Albanese makes a taxing decision
On the day the nation celebrated the extraordinary feat of Ariarne Titmus winning her first Olympic gold medal in the pool, Anthony Albanese did a political triple backflip with a twist he hopes will bring him just as glorious a victory.
The timing of Labor’s announcement – ditching a significant tax policy it had taken to the previous two elections – may have been curious. Its significance, however, should not be missed.
It was curious in the sense that it was made while the country was hugely distracted. Even without the Olympics vying for attention, half the nation’s population was in lockdown, battling to contain the highly infectious Delta strain of the Covid-19 virus.
It was significant, in the sense that it heralded the kind of strategy Labor is taking to the election: one where it will be willing to match the Coalition on certain policies, in the hope it can differentiate over other key failings.
The simplest explanation for the new position is that Albanese has decided it is time to take the wind out of the government’s sails over Labor’s tax intentions based on the party’s past form. Labor simply could not waste another minute allowing Scott Morrison to distract from his own failures.
One senior Labor strategist says the announcement was long overdue. If the past two defeats had taught Labor anything, Albanese would need more time in the run-up to the election to persuade wavering voters he would not be “taxing them to death”, as the Liberals so successfully claimed against Bill Shorten in 2019.
The capitulation to this hard political reality was complete. After virtual shadow cabinet and caucus meetings had signed off on it, Albanese told a media conference in Brisbane “a Labor government will deliver the same legislated tax relief to more than nine million Australians” that the Morrison government is promising. Also abandoned was Shorten Labor’s trimming of tax concessions for negative gearing and capital gains tax. The existing regimes will remain untouched.
Far from Shadow Treasurer Jim Chalmers being rolled, as some media reported, he took the changes to the party for ratification, which it did despite hand-wringing by some on how they might sell the reversal. One Victorian MP says there was a unanimous backing because it would deny Morrison the unfettered opportunity to fight the election on his terms. The MP said, “We’re sick of opposition.”
The Greens’ Adam Bandt accused Labor of betraying its principles. He said with “Labor backing the Liberals’ trickle-down nightmare, Gough Whitlam must be rolling in his grave”. But ringing in Albanese’s ears after two election losses would be the former Labor prime minister’s famous defence of his own pragmatism: “Only the impotent are pure.”
Albanese is from the Left faction of the party in New South Wales, but his hard-nosed approach has echoes of his old sparring partners in that state’s once powerful Right. He is certainly hoping he can emulate their electoral successes in the 1980s and ’90s. He insists the party’s new position comes after listening to the voters. The thinking goes that repealing the tax cuts would not win one extra vote but rather would block the regaining of government.
To be clear, these high-end tax cuts – flattening the tax rate to 30 per cent for everyone earning between $45,000 and $200,000 – do nothing to make the system fairer. Indeed, they widen the gap between high earners and the rest. The biggest winners from the $17 billion yearly cost are those earning above $150,000. The cuts were legislated two years ago by the Liberals over the objections of Labor and are set to be introduced in 2024-25. But Labor has decided the cuts are better than more time in opposition.
Government backbenchers have no illusions that Labor’s repositioning has made life harder for Morrison in the election campaign. Not that any of them think the prime minister will be going to the polls this year. They are hoping the prime minister’s midweek prediction – that lockdowns will be a thing of the past by Christmas – will be fact and not wishful thinking. Morrison’s promise is that by then all Australians who wanted the Covid-19 jab would have received at least their first vaccination.
The Albanese announcement has flummoxed senior government ministers. Finance Minister Simon Birmingham – like his colleague, the treasurer – says you simply can’t believe Labor. Birmingham was wheeled out on Monday afternoon to deride the announcement as “the most agonising, the most half-hearted concession in Australian politics ever, and one that cannot really be believed”. He said Labor “can’t be trusted with it”.
Shadow Treasurer Chalmers admitted on the day of the big surrender: “These decisions are not easy decisions. They’re big decisions.” But, he said, “they are the right decisions”. The definition is important here: they can only be “right” in political terms and not economic terms.
