Labor’s contortions on tax package
This weekend Scott Morrison is rubbing shoulders with 19 other world leaders at the G20 summit in Osaka, enjoying the status of Australia’s newly elected prime minister. It’s perfect cover for the softening economy back home. Before his departure, he warned: “There are gathering clouds in the global economy.” The subtext was that Australia will play its part and is not immune from any shockwaves. It was left to his treasurer to do most of the pre-emptive blame shifting.
From New York, Josh Frydenberg aimed a political missile with laser-like accuracy. “Earth to Anthony Albanese: Labor lost the election. Now it’s time to support the Coalition’s tax cuts in full.” It hit the opposition midship, striking at the vulnerability dividing Albanese’s shadow cabinet and caucus. From Germany, Finance Minister Mathias Cormann added his firepower. He accused Labor of playing tactical political games with the economy and with people’s livelihoods.
Much to the fury of Albanese and some of his most senior tacticians, the agriculture and resources shadow minister, Joel Fitzgibbon, limited their options with a forthright interview on RN Breakfast. He said his starting point was that “you can’t deny the punters a tax cut from opposition, particularly so soon after an election where we had our backsides kicked. And we can’t afford to give our political opponents the opportunity to blame us for a bad economy, an economy which has gone bad on their watch.”
But the shadow cabinet minister did not leave it there. He agreed the third stage of the government’s $158 billion tax cuts package should be decoupled because it is “very expensive at $95 billion”. The cuts are weighted to high-income earners. He said, “We still believe that is unfair, we still believe they are regressive.” However, Fitzgibbon is no poker player. While he said splitting stage three out of the package “should be our first objective”, he conceded that if the government refuses, Labor has only two choices: support the whole thing or support none of it. He is not attracted to the latter option because, he told host Fran Kelly, it “would deny low- to middle-income earners much-needed tax relief”.
Fitzgibbon’s unwillingness to stare down the government’s “recklessly stubborn” behaviour can probably be explained by his own near-death experience at the election. His primary vote collapsed and One Nation recorded close to a 22 per cent vote in his Hunter electorate. He blames it on Labor’s botched campaign. He says the attack on the “top end of town” – taking from the rich to give to the poor – had a fatal flaw. It “failed to define who the rich are”. His coalminers, he said, “on their $160,000 a year, with potentially a negatively geared house, were entitled to ask themselves whether we were talking about them, and the rest is history”.
A couple of hours after the interview, Fitzgibbon joined his shadow cabinet colleagues and found quite a few of them shared his inclination to wave the whole package through if attempts to amend it failed. But there weren’t enough of them to reach a firm consensus. That left Albanese and his Treasury spokesman, Jim Chalmers, to face the media claiming they had not discussed what to do if the government resisted Labor’s “much better package”.
What made the package better in their opinion was in fact a spectacular Labor somersault. Ditched was its election campaign opposition to stage two of the tax cuts. Now Labor was calling for an immediate adjustment to the 37 per cent threshold, delivering relief for those earning up to $120,000. That was not due to happen until after the next election. And for good measure, Labor also called for planned infrastructure spending to be brought forward, to give the economy the stimulus everybody, and particularly the Reserve Bank governor, keeps banging on about.
Chalmers, in a defiantly humble speech at the National Press Club, said now was the time to get real about economic stimulus and true aspiration. He also fessed up to getting his politics-of-envy language wrong in the campaign. He said the Liberals’ plan as it stands “won’t actually see every Australian worker get a tax cut in this term of parliament, but Labor’s will”. And he said it can be done while still delivering the forecast budget surplus thanks to higher-than-bargained-for iron ore prices and revenue from company profits holding up.
