Perhaps the biggest irony of the current political situation is the shift by Peter Dutton and his Coalition team from demanding more detail to ducking it. Compare the opposition’s insistent calls for detail on the Voice to Parliament referendum and for a response from the government to the High Court’s decision on indefinite detention with this new evasiveness on tax and, indeed, on any policy issue.
Dutton’s clear strategy as opposition leader has been to make headline-seeking statements, which he can then rely on friends in the media to reproduce as stated, without question. Conspicuous examples are the claims that offshore wind farms pose a threat to whales or that nuclear power is the answer, without any supporting evidence or detail and without any relevant interrogation from reporters. In a similar fashion, he based much of his “No” case in the referendum campaign on a commitment to a second referendum, and unspecified alternative strategies to close the gap of Indigenous disadvantage. Even now, months after the vote, he has provided no detail and these commitments have been left to drift into the ether. Yet there’s been no outcry from the mainstream media about his “broken promises”.
Dutton relies on journalistic slackness on a range of issues to sink Prime Minister Anthony Albanese. He needs to be asked a range of questions. What is the opposition leader’s response to further cost-of-living assistance? What is his fiscal strategy? What is his anti-inflation strategy? What is his productivity strategy? How does he see our middle-power role in foreign affairs and defence? He’s provided no details, even if he actually has a view.
Dutton and his reporters have looked ridiculous with their attacks on Albanese over his changes to the stage three tax cuts, while continuing to bleat on about the need to do even more to assist with the cost-of-living crisis.
It is clear Dutton et al were caught short by Albanese’s move on stage three. How easily they ignored the detail of their original announcement of the cuts – which were deliberately inequitable, locked into legislation and clearly designed to wedge an incoming Labor government. Only a Coalition government could deliver such “reforming” tax policy, they said, with slogans touting the Liberals as the party of lower taxes. It was a wedge similar to their low- to middle-income tax offset (LMITO), given as part of their temporary “cushioning” of Covid, and for which they had locked in a termination date that an incoming Labor government would also have to deal with.
The original stage three cuts carried echoes of both Paul Keating and John Howard. I, for one, will never forget the dishonesty of Keating’s L-A-W tax cuts, which he legislated for the 1993 campaign to create the illusion he could deliver the personal and other tax benefits of my Fightback! package, without a GST. Of course, he would never be able to do that. I vividly recall the day he sent the then treasurer, John Dawkins, into the parliament to admit they couldn’t deliver them, even though they had been legislated to take effect. Using legislation in an attempt to convince voters of a leader’s bona fides in support of an unaffordable election promise – sounds familiar, doesn’t it?
Howard’s most memorable broken promise was that there would “never, ever” be a GST under his government. But before that he explained his surprise cuts to education, labour market programs and the ABC in the 1996 budget by declaring that he had kept “core” promises. Then there was the legacy of the tax cuts he promised, and delivered, squandering the benefits of the China resources boom. This led to the early broken promises of the Abbott government, in the face of a “debt and deficit crisis”. The budget deficit at that time basically reflected the full-year cost of those promised Howard–Costello tax cuts.
Which leads to the question: would the Coalition actually have delivered the stage three cuts as announced and legislated if they had won the election? They would have had to face the alarming costs of the policy, running into hundreds of billions of dollars, and the inflationary consequences in the context of the inflation and cost-of-living crises they had created.
Albanese was right that the only responsible position was to reconsider those cuts in light of the very different economic and geopolitical circumstances we’re in now – he is clearly prepared to take the political risk of doing the right and responsible thing and is willingly copping the claims of broken promises.
I have been fascinated that the media hasn’t recalled, in its enthusiasm to call out a broken promise, Labor’s attempt when in opposition to amend the legislation, a move that was blocked by the then Coalition government with the support of Jacqui Lambie.
Another demonstration of Dutton’s ignorance of detail is his claim the opposition’s version of stage three was real tax reform – specifically, that it would have eliminated bracket creep, which the Coalition hung on the proposed abolition of the 37 per cent tax bracket. Surely Dutton is not really arguing that the way to get rid of bracket creep is simply to abolish the tax brackets? This is clearly one aspect of his attack on the government in which the opposition leader should be challenged on detail. What is his position on a progressive tax system? And what is his position on the transfer system, especially as it links to the tax system?