Undermining Birmingham’s contention that Labor would reverse its position if it won the election is the fact that shadow cabinet discussed the option and rejected it. One source says they explored the implications of John Howard’s “never ever” on the goods and services tax. Howard played the political daredevil taking the GST to the next election. It was a near-run thing for the Liberal prime minister: he lost 19 seats. Only his landslide win at the previous election saved him.
Those with longer memories recalled the Keating Labor government’s first budget after the 1993 shock election victory over Liberal John Hewson’s GST. The “L-A-W tax cuts” were modified and a range of indirect taxes raised. That budget is still considered to have been the biggest contributor to Keating’s defeat at the next election. “It would be a very short-lived Albanese government” was the way one MP summed up the conclusion of the shadow cabinet discussion.
But there is no getting away from the fact the tax cuts are “reckless and unfair”, as Chalmers said during the original parliamentary debate. Their recklessness is made worse at a time when, on the government’s own reckoning, there are deep budget deficits as far as the eye can see. Chalmers wryly notes that the Coalition came to government promising annual budget surpluses and so far has delivered eight deficits, getting deeper into the red every year. The intergenerational report doesn’t see a return to budget surplus in the next 40 years.
Economist Stephen Koukoulas says that if the economy is in a recovery phase by the time the tax cuts are introduced, as Treasurer Josh Frydenberg is foreshadowing, whoever is in government can only repair the budget by lower services or more taxes. More likely they will claim that stimulating economic growth is a better way. On their record, however, the Liberals will find it hard not to sock the poor with a vigorous return to a revamped robo-debt. The care sector is worried for the fate of aged care and the National Disability Insurance Scheme.
But despite Deputy Prime Minister Barnaby Joyce reverting to his previous job as village accountant on ABC Radio, talking about the need to rein in debt and deficit, the government, apart from him, scarcely pays lip service to that idea. Albanese points to the $100 billion of commitments in the budget with no offsets. Every dollar of extra spending announced then and since May is similarly being funded by borrowings.
Labor is infuriated by the free ride many mainstream commentators and media outlets have afforded the Liberals. Albanese has a point. At the very least this double standard will weaken the potency of any argument Morrison runs against Labor on spending. After all, his opponents have now joined him in funding tax cuts in the same way he has.
Labor’s pivot on the high-end income tax cuts is aimed solely at making Morrison and his handling of the pandemic the main focus of the election campaign. A poll in The Australian Financial Review, by the long-respected polling firm Utting Research, adds weight to the view that this is an adroit move by Albanese.
The poll of 1600 voters in prolonged lockdown in NSW found that Premier Gladys Berejiklian is doing a much better job than Morrison in handling the pandemic, despite her prevarication and stumbles. Her rating is not as high as other premiers – but at 56 per cent, it’s a long way ahead of the prime minister’s 37 per cent satisfaction rating.
The poll, taken on the Monday of the week the premier announced a month-long extension to the so-far-failing lockdown, points to the fact the prime minister is getting the blame for the slow vaccine rollout and quarantine failures.
Just 29 per cent of NSW voters are satisfied with Morrison’s handling of the rollout, with 62 per cent dissatisfied. The findings on his handling of quarantine are equally dire: 33 per cent approve, while 57 per cent disapprove. Federal MPs from the state are not surprised. One says that everywhere he goes around Sydney people tell him Morrison has “stuffed up”.
On Wednesday, the prime minister finally succumbed to calls from the NSW government and opposition, business and federal Labor to offer more assistance to businesses and people hit by the shutdown. It only served to highlight his previous stinginess towards Victoria during its more than 100-day lockdown last year.
Voters are already marking down the Morrison government for its incompetent handling of the second year of the pandemic. A freedom of information request from The Canberra Times resulted in more evidence of extravagant ineptitude in the setting up of the COVIDSafe app, where $10 million was paid to private contractors. It is still costing $60,000 a month to keep running.
Despite heavy redactions, the report found the app identified just 17 close contacts since its launch in 2020, in situations where the contact was not identified by manual tracers. That’s $1.5 million for every contact it uncovered.
No wonder Albanese wants to make sure nothing distracts from Morrison’s record in this national crisis when voters turn their minds to a better option to take the nation forward at the next election.
This article was first published in the print edition of The Saturday Paper on Jul 31, 2021 as "Don’t blame me, it’s the other bloke’s fault".
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