Truganina. It is one of Melbourne's most affordable suburbs, and one of its fastest growing. Sudanese refugee Ayan Majok moved here in 2008 with her husband and five children. Last year fellow refugee Hawa Mahmoud and her husband and seven children moved in next door. Both women complain about the lack of services, which has turned the street into the children's playground.

"We don't have a park for the kids to go and play in," Majok says. "There's no school around here, no shops around here, no petrol station and now we have a bus, but not many services. If you don't have a car or the car breaks down, you have to walk 25 or 30 minutes to the shop."

But Truganina was cheap: the Ayan Majok bought a 500-square-metre block for $135,000, and look back on it now as a bargain. "Now the prices are up to $220,000, and the blocks are 400, 350-square-metres," she says. It's a good neighbourhood with "all kinds of people Aussies, Indians, Sri Lankans, Lebanese, Arabs".

The latest Melway map shows a park and school proposed for Truganina: it's just that the people got there first, and they're still waiting. Across Skeleton Creek in the slightly more upmarket suburb of Tarneit, resident activist Shawn Lynch notes drily: "It's always in catch-up mode here. The Baden Powell P-9 College was opened just three years ago, and they've already had to add portable classrooms because they didn't allow for population growth.

"The high school hasn't started yet. The kindergartens are full, and some people had to sign up for a kindergarten as far away as Little River."

And the lack of broadband access in many areas is a big problem. A recent study found Truganina has the slowest internet speeds in Melbourne.

Yet people keep coming, because Truganina remains cheap. The median house price was $325,000 in the September quarter, the Real Estate Institute of Victoria estimates, and around the corner from the Majok home, land and three-bedroom-unit packages are on sale from $295,000. People want their own home, and they have to buy where they can afford it.

And Truganina is just over 20 kilometres from the Bourke Street Mall: no further from the city than Mitcham, Glen Waverley and Beaumaris.

In this state election campaign, the issues and problems raised cover every area. For some, the issue is hospital waiting lists. Between 1999 and 2009, public hospital admissions rose more than 40 per cent, yet waiting lists have mostly kept growing. For others, the issue is public transport: in the past four years, Melburnians have made more than 100 million extra trips on trains, trams and buses, with train passengers alone soaring by 57.5 million, or 36 per cent. After years of little growth in passenger demand, a landmark change in Melbourne's culture has arrived suddenly, catching the government off guard, with overcrowding and late or cancelled services becoming widespread.

For some, the issue is traffic congestion, as population growth and rising affluence lead to hundreds of thousands more cars piling onto Melbourne roads.

For others again, it is street violence, and a sense of diminishing safety.

There are so many issues the $5.4 billion desalination plant, the pipeline to send Goulburn water to Melbourne, the state of schools, and thousands of local grievances that have built up over the 11 years of Labor's rule.

There's a common thread underlying much of this. Rapid population growth, particularly since 2005, has combined with other factors to put serious pressure on the state's services, and the government has struggled to respond quickly enough. That's its job, you might say, and when the population grows, taxes also rise. Victoria's revenue from all sources has more than doubled from $22 billion when Labor took power to $45 billion this financial year.

Yet most of that has come from the relentless growth of Commonwealth grants, as a revenue-swollen Canberra imposes its spending priorities on areas run by the revenue-deprived states. This year, almost half of Victoria's day-to-day spending will be funded by Canberra. But meeting rising demand also requires more capital spending, and the government's ability to do that is limited by a political culture that treats government debt as undesirable, and by a construction culture that has pushed building costs so high as to make urgently needed projects unaffordable.

But how did Victoria attract all that population growth? Let's go back a step.

FROM outside the state, Victoria looks quite different. In the rest of Australia particularly in New South Wales it is widely seen as a success story, a competently run state where things work. Until yesterday's surprising revisions to state growth figures, Victoria was ranked fairly consistently as the fastest-growing of the non-resource states. Thursday's report by the Business Council naming the Brumby government as Australia's most business-friendly government is in the latest of a range of commendations from business and economists.

Two crucial areas exemplify Victoria's strong performance. Over the past four years it has generated 278,000 new jobs, more than any other state, and 28 per cent of the nation's job growth. Full-time jobs have increased by 2.1 per cent a year, including the period of the global

financial crisis, and total employment by 2.6 per cent a year, both second only to booming Western Australia.

