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As Malcolm Turnbull and Scott Morrison sell their ‘election’ budget, the prime minister is weighing up a poll that could be as early as August. By Karen Middleton.

Gunning for an early election?

Prime Minister Malcolm Turnbull in Canberra this week.
Credit: AAP Image / Mick Tsikas

In every interview he has done since Tuesday’s budget, Malcolm Turnbull has been asked about election timing. And in every interview except one, the prime minister has said the election will be next year.

“You should expect the election to be at the due date, as I’ve said, which is in the first half of next year,” Turnbull told journalists on Wednesday.

He said much the same to his own MPs in their party room meeting on Tuesday afternoon.

The only time he did not give a direct answer was when the Seven Network’s David Koch asked him the morning after the budget if his plan was to go to the polls in August.

“Well the economic plan is to deliver stronger economic growth,” Turnbull replied. “That’s the plan we’re working on.”

Turnbull’s stable of stock responses on the election question includes the reminder that the Australian people expect their parliament to run a full term.

But The Saturday Paper understands he has told associates privately that, having seen the opinion polls tighten recently, he is prepared to go to an election later this year if the uptick starts to look like a trend.

The High Court’s latest section 44 decision, ruling Australian Capital Territory Labor senator Katy Gallagher ineligible to remain in parliament on citizenship grounds, prompted a cascade of resignations this week from members of the House of Representatives whose circumstances were similar. It also added a complicating layer to Turnbull’s calculations.

The need for four more lower house byelections, plus a fifth to replace West Australian MP Tim Hammond, who announced last week that he was quitting for family reasons, has not necessarily ruled out this year as a general election option.

The House of Representatives Practice handbook explains there are no constitutional or statutory requirements that the writs for byelections be issued within any specified period.

Even so, the speaker, Victorian Liberal Tony Smith, tends to move on such things promptly and was expected as parliament rose to settle on a byelection date by next week at the latest, having received the resignations on Thursday of Labor MPs Justine Keay from Tasmania, Susan Lamb from Queensland and Josh Wilson from WA, along with that of their Labor colleague Hammond. At time of publication, South Australian Rebekha Sharkie, formerly of the Nick Xenophon Team, now renamed the Centre Alliance, had foreshadowed her resignation but not formally tendered it.

What can influence the speaker’s decision, aside from the logistics of securing a date preferably free of school holidays and other inconveniences, and ensuring the Australian Electoral Commission is ready to roll, is whether there is a general election “pending”.

In that case, the speaker is able to defer one or more byelections so Australians in the affected electorates aren’t asked to vote twice in short order.

It’s understood an election due in 12 months is not considered pending, so that is no impediment to scheduling the five byelections promptly, for within the next couple of months.

However, the rules also say that once the byelection writs are issued, they can be withdrawn again if a general election is called in the meantime.

The earliest a general election for the House of Representatives and half of the Senate can be held without mucking up the Senate’s rotation is August 4. The latest is May 18 next year.

It seems the only way it would be feasible to leapfrog the pending byelections and go straight to an election would be if they were delayed for some reason beyond June. Across Australia, the next school holidays fall between July 2 and July 20 and could theoretically provide a reason.

If the byelections are scheduled for after that, an election this year could still be in the offing. If not, it appears unlikely.

Holding a so-called super Saturday of byelections could suit Turnbull, with several of them Labor-held seats on a knife edge and the SA seat, Mayo, a chance of returning to the Liberals, who have traditionally held it.

Also militating against the early election scenario is the need to have all candidates preselected – and confirmed as holding solely Australian citizenship – and to have the money to run a campaign. Senior government sources insist those conditions are still to be fulfilled.

Nevertheless, the budget and the embarrassing Labor resignations over citizenship – after Opposition Leader Bill Shorten insisted that his party had “the strictest processes in place” – have helped give the government momentum this week. Senior people in both major parties concede such momentum may be harder to muster next year.

Within hours of the High Court’s ruling on Wednesday, Turnbull had his lines ready, weaving the budget and the week’s other events into an anti-Shorten narrative around trust.

“You can’t trust Bill Shorten,” Turnbull told Sydney’s Radio 2GB. “You can’t trust him to be straightforward with the Australian people on matters of citizenship and you certainly can’t trust him with your money.”

