In an interview with The Saturday Paper, the prime minister explains his thinking on the stage three tax cuts and names the four themes that will drive Labor as it prepares for the next election. By Karen Middleton.

The Albanese interview: ‘It is the right plan for the right time’

Anthony Albanese wearing glasses and a grey suit.
Prime Minister Anthony Albanese.
Credit: Alex Ellinghausen

Anthony Albanese is not unhappy that people are talking about him breaking a promise on tax. When it is suggested he appears to be almost revelling in the criticism for overhauling the former government’s planned stage three tax cuts, he does not deny it.

“We were conscious that it would be a contentious decision, but it’s the right decision for the right reasons,” Albanese tells The Saturday Paper. “And I am prepared to argue the case and have been doing so and will do so in the parliament as well.”

Having taken less than a week’s break over the summer, and deliberately created a political storm to start the year, Albanese is surprisingly energised as he speaks to this newspaper from the New South Wales Central Coast on Thursday. Between FM radio interviews and with a news conference pending, he is out spruiking the revised package of tax cuts along with figures revealing a rise in the number of doctors bulk-billing, released to mark the 40th anniversary of Medicare.

With last year’s speculation about a pre-return ministerial reshuffle banished, a political reset has taken the form of tax changes instead.

Albanese insists easing the cost of living remains his primary focus heading into parliamentary year 2024. “Cost of living, strengthening Medicare, a future made in Australia and our place in the world: they’re the four themes of the government going into this year and we’ll continue to focus on that,” he says.

The upbeat demeanour is due to what Labor strategists believe was a correct calculation – at least so far – that the economic and political consequences of abandoning a promise to deliver the Morrison government’s legislated tax cuts would end up more positive than negative.

Albanese says the government decided late last year more cost-of-living relief was necessary, although the Coalition believes the change was in the works much earlier, given Labor’s backing of the original package was always extremely reluctant.

Commissioned in December to examine options, Treasury recommended a rearrangement of the Coalition package, making the cuts more generous for those on low and middle incomes and smaller at the top, but within the same general cost envelope. It reported it could find no other way to offer direct relief – and nothing at all within the next six months – that would avoid pushing up inflation.

According to other senior Labor figures, the government’s political calculations began with the assumption the Coalition would object to the change. If it did, they reckoned it would then face the same unpalatable choice Labor faced in opposition ahead of the 2022 election: giving the government a political win by agreeing to its proposed changes, or setting itself up for a loss by saying “no” to more voters receiving more money.

“This is reminding people that the Coalition have become the ‘Noalition’ – that they oppose every cost-of-living measure that we’ve put forward,” Albanese says, rattling off a list including energy price relief, cheaper medicines, fee-free TAFE and a rise in the minimum wage.

“They are addicted to just saying ‘no’ and this is a reminder that they are always just focused on the politics, not focused on the impact on people.”

Albanese accuses the Coalition of being “all over the shop” on how to respond.

“At first, they said they were opposed to it,” he says. “They didn’t know what it was, but they were against it. Then they said they would reverse it, which means increasing taxation on 12 million Australians at the next election.

“And now it’s unclear what they are going to do. They’re not an alternative government. They’re just a protest group and I think this issue has highlighted that.”

Albanese insists he is “not looking at politics” in relation to the tax decision but that the opposition is “obsessed” with it. “We’re looking at doing the right thing by people.”

Senior government figures acknowledge making the tax changes is not without political risk. Treasury reports it will actually increase the tax take by $28 billion over 10 years, as people earning more are pushed into higher tax brackets.

The government dismisses concerns about bracket creep as fears on the never-never, banking that people will care more about their take-home pay today than what they might earn in 2034. Yet critics including teal independent Allegra Spender insist it was an opportunity for greater reform.

The government is also not ruling out further direct help in the federal budget in May, albeit with the inflation threat still present.

“We are making very welcome and very encouraging progress in the fight against inflation, but it’s not mission accomplished because we know people are still under pressure,” Treasurer Jim Chalmers said in a speech to The McKell Institute on Thursday night, delivered after the release of figures that showed inflation had dropped beyond expectations to 4.1 per cent over the year.

“We expect to see real wages growth this year,” he told journalists on Wednesday. “We expect to see inflation moderate further and the tax cuts will be flowing in the second half of the year.”

Politically, the greatest potential danger for Albanese and his government is to their credibility, having dumped the position they took to the election after insisting repeatedly they would not. Although they avoid the terminology, they effectively concede it is a broken promise from a government that campaigned on integrity. Senior Labor figures have differing views on how big a problem that could be.

