Paul Bongiorno
Anthony Albanese and Labor roar back to life with stage three revamp

Anthony Albanese denies he ever lost his mojo, despite appearances to the contrary in the final months of 2023. And if perceptions are everything in politics, the prime minister is a changed man at the start of 2024.

The potentially fatal drift the prime minister and his government had fallen into has been arrested by a stunning reversal so bold it has left the opposition in disarray. One key Labor adviser says it’s obvious the change of position on the stage three tax cuts “caught Dutton with his pants down”.

The Coalition party room came to the reluctant conclusion it had been skewered and had no option but to wave the package through. In the space of 14 days the opposition had gone from Sussan Ley’s ill-considered first response to fight the changes, to a suggestion to roll them back, to accepting that blocking bigger tax relief to 84 per cent of taxpayers and a still-generous cut to the highest income earners was not very smart.

The Liberals are left to obsess about an “egregious” broken promise that puts “a liar in the Lodge”. The basis for that slur is dubious anyway – no one close to Albanese believes he did not mean his 2022 election pledge. After all, he stuck with it for two years, until the cost-of-living crisis demanded a stronger response than had been so far offered. But a backdown on the promise became an economic and political imperative with the Dunkley byelection looming.

In the first Question Time of the year it was clear Albanese has come to realise, in our contested parliamentary system, attempting to play a “kinder, gentler politics” is a mug’s game when your principal opponent is not interested in consensus or compromise but rather just in tearing you down by whatever means. 

Albanese easily handled Dutton’s attempts to create a “look away diversion” by asking about everything except the new stage three arrangements. No, the prime minister would not tax the family home and, drawing on revelations in the ABC documentary series Nemesis, ridiculed Dutton’s promise to smile more if he became leader. Instead the prime minister said “he gave us Jack Nicholson in The Shining, smashing through the walls”, full of negativity and hatred.

The government back bench loved it. One minister said it was the best Question Time performance of the term, with the government strong on the counterattack. Treasurer Jim Chalmers said the opposition wants to “ask us a question about all of the things that we haven’t said we’re doing, because they can’t defend their position on the thing that we have said we’re doing”. The prime minister said if Dutton was “fair dinkum, you would vote against our measure and you would commit to roll it back, just like your deputy absolutely promised to”.

Politics is a confidence game and after the overwhelming rejection of the Voice referendum last year, according to one colleague, “the wind went out of Albo’s sails”. The referendum was an election promise kept and herein was a bitter lesson. A failure to respond to the changed circumstances of an opposition hell-bent on destroying the hitherto national consensus rendered the promise futile and, in the end, inimical to the goal of reconciliation.

Albanese thought long and hard about this over the summer break as he and Chalmers waited for Treasury advice on the best way to have an impact on cost of living, particularly for low- and middle-income earners. Both men are adamant they didn’t tell the public service they were prepared to break the election commitment. Labor’s distaste for the five-year-old Morrison-designed package was hardly a secret, however. Apart from repeating ad nauseam that their position had not changed on stage three, neither the prime minister nor the treasurer did much, if anything, to defend the actual design.

Senior Treasury officials on Monday told a Senate cost-of-living inquiry the idea to overhaul stage three was theirs and not the politicians’. The deputy secretary for revenue, Diane Brown, said the treasurer asked his department to consider further cost-of-living measures in mid-December.

Brown said Treasury’s advice was that revamping stage three was the best way to deliver broad-based relief to all taxpayers and did not add to inflationary pressures. It’s a view that was supported by the Reserve Bank governor, Michele Bullock, on Tuesday.

Brown said the advice was delivered to Chalmers a couple of days before cabinet was due to discuss its cost-of-living response. It was economic, not political, advice, she said.

The opposition’s attempts to paint the broken promise as an opportunistic thought bubble rather than a genuine attempt to address bracket creep was rejected by the respected Grattan Institute. Grattan analysis shows the new rates and thresholds to the tax scales, including restoring the 37 per cent rate, means more than 80 per cent of taxpayers should pay the same or even less tax over the next decade.