Turnbull and Treasurer Scott Morrison have pitched their budget around steadiness, reliability and, yes, trust.

“A stronger economy, more jobs, guaranteeing essential services, the government living within its means – that is what this budget is about,” Morrison told parliament as he presented it.

In reply, Bill Shorten and Labor are emphasising fairness.

In a break from Labor’s traditional focus on the lowest income earners, this year it has broadened its scope deliberately to those on middle and upper middle incomes – an attempted counterpoint to the government’s hip-pocket offerings.

“We can do better than this,” Shorten told parliament, comparing his own proposals to the government’s. “The people of Australia deserve better than this and a Labor government will deliver better than this.”

The government’s anti-razzamatazz budget, unveiled on Tuesday night, emphasised people retaining more of their own money but also paying what they owe.

It promised a return to surplus one year early, in 2019–20 – at just $2.2 billion Morrison is choosing not to trumpet that, describing it instead as achieving “balance” – and a bigger-than-forecast surplus of $11 billion in 2020-21.

According to the budget papers, there has been a $10.7 billion tax windfall in the five months since the midyear economic and fiscal outlook, or MYEFO, was published, but only a little of that is being put towards reducing debt and lowering the deficit.

Most is being spent, including on a tax cut – the budget’s centrepiece – to be provided in three phases, the third of which does not take effect until 2024–25.

The first stage, scheduled from July 1 this year, involves a new tax offset for people on low and middle incomes, to be paid in a lump sum at the end of next financial year.

That will equate to about $200 a year for the lowest-earning taxpayers, rising to $530 for those earning $125,000 a year.

The upper threshold for the 32.5 per cent tax bracket also rises from $87,000 to $90,000, allowing people to earn more before they are pushed up into the next bracket.

In the second stage, from 2022–23, the upper threshold for the 19 per cent tax bracket rises from $37,000 to $41,000, which the government says will effectively lock in permanently the previous year’s annual lump-sum bonus.

The threshold for the 32.5 per cent rate rises again to $120,000 in what would be the third threshold increase in that bracket since 2016–17, when it was $40,000 lower.

Finally, seven years from now, the next bracket – the 37 per cent rate – will be abolished, cutting the number of brackets from five to four.

That means all taxpayers earning between $41,000 and $200,000 will be taxed at the same rate: 32.5 per cent. The top rate of 45 per cent will apply above that.

The government insists this would still constitute a progressive tax system and one that would abolish the problem of bracket creep for most taxpayers, whose incomes would have to rise substantially – by a multiple of five for those at the bottom – before they would be pushed into the highest bracket. It says by 2025, 94 per cent of taxpayers would be paying 32.5 per cent.

But the Opposition and Greens say it’s effectively a flat tax and not progressive at all, favouring the highest earners most.

The cost of the first phase is $13.4 billion. The whole package is worth $140 billion over a decade but the government is refusing to itemise it, year on year.

It wasted no time in asking parliament to endorse it, rushing legislation into the House of Representatives first thing Wednesday morning.

Labor has said it will support the first stage of cuts for low- and middle-income earners but not the rest, protesting that parliament is being asked to endorse measures seven years hence for which there are no available costings.

The government insists it’s all or nothing – part of a strategy to tell voters they will have to return the Coalition to guarantee they will receive the whole lot, three elections from now.

In his budget reply on Thursday night, Shorten promised to better the first-year tax cuts for low- and middle-income earners. Labor also opposes the government’s proposed company tax cuts for businesses with a turnover of more than $50 million.

The government continues to negotiate with the Senate crossbench, trying to win enough support to legislate that next round, but it has refused to provide any updated costings for the whole package.

Labor was chasing itemised costings on both the proposed corporate tax package and the one already legislated for smaller businesses so it could know how much money it would have available to allocate to other measures in its own version of the budget.

For the same reason, the government refused to give them.

The biggest ticket savings in the government’s budget come from shifting more people with disabilities off the pension and into work, saving an estimated $4.5 billion over four years; a crackdown on the import and sale of illicit tobacco, reaping $3.6 billion over four years; and a tightening of business access to research and development tax breaks from July 1 this year, saving another $2 billion.