New home building has been spectacular: one in every three homes approved in Australia over the past two years has been in Victoria, 34 per cent of the nation's housing construction activity, rising to almost two in every five so far in 2010-11. In the past year, councils in Melbourne approved 44,194 new homes more than their counterparts in Sydney, Brisbane and Adelaide combined.

Construction has been one of the industries picking up the baton of growth as the high dollar and government indifference has meant the stagnation of Victoria's manufacturing industry since 2002. Another factor has been the foreign student market, with Melbourne the main magnet for overseas students, particularly from India. With Melbourne's image as Australia's coolest city, tourism has soared. Victoria has attracted 38 per cent of the growth in foreign tourists over the past decade. The financial sector, healthcare, the cafe culture, transport and distribution, wholesaling and retailing: Victoria has developed a diversified services economy which has helped it withstand the loss of almost 50,000 manufacturing jobs in the past 10 years.

And with the students came migrants. In the past three years net overseas migration into Victoria has doubled to 227,000, almost as many as in NSW. India and China were the biggest sources, but Victoria has also been the main settling ground for Malaysians, Sri Lankans and of course, the refugees from the Horn of Africa, who have now become a significant presence not only in western Melbourne, but also in cities such as Shepparton.

It is not only our people who are changing: so are our cities. In the past year, Victorian councils approved 19,900 new apartments and units, more than double the 8147 approved four years earlier. Most of them were in high-rise apartment blocks in Melbourne. In the metropolitan area, 18,083 of the record 44,194 new homes approved were apartments and units, roughly 10,000 of them high-rise.

It is a different Melbourne we're building. We're not just building out any more, we're building up. Expansion at the fringe is also booming, but two-thirds of the growth in home building in the past four years has been in apartments and units most of them in the inner-city, where prices have risen fastest, and demand is hottest.

Even before the apartment boom started, the tide had begun turning in. Between 2004 and 2009, a third of Melbourne's population growth took place within 15 kilometres of the Bourke Street Mall. The city centre, bayside, the leafy eastern suburbs, the affordable inner-west: people raced to buy the new apartments, units and townhouses that developers put up wherever they could get a permit.

Between 2001 and 2009, the populations of Brighton, Caulfield and Hawthorn all grew by 10 per cent, Footscray by 17 per cent, the inner-bayside suburbs by 19 per cent while the CBD, Docklands and Southbank population trebled. For the first time in decades, 1 per cent of Melburnians live in the centre of the city.

Yet populations are now growing almost everywhere. Between 2004 and 2009, excluding the area of the bushfires, only six of Victoria's 79 councils recorded falling populations, all in the Mallee and Wimmera. Geelong grew by 15,000, Ballarat 8250, Bendigo 8700, and even the Latrobe Valley added 5000. Virtually anywhere within a two-hour drive of Melbourne has been touched by the population boom, as have the larger cities and coastal areas beyond it.

But that is in the past. As we head into the election, Victoria's economic future is more clouded.

Foreign student numbers have plummeted thanks to the soaring dollar, the end of the backdoor working visa rorts, and the lasting impact of the violence against Indian students.

The Reserve Bank's interest rate rises are hitting manufacturers and exporters with a double-whammy of rising costs and rapidly shrinking returns. Treasury is pressing the federal government to end support for the car industry, which would shut down Melbourne's largest manufacturing sector. And construction activity is surely at its peak.

Another worry is housing prices. One crucial part of Victoria's success story has been its ability to offer affordable housing, compared with Sydney. But as its population has grown so strongly, housing investors have moved in to buy up Melbourne homes, helping drive prices to record levels. The Real Estate Institute of Victoria says the median price in the September quarter was $565,000. The zone of affordable housing has shrunk to suburbs such as Truganina, the outer suburbs with poor services and poor public transport. And while we are now building up the inner city, the building unions make it a high-cost activity, resulting in high-price apartments.

But Victoria's future is what Victorians make it. Melbourne's incredible rebirth from the ashes of the 1990-91 recession was the product of many creative people, each adding their bit, in their own way, to remake the old town as a wonderfully vibrant, alive city.

Whoever forms our next state government will have to nurture that, and foster new sources of growth to take over from those whose time is past.