Cormann was disdainful. He said Albanese and Chalmers “are wanting to run the budget and the government from opposition, holding Australian workers who voted for lower income taxes to ransom”. Chalmers says, on the contrary, it is the government holding low- and middle-income earners to ransom for an excessively large tax cut for the most wealthy, which isn’t due to “kick in for another 262 weeks”. And worse, the government has not spelt out what outlays will have to be curtailed to deliver that part of the package. Unfortunately for Chalmers, his arguments have been undermined by Fitzgibbon and Victorian Labor backbencher Peter Khalil, who revealed Labor’s nervousness about how hard the party should pursue its objections.
Utterly unimpressed with Labor’s contortions is Greens leader Richard Di Natale. He says “there’s not a chance in hell” the Greens would support stage three of the tax package. He accuses Labor of being willing to betray 100 years of commitment to progressive taxation. He describes the $95 billion price tag and the flattening of the tax brackets to 30 per cent as “utterly obscene”. Di Natale says this aspect of the package is “taking us down the American path”. He says Fitzgibbon and Labor are taking the “wrong lessons out of the election”.
Di Natale is hoping the two Centre Alliance senators and the newly reinstalled Jacqui Lambie deny the government the numbers to wave the whole package through. The Greens have been talking to this new bloc in the hope of steeling its resolve. Despite this, Di Natale, like many in the Labor camp, believes the government will get the numbers it needs.
An early test of that will be the senate’s reaction to Morrison’s demand that it stays sitting until the package is dealt with. If the Liberals get the numbers for that, Di Natale says it will be a sure sign the entire package will pass. If it does, the Greens will move for its repeal.
Indeed, Rex Patrick and the Centre Alliance may already be inside the government’s tent. Midweek, Patrick confirmed The Australian’s report he and his colleague Stirling Griff were “confident of a positive outcome” in coming days. They were waiting on Resources Minister Matt Canavan to get back to them in writing with details on how he would assure domestic gas supply and bring down energy prices that would otherwise “gobble up” any tax cut relief. Labor’s Joel Fitzgibbon says the two issues – tax and energy prices – shouldn’t be conflated but he, too, has been talking to Canavan with a view to crafting a bipartisan national interest test that would meet real concerns over supply.
Di Natale is still trying to come to terms with Morrison’s “miracle” win, as are many in the Labor Party. In his press club speech, Chalmers lamented that Labor taking “so many ambitious policies to the election” obscured or even prevented a “proper conversation about the Coalition’s substantial failures, not least of which is their stewardship of a weakening economy”. He said the spotlight “must now turn to the Coalition and its failures – where it should have been all along”.
The Shorten opposition, unlike the Abbott one in 2013, let the government off the hook for its dysfunction, vendettas and betrayals. Where were the dramatic black-and-white ads tying three prime ministers and three treasurers into the “longest per capita recession since the early 1980s”, as Chalmers now bemoans, along with stagnant wages “growing eight times slower than profits”? Anthony Albanese is determined not to repeat the mistake and fully intends to exploit damaging revelations that promise to be unleashed in the next six months, in tell-all documentaries and books. The most eagerly awaited will be MalcolmTurnbull’s own account, A Bigger Picture, with a trail of WhatsApp messages documenting what he sees as treachery.
The first in the series was broadcast this week on Sky News, titled Bad Blood/New Blood. It produced two Liberals who, on the record, pointed to evidence that Morrison did indeed have “blood on his hands” in the coup that toppled Turnbull. Morrison denies it, but his closest supporters not only marshalled numbers, they engineered a switch whereby five of them voted for the spill only then to vote for Morrison in the run-off against Peter Dutton and Julie Bishop. One Liberal MP says it defies belief that his colleagues Alex Hawke and Ben Morton would have been working so assiduously if they weren’t sure they had a candidate.
Next off the rank is Plots and Prayers by Niki Savva, whose account of the Abbott government’s ruin was full of ugly revelations. Out next week, her new book is sure to embarrass Cormann and Home Affairs Minister Peter Dutton, both key players in the government whose poor view of Morrison is documented.
It all makes consolidating the “miracle” victory just that little bit harder.
This article was first published in the print edition of The Saturday Paper on Jun 29, 2019 as "Package deals". Subscribe here.