The government is introducing a suite of measures aimed at tackling the black economy in which cash transactions allow service providers to avoid tax, and will be channelling extra funding to the tax office to help it chase down more tax debts and faster.

The knock-on effect of previous decisions to raise the pension age will save another $2.3 billion over four years.

The government is cutting back its visa program for overseas doctors, saving $442 million, and increasing incentives to use lower-cost generic medicines over branded versions, saving another $317 million.

The creation of the Home Affairs Department has allowed some back-of-house operations from various agencies to be amalgamated, saving an estimated $256 million over four years.

The funding for the Australian Securities and Investments Commission (ASIC) is being cut by $28 million over three years, resulting in average staffing levels being reduced by some 30 positions.

And there is a freeze on ABC funding, equating to a cut of $83 million.

Some of the savings to pay for the tax package come from cuts to welfare, particularly for refugees and newly arrived migrants.

From next financial year, refugees needing job-search assistance will have to wait twice as long, 26 weeks instead of 13, saving $68 million over four years.

From July 1, new migrants to Australia will have to wait an extra year – from three to four – to access certain welfare benefits, saving $202.5 million.

The controversial welfare-debt-recovery program, dubbed “robo-debt”, is being extended, with the government planning to target former recipients with large outstanding debts, eventually using new data matching between the Australian Tax Office and the Department of Human Services to track them down. It estimates this will recoup another $299.3 million.

Restricting access to unemployment benefits and a drop in the number of students accessing welfare support will save another $1.2 billion.

There are further changes to welfare. Anyone accepting government support will have their payments docked if they are “serial fine defaulters” – definition unclear – or have outstanding fines imposed by state and territory courts.

Those with outstanding arrest warrants for indictable criminal offences will have payments suspended or cancelled. There is no figure placed on estimated savings because it is subject to negotiation with state and territory governments.

The income-management pilot program being run in Ceduna, South Australia, and WA’s East Kimberley is being extended by another year.

There is also spending in the budget beyond the tax cuts, spearheaded by billions on infrastructure projects across Australia.

Adding a range of new specialist drugs to the Pharmaceutical Benefits Scheme will cost $748 million over four years.

Defence spending will increase by $787 million and there is a funding boost for Australia’s security agencies.

Security screening in airports will also be increased, at a cost of $293 million.

The government has allocated $440 million to improving remote Indigenous housing in the Northern Territory.

The national schools chaplaincy program, providing pastoral care and other support services and whose constitutionality was challenged and upheld in the High Court, has been extended at a cost of $247 million over four years.

There is also a suite of measures aimed at ageing Australians.

A $258 million package, taking effect from July next year, will allow pensioners to earn up to $7800 a year without affecting their pension – including those working in their own businesses. It will also ease the pension means test rules to allow retirees to invest in lifetime superannuation products, to help avoid outliving their savings, and set up a special loans scheme so pensioners can borrow against the equity in their homes.

The government proposes an extra 14,000 high-level home care packages over four years, and 13,500 residential aged care places.

In a bid to boost retirement savings, it is also proposing to change the law so young people with low superannuation balances have their fees capped and are not forced to pay for unnecessary life insurance. It aims to ban exit fees, to encourage people to close extraneous accounts and consolidate their super.

There are also some one-off measures with high price tags.

As Prime Minister Turnbull and Treasurer Morrison announced late last month, the government will fund a series of events and exhibitions over the next four years to mark the 250th anniversary of Captain James Cook’s voyage to Australia and the Pacific, at a cost of $48.7 million.

Tuesday’s papers also confirm $50.3 million from the foreign affairs budget is being allocated to helping fund the Dutch investigation into the shooting down in the Ukraine of flight MH17 in 2014. The money will keep the Australian Embassy in the Ukraine open for the duration and will fund travel to any future court proceedings for the families of Australia’s 38 victims.

In the wider foreign affairs budget, Australia’s overseas aid is being frozen again at $4 billion a year, saving $170 million over four years. Indexation is now due to resume in 2022–23.

And the budget reveals the High Court cases over MPs and senators’ citizenship have cost taxpayers $11.6 million.

Overall, the government’s emphasis is on helping those who help themselves and the budget is as telling for what it doesn’t include as what it does.

Despite the advocacy of a diverse range of experts, the government declined to increase the Newstart payment, now at about $39 a day and frozen in real terms since 1994.

