Everything is going up, except Morrison’s chances
With three weeks to go, one thing is crystal clear: this is not a re-run of the 2019 election campaign for Scott Morrison. The prime minister is at best treading water; a more apt description might be that he is taking it.
What we have seen in the first half of the campaign is a floundering Morrison unable to get a firm fix on Labor despite the leg-up he was given in the first week by Anthony Albanese’s memory lapse over key economic figures. Albanese is a threat, according to Morrison, because he is a known unknown. Unfortunately for the prime minister, he himself is a known known, with a record over the past three years that he is having great difficulty defending or explaining. How sweet must be the memory of the blank page that he presented the last time he faced the voters.
Even with his opponent housebound in Covid-19 isolation, the prime minister has been buffeted on the key issues of national security, climate change and, crucially, the cost of living.
Midweek the latest fix on inflation struck the Liberal campaign like an anti-ship missile. The treasurer and prime minister were expecting a hit but not as big as the one that arrived, with a quarterly rise of 2.1 per cent for an annual hike of 5.1 per cent. Both numbers are the largest increase since John Howard introduced the goods and services tax in 2001.
The biggest contributors to this outcome were house costs, food and fuel prices. The pre-election budget took out some insurance by halving petrol tax for the next six months, offering a one-off top-up of the low- and middle-income tax offset, and granting a one-off $250 payment for pensioners and concession card holders.
But there was a real sting in the underlying rate, which is the one the Reserve Bank of Australia looks at when it is determining monetary policy. That increased to 3.7 per cent, outside the Reserve’s target range of 2 to 3 per cent. Economist Stephen Koukoulas is not alone in believing it puts real pressure on the RBA to raise interest rates as early as next Tuesday. Such mid-election campaign rises are rare. The last time it happened, in 2007, John Howard was furious. But unless governor Philip Lowe wants to see inflation roar out of control, Koukoulas says, he has no real option but to announce a rise. His view is that they should have been raised much earlier. “Rates have to rise sooner rather than later and everybody knows it.”
The shock result, well above what the market was expecting, feeds directly into Labor’s campaign mantra that “everything is going up except your wages”. The budget somewhat optimistically forecast wage growth of 2.75 per cent but, with inflation running at 5.1 per cent, real wages aren’t falling they are crashing. This is happening at a time when highly leveraged homebuyers are about to see their mortgage costs increase, and renters will likely be similarly hit.
Labor’s shadow treasurer, Jim Chalmers, blamed the government for what he called the “triple whammy” of stagnant wages, rising living costs and the anticipated interest rate hike.
The day the inflation numbers were released Labor unveiled key elements of its economic plan, which includes savings of $3.1 billion by scrapping the use of external contractors and consultants by government departments. There would also be an audit of government rorts and the estimated $23 billion worth of pork-barrelling rolled out in targeted seats.
The announcement included a commitment to the OECD’s crackdown on multinational tax avoidance, with the imposition of a minimum 15 per cent tax rate and banning of the use of international tax havens. There was no dollar sign put on this, but the question remains whether Morrison’s guarantee of “no new taxes” if his government is returned applies to these international businesses.
Morrison’s guarantee is already looking very suspect. It does not include the estimated $14.8 billion in tax hikes over the next 15 months, contained in the fine print of the budget. That includes doubling the petrol tax to 44 cents per litre and abolishing the low- and middle-income tax offset. The one-off $250 payments will also be well out of the equation by then.
When he was tackled about these rises, Morrison said the already legislated stage three tax cuts that will come in the next term would mean 94 per cent of taxpayers would not be paying a tax rate higher than 30 per cent. Apart from the unaffordability of this measure as the government heads to a $1 trillion in debt, and its inherent unfairness, it doesn’t happen until 2024-25.
Labor is not proposing to scrap these tax rises or the stage three cuts, but says it would actively argue for wage increases in the Fair Work Commission.
Morrison scoffs at this, saying Albanese has no “magic pen”, and somewhat curiously claims that should the Labor leader become prime minister he would not be all that influential.
What also needs to be factored in is Labor’s industrial relations reforms, looking to insecure work, labour hire arrangements, conditions for casuals and greater scrutiny of the gig economy. Also worth considering is the impact of Labor’s childcare affordability reforms, which would boost the incomes of more than 90 per cent of working families. Chalmers says Morrison “just has a plan for the election and not one for the economy”.
What this shows is that the alternative Labor government is more than willing to engage on the Coalition’s preferred turf. The lazy analysis that says if Labor is talking about the economy or national security then the Coalition is winning is bunkum. Nowhere is this clearer than in the way the China–Solomon Islands security deal has dealt a serious blow to the Morrison government’s credibility.
Labor was quick to hang the blame on Morrison for the “biggest policy failure in the Pacific since 1945”. The Labor campaign had not planned to make national security a big part of its case against the government’s re-election, but was quick to pivot in this direction, utilising the trustworthiness of the shadow Foreign minister, Penny Wong, to lead the charge. According to a Morgan poll, she is Australia’s most credible federal politician.
Everything Labor had been saying about Morrison’s failure in government to turn up and accept blame unfolded in the days that followed. Its research found Morrison’s counterattack was seen by voters as “childish”. There was an example of this in the leaders’ debate, where the audience groaned when Morrison accused Albanese of “always taking China’s side”.
Wong’s criticism of Minister for Foreign Affairs Marise Payne for not personally going to the Solomon Islands also cut through. Payne admitted on RN Breakfast that she hadn’t been there for almost three years, which was picked up forcefully by former prime minister Malcolm Turnbull. He said bullyboy tactics are not the way to treat our neighbours in the Pacific. What is needed is respect and engagement. He told ABC Radio: “This is a hose you have to hold.” Albanese couldn’t have put it better.
While some believe Turnbull is motivated more by revenge against those who cut him down in 2018, it is hard to question the validity of his criticism of Minister for Defence Peter Dutton’s war talk against China on Anzac Day. He said Dutton was “becoming more and more bombastic and belligerent”. Turnbull accused Dutton of chasing tabloid headlines and said “it’s a pity that he doesn’t match it with actual preparation and work”.
Turnbull described the cancellation of his contract with the French for a fleet of submarines as “bizarre” and noted it left a huge capability gap. It’s a gap almost as big as the one opened by Morrison when he talked of a “red line” if China established a military base in the Solomons.
Although the prime minister was careful to hitch his threat to the Americans’ “significant concern” and warning it would “respond accordingly”, defence experts derided the hollowness of Australia’s sabre-rattling at the Asian superpower.
Two days later, Morrison attempted something of a backtrack. When asked what he meant by the “red line”, he claimed “it would not be responsible” for him to speculate in public. This did nothing to repair our relationship with our biggest trading partner. It is as if our almost $600 billion annual two-way trade is completely expendable. It surely is a counterproductive way to serve the national interest and shows an appalling lack of diplomatic statecraft.
Labor will launch its national campaign in Perth on Sunday. The unprecedented move shows the enormous significance the party places on the Western Australian capital for its election chances. It believes two to three seats are within its grasp.
Albanese’s isolation period ended on Friday and he hopes to be well enough to be the star turn. Whatever the fates have in store for his health, the campaign will return to its core cost-of-living themes. Climate change action, which is integral to those plans, will assume even greater prominence as the civil war within the Coalition has trashed the credibility of its key commitment to net zero by 2050.
The latest opinion polls have boosted Labor morale, with no real shift in the party’s persistent election-winning lead. Time is running out for a drowning government.
This article was first published in the print edition of The Saturday Paper on April 30, 2022 as "Everything is going up, except Morrison's chances".
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