It is important to note here that there is latent support among many Liberal members, including those in the party room, for a flat tax system. I suspect this was an element of the so-called stage three “reform”: moving as far as possible towards setting that flat rate around 30 per cent. Dutton should be drawn out on this question, and the possible consequences for our so-called egalitarian society. Further, how does this fit with his view of welfare assistance and the transfer system?
Unfortunately, Dutton seems to think he is on a winner with this bracket creep issue, now peddling some data released by one of his mates at The Australian Financial Review, suggesting the revised stage three will mean the government still collects a further $28 billion from bracket creep in future years, thereby negating much of the benefit to middle Australia. I also noted one of his Sky News mates claiming the scheduled indexation of petrol excise will also eliminate the benefits for many in Middle Australia. Of course, no detail to support these criticisms is genuinely put forward for discussion and debate. Dutton should be challenged for his views and for the promises he is prepared to make.
The correct method for dealing with bracket creep is to index the tax scales to the consumer price index or to some other relevant wage/prices index. This would impose a most-effective fiscal discipline. As an adviser to the treasurer in the 1970s, I was part of the process that led to the indexation of tax scales under the Fraser government. Although the benefits in terms of fiscal responsibility were unquestioned, Malcolm Fraser was pissed off that he couldn’t extract clear political credit for such a courageous and responsible policy. I recall he challenged me directly on the matter, and somewhat jokingly I suggested the Australian Taxation Office should be made to calculate the benefit of such indexation for each taxpayer, and mail it out as a cheque from the PM each Christmas. Clearly, few could recognise just how much bracket creep they had avoided thanks to effective indexation.
This remains a significant public policy challenge, to determine how to eliminate bracket creep and to ensure the political recognition of the policy.
Unfortunately, it’s politics that is now basically preventing our political leaders from advocating genuine tax reform. There have been too many successful fear campaigns against reform, certainly going back to Keating’s opposition to the Fightback! proposals, the scare campaigns against Bill Shorten’s attempt to deal with a range of conspicuous inequities in the system, and the constant, dishonest campaigns by corporate bodies for lower corporate tax, to name a few. Objectivity and evidence have been lost to fear. The tragedy is that with so many authoritative reviews of the tax and transfer systems, most politicians know what needs to be done to reform the system, but they simply don’t have the courage to get on the front foot and advocate it. Another constraint on their willingness has been the mounting evidence the system simply underfunds the enormous spending commitments and promises made by both sides, with national and state debts already unsustainable.
No one is prepared to be honest enough to admit some hard truths: the tax base has to be increased, serious further spending cuts need to be made; the inequities of many tax expenditures have to be eliminated; reform of our federation is a fundamental precondition to tax and transfer reform; corporate loopholes need to be closed to limit the sector’s capacity to move profits offshore; the reliance on income taxes must be reduced and expenditure and assets taxes increased. There are many more such points to be made. The evidence is voluminous, the willingness to address it non-existent.
In this environment, Dutton will continue his headline-grabbing announcements and negativity, resisting the call for detail to support his arguments. Although this worked well for him during the referendum campaign, voters will increasingly suspect he hasn’t done the hard yards in policy development, that the emperor has no policy clothes. In turn he will be counting on his media allies to run his lines and claims uncontested.
His immediate challenge was to respond to the government’s reset of stage three cuts, which were very effective from an equity and cost-of-living perspective. He had little option but to back the cuts for Middle Australia – that is, to acknowledge the reverse wedge. If he wants to restore cuts for his mates at the top end, he will have to find the billions required to do so.
Recent polling suggests that despite Dutton’s “liar in the Lodge” campaign, the government retains a significant two-point lead in the two-party preferred poll, with about two-thirds of voters canvassed – in both the younger and older demographics – supporting the government’s reset of stage three. Dutton will just continue to create the impression, as the election draws nearer, that he will release a raft of policies consistent with his unspecified “vision” for the country.
What a tragedy. Watching the ABC’s Nemesis program, one can’t help but think that if only all that effort in leadership battles could have been put into policy development, there would be no question today about what the Coalition stood for. Our nation would be much better for it.
This article was first published in the print edition of The Saturday Paper on February 10, 2024 as "Broken word artists".
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