In an unusual chorus, the Business Council of Australia had joined the Australian Council of Social Service in advocating a rise to the unemployment benefit. After the budget, and even more unexpectedly, former prime minister John Howard agreed with them.

“I was in favour of the freeze when it happened but I think the freeze has probably gone on too long,” Howard told a post-budget breakfast in Melbourne on Wednesday.

In response to protestations that $39 a day is not enough to live on, Treasurer Scott Morrison said: “Newstart is not intended to be a payment you live on, it supports you while you get yourself back into work. Our priority is to provide tax relief for working Australians and ensure we create a stronger economy so we can provide those people not in work with the best from welfare which can be provided, which is a job.”

Government sources argue that the bottom line in their decision not to raise Newstart was the bottom line: cost.

Labor has not committed to a Newstart rise. The Greens are pushing for Newstart to increase by $75 a week.

In his budget reply, Greens leader Richard Di Natale is rejecting the government’s proposed tax changes.

“We don’t have a tax system, we have a tax avoidance system,” Di Natale told The Saturday Paper.

He advocates an overhaul of the tax system to introduce what is known as the “Buffett rule” after its chief proponent, entrepreneur Warren Buffett, in which all earnings over $300,000 would be taxed at a minimum of 35 cents in the dollar, regardless of deductions.

The Greens have had the measure costed by the Parliamentary Budget Office, saying it would raise $9.5 billion over four years.

Di Natale proposes a greater effort to address multinational tax avoidance, including a boost for the ATO and an insistence that any secret settlements with companies be made public.

He criticises the budget’s crackdown on refugees and migrants and the lack of any detail about reintroducing a petroleum resource rent tax. He says there is far too little emphasis on addressing climate change.

“It is a budget that sticks the middle finger up at anyone who cares about a safe and stable climate,” he says.

Bill Shorten’s budget reply included what he said was a tax cut double the size of the one in the government’s first stage. He proposes to fund 100,000 fee-free TAFE places in areas in need of skilled workers. He is also proposing to reverse the government’s cuts to hospitals, which Labor has costed at $2.8 billion over the next seven years.

The Labor reply targeted spending on health and education, under a fairness banner.

As one senior Labor figure observed privately, the coming election – whenever it is held – is likely to be one of the rare occasions when both major parties are focused on similar issues, albeit with different emphasis.

As Shorten’s reply approached this week, the government was focused squarely on him, seeking to undermine his personal credibility.

Senior Coalition figures have acknowledged they aim to damage Shorten but not so badly that they risk his more popular frontbench rival, Anthony Albanese, replacing him.

The government has taken out a little insurance against Albanese in the budget, in the form of its measure to abolish a tax that charges craft brewers 40 per cent more than mass-production operations for using smaller kegs.

“This not only champions the craft brewers that we’ve all grown to love, it raises a very tantalising prospect for Australians: the likelihood of cheaper craft beer,” Scott Morrison said, announcing the measure a few days before the budget.

Albanese has campaigned for an end to the tax since its introduction and has a craft beer named after him – microbrewery Willie the Boatman’s “Albo Corn Ale”, produced in his Sydney electorate. Having previously introduced a private member’s bill in parliament aimed at making the change, he has been busily taking credit for the government’s left-field move this week.

But for now, the government’s main focus is on the bloke who’s in the opposition leader’s job, not the bloke who ran against him once before and lost.

“This is the deliverer of rolled-gold guarantees,” Malcolm Turnbull bellowed at Shorten in parliament on Thursday, mocking his prior assurances about the citizenship status of his MPs.

“He is a guarantee deliverer of Olympic proportions.”

Turnbull elected not to remind parliament that he had given his own guarantee last year, that his then deputy prime minister Barnaby Joyce was not a dual citizen, insisting that the High Court would “so hold”. Labor was quick to do it for him.

With Joyce ruled ineligible and forced to a byelection, Turnbull’s original assertion was found to be somewhat shy of correct.

It remains to be seen whether his recent assurances on election timing are any more reliable.

This article was first published in the print edition of The Saturday Paper on May 12, 2018 as "Is he gunning for an early election?". Subscribe here.

Karen Middleton
is The Saturday Paper’s chief political correspondent.