Economist and executive director of The Australia Institute, Richard Denniss, says Albanese’s recasting of Morrison’s 2018 tax cuts to suit the economy of 2024 “is the biggest and most honest piece of tax reform in Australia in decades”.

Denniss says “it’s the change we need in the middle of a cost-of-living crisis”. He says the government’s legislation will “shift around $90 billion from the top 10 per cent to low- and middle-income earners”. But the cleverness of the design means even the top 10 per cent get a cut. Dutton argues they are being robbed and at his Tuesday news conference made no secret of his rejection of this fairer wealth distribution. He promised to address it with a new tax package closer to the election.

Was this just another magic pudding offer so beloved of oppositions? No one loses and everybody gets a cut without damaging the budget. Dutton did hint he would be looking for savings, and he nominated sacking the thousands of public servants appointed to replace more expensive contractors such as PwC and those hired to address the neglect and depletion of government services.

Denniss says it is true to form. The conservatives in the good times “reward their mates at the top end and in the bad times make lower- and middle-income earners pay with harsh cuts”.

Greens leader Adam Bandt accepts his party has been sidelined from trying to leverage even more assistance to lower-income earners as well as renters and the unemployed. He told his post-party room news conference the Coalition’s capitulation shows Labor and Liberal parties are “about bigger tax cuts for the rich”.

It will be fascinating to see Dutton fulfil his promise of a new tax plan. If his Tuesday news conference is any guide, it will have a very narrow purview after ruling out touching negative gearing, capital gains taxes, wealth taxes or broader resource rent taxes.

Teal independents in seats the Liberals need to win back aren’t so restrictive. Allegra Spender, whose seat of Wentworth is one of the wealthiest in the country, says everything should be on the table.

There is crossbench support in the Senate for reforms to negative gearing and capital gains tax around property. Tasmania’s Jacqui Lambie and the ACT’s David Pocock say housing can’t be ignored and these taxes in their current form have played a significant role in the housing supply crisis.

Pocock says it shouldn’t be easier to buy your second property than to buy your first. Lambie wonders how many investment properties some people need. She told RN Breakfast these investors can’t take their money with them when they are “10 foot under”.

Monday’s Newspoll result was seen by Albanese and Labor as a vindication of his “difficult decision”. It found 62 per cent of Australians believe the prime minister did the right thing by changing the Morrison tax cuts to give lower- and middle-income earners a fairer share.

The Australian noted the government got “no bounce” from the welcomed broken promise. However, it was the Coalition that got no bounce: Labor held its lead from the last December poll, 52-48. The only significant movement in the poll was suffered by Dutton, with a four-point deterioration of his approval to a net negative 13 per cent.

While opinion polls are no predictor of which party will form government after the next election, they are an indication of how the parties are travelling now. And as we were reminded in the Nemesis documentary, Tony Abbott’s loss of 30 consecutive Newspolls was used as a reason to dump him as prime minister.

Albanese, in dismissing claims his mojo hit a flat spot, told ABC TV the Labor government had not lost one Newspoll since he had been prime minister. Senior Labor strategists, however, are cautioning against complacency in the wake of this week’s stage three triumph and the Dutton opposition’s capitulation.

They are very aware that once the tax cuts are paid, voters will ask: what’s next? Former treasurer Paul Keating believed gratitude only lasted until the first pay packet.

The Reserve Bank’s decision to hold interest rates steady on Tuesday was welcomed by the treasurer. But, as economist Stephen Koukoulas points out, the latest assumptions of the RBA give weight to the view that the November rate rise was a mistake and the economy is showing signs of tanking. The revised forecast of economic growth shrinking to 1.3 per cent in the year ahead is very anaemic and linked to rising unemployment.

No wonder the treasurer is already signalling more relief measures in the May budget. Dutton suspects there may be more broken tax promises. He may be right, but if they actually deliver for hard-pressed Australians, he could be pursuing another lost argument.

This article was first published in the print edition of The Saturday Paper on February 10, 2024 as "The boss regains his gloss".

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