Some believe the politics of it could still go either way. Others are confident voters will be more willing to forgive the prime minister a broken promise that advantages them financially than if it had a more distinct personal downside. Still, they do not advocate trying it again.

There appears to be greater consensus that having a public argument about delivering bigger tax cuts to more Australians, especially at the lower end of the income spectrum, is no bad thing. One source predicts the Coalition will complain but ultimately allow the legislation through when it is introduced into parliament next week. In short, and more colourfully, they predict it will “bitch and fold”. Several Labor sources confirmed there is no room for any tweaking, ruling out deals with the cross bench.

The Coalition leadership is deferring fixing a position until it sees the legislation, arguing the need to ensure there are no political “booby traps”. The shadow finance minister, Jane Hume, accused the government of presiding over an 8.6 per cent reduction in disposable income for the average Australian family over the past 18 months.

“Now for someone on an average wage, that equates to around $8000 worse off that you are today than you were 18 months ago, yet Prime Minister Albanese, lying through his teeth, has now said that you should be grateful for what would probably be about $800 or about $15 [a week],” Hume told Sky News on Wednesday. “Quite clearly, this was always on the agenda. His integrity is shot and his cabinet, like lemmings, have followed their lying prime minister off an integrity cliff. We can never believe them again, whether they promise to not touch negative gearing, not touch taxes on the family home.”

Senior government figures argue the Coalition’s push to expand the debate to negative gearing – political poison for Labor in 2019 – proves it is losing the substantive argument. However, they also do not want to discuss negative gearing – or anything else that could muddy the waters on tax.

All Albanese will say is: “We are focused on the reform that we will introduce into parliament next week.”

Key Labor strategists believe the political criticism serves to remind people there are tax cuts and the longer the fight goes on, the more that is the case. They point out that oppositions usually see no political benefit in blocking a tax cut and acquiesce quickly, as Labor did in relation to the Morrison government’s stage three cuts when they were legislated in advance five years ago.

That consensus generally guarantees the cuts are implemented but also that they fade from public memory with little political boost for the government that delivered them.

In contrast, Labor’s strategists say, a grumbling opposition keeps the tax cuts alive in voters’ minds before and even after they land in pay packets. They hope this might generate positive sentiment where otherwise there would be none. The Saturday Paper understands this was at least part of the thinking in taking the risk.

The change was unveiled before the Dunkley byelection, to be held on March 2. The government feared it would be accused of deceiving voters there if it waited until afterwards. It still expects a swing – possibly sizeable - against it in Dunkley.

The decision to slash the tax cuts for the highest income earners and increase them lower down has also delivered a morale boost across the wider Labor Party membership, which had ended last year despairing after the rejection of the proposed Indigenous Voice to Parliament and a brutal final parliamentary session.

They, and the prime minister, suddenly have something for which to advocate, that ignites Labor convictions on traditional Labor turf of equity and fairness. Doing nothing, some say, would have risked disillusioning the Labor base further and seeing party support desert the government – a point that arguably adds weight to the suggestion they may have contemplated this all along.

The government believes the change enables it to claim both ownership and credit. “Ours are immediate,” Albanese says of his proposed amended cuts. “We’re not saying, ‘We’re going to do something in five years’ time.’ We’re doing it now and the parliament across the spectrum will get the choice of whether our plan is better than the previous plan. And quite clearly it is. It is the right plan for the right time for the right reasons.”

Albanese makes a point of referring to the “Morrison tax cuts”, stirring memories of a predecessor who still registers negatively among voters. Former prime minister Scott Morrison flagged his resignation from parliament as the summer political hiatus ended and is expected to formalise it next week.

Government strategists were surprised the Coalition leadership did not use the quiet summer period to hammer Albanese and the government harder. They had expected senior Coalition figures to make a more concerted effort to retain the political momentum they gained at the end of last year.

That also allowed Albanese space to refresh, after only a four-day holiday in early December, which he shortened from a week to attend the funeral of colleague and friend Peta Murphy, whose death triggered the Dunkley byelection.

He insists he is rested enough and ready for the year.

“I work hard because I have an incredible privilege and I intend to not waste a day,” he says, echoing a pledge he made on election night. “At some stage in the middle of the year, I’ll have a short break, but this has been a challenging time.”

He volunteers that he was amused to read excited early-election speculation after he visited particular electorates. “If they’ve been paying attention over the last 20 years, they would have seen that was business as usual.”

Nevertheless, that business is the business of seeking re-election. More than a year before the general election is due, campaigning is already under way.

This article was first published in the print edition of The Saturday Paper on February 3, 2024 as "The Albanese reset: ‘It is the right plan for the right time’".

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