‘I’m not trying to own the past, I want us to own the future’: Chalmers attempts to escape Keating’s shadow

In less than a decade, Jim Chalmers has travelled from the opposition backbench to the treasury portfolio.

Chalmers’ talents are not in question. His ambition, and his obvious place at the front of the succession queue, are frequently discussed by colleagues, both junior and senior. He’s also often compared with Paul Keating, his political idol, mentor and subject of his PhD.

But that comparison with Keating – arguably the nation’s greatest economic reformer – is seeping more often into discussions about Chalmers’ performance.

And the treasurer is starting to feel that pressure.

Critics of Chalmers within his own party say he has been too timid in the government’s first term.Credit: Alex Ellinghausen

Chalmers doesn’t want his success to be defined by how faithfully he replicates Keating’s reforms – he wants it to be measured by how successfully he leads and owns the narrative about Australia’s future, as Keating did for so many years.

“I’m not trying to own the past, I want us to own the future. We’re not interested in some kind of pissing contest with the past. Good governments face forward, not back,” he says.

“The 2020s equivalent to the 1980s reforms – what Paul had to do with the opening up the economy – is the energy transition. Sticking [successfully implementing] the energy transformation will do for Australia in the coming decades what the opening up of the economy did for the last generation in terms of prosperity – that’s my genuine belief.”

His critics within the Labor Party describe him as timid and question whether he is being kept on the leash by Prime Minister Anthony Albanese, who favours incremental change. They ask where is the big bang reform that Keating delivered – think floating the dollar, opening up the banking sector to foreign competition, tearing down tariff walls, overhauling the tax system and more.

Chalmers and his allies are keenly aware they’re operating within the confines of a patient government and a cautious prime minister, in a less patient, more incautious age. The media and policy landscape of the 2020s would be unintelligible to someone of the 1980s.

Labor may be only a one- or two-term government, one of Chalmers’ allies says pessimistically, so they have less time to deliver reforms and make them stick.

Does the treasurer lack ambition? Or has he got more done, quietly, than perhaps people realise?

Huge challenges

One of those who believes Chalmers is squandering his position is former Treasury official and current Macroeconomics Advisory managing director, Stephen Anthony.

He says the treasurer started with a lot of goodwill but that is ebbing as the government focuses on “third-tier” issues rather than ones that will be pivotal to the nation’s economic future.

“This government, at the moment, is focusing on a range of social issues but not dealing with the tougher, economic reform questions that need to be addressed,” he says.

“At this stage, these guys look a lot like the Fraser government. There’s been a shock and they’re trying to be cautious, but there are huge challenges facing this country that have to be dealt with. They can’t be kept being put off.”

Anthony starts with high unit labour costs and the dearth of productivity that has held back Australia, and much of the developed world, over the past decade.

Other major issues include the transition from fossil fuels to renewable energy, defence spending, the National Disability Insurance Scheme, as well as population growth and ageing.

Anthony says Chalmers should be prepared to commission independent reviews into a range of major economic problems and act on them.

“I want this guy to be in the pantheon of great treasurers, and he needs to get hold of a big issue – like the energy transition – and show what he’s made of.”

One critic of Chalmers inside the ALP argues that he has been too cautious so far and that “everything Jim has done so has been done with one eye on the next job” – the prime ministership.

Another MP states: “The criticism that is getting round, that he is no Keating, is really biting him and he doesn’t like it.”

Evidence that the criticism is on Chalmers’ mind was a speech he gave this week in which he announced the biggest changes to merger laws since the 1970s.

Ordinarily, that would be enough to grab reformers’ attention. But Chalmers went further, listing nine other areas, including the financial system, superannuation taxation and environmental approvals, as key pillars of the government’s reform agenda.

In case you missed it, the treasurer used the “R” word – reform – 35 times in his speech.

A day later, Albanese unveiled government plans for a Future Made in Australia Act – the policy response to government market interventions around the world, such as the United States’ Inflation Reduction Act and the European Union’s Economic Security Strategy.

Next month’s budget will set out the details and the treasurer’s fingerprints will be all over them.

Then there are huge issues around the NDIS, aged care, managing the cost of the energy transition and implementing migration reforms that this government will have to solve.

These do not all sit within Chalmers’ portfolio, but they all require money or will have economic ramifications – which means he has input into each.

“I don’t want to see them do a shitload of things poorly, I’d like to see them do a few things well,” one Treasury official says, adding that “people forget Chalmers has been there for less than two years and Keating took 10 to land those reforms”.

But just saying the word “reform” doesn’t mean you’re actually doing it, as a Labor-leaning economist who asked not to be named, says. Instead, it “belies the truth”.

“There’s been little progress on aged care reform, though Anika Wells was brave enough to suggest some form of user-pays. On the NDIS, they’re just pretending to solve the problems. And there is the WA GST deal, which is a time bomb costing billions of dollars,” the economist says.

“But the thing that gives me the greatest sense of foreboding is the coalition of business and environment groups and unions, who have been asking for a response to the Inflation Reduction Act and have got it – we are about to see the fruits in the budget. Industry policy isn’t always bad, but historically, it’s mostly a bad idea.”

‘Circumstances have changed’

Chalmers has shown little appetite for taking up often championed policy changes such as winding back negative gearing, capital gains tax breaks or expanding the GST. The government has said little to date, too, about changes like road-user fees for electric vehicles.

During our interview, Chalmers is clearly frustrated when these comments are put to him. In his view, too many commentators have been arguing for the same reforms for decades – and he believes the government is taking some of the biggest challenges head-on.

“What people have to recognise is that circumstances have changed and that the solutions change, too. For our generation, many of the issues we are grappling with didn’t exist in this form 30 or 40 years ago. I reject a formulaic view that the solutions of the past are the same today,” he says.

“Many of the issues we are grappling with didn’t exist in this form 30 or 40 years ago”: Treasurer Jim Chalmers.Credit: Alex Ellinghausen

“The best way to align our economic and national security interests and deliver the next generation of prosperity is to make ourselves an indispensable part of the global energy transformation – and that’s a very different challenge to that navigated by previous governments, even the great ones.”

Martin Parkinson, a former secretary of the Treasury and Prime Minister and Cabinet departments, who has worked with Chalmers, says the treasurer has done some ambitious things and “people just haven’t actually recognised it yet”.

Parkinson lists the employment white paper, raising productivity, improving low-paid workers’ skills and getting more people into the workforce as economic measures that Chalmers has helped drive.

“Negative gearing, capital gains and raising the rate of the GST and broadening the base have been the measuring stick of a treasurer’s ambition,” Parkinson says. “But the reality is there are other areas of reform that are equally, if not more, important in the microeconomic area – in improving competition, workforce participation.

“The bottom line isn’t that those tax issues are unimportant, it’s that people have turned them into the only thing that is important.”

“It’s an ambitious agenda but it’s not the ambitious agenda that the [Australian Financial Review] is used to writing about.”

That agenda has included the first major reforms to the Reserve Bank in more than a generation.

Nothing is more important to the economy than the operation of the RBA. And Chalmers took a substantial risk in opposition to argue for the review that he put in place and which has generated the changes which are working their way through parliament.

The Productivity Commission, which has struggled to have its calls for economic reform acted on over the past decade, is being revamped under respected economist Danielle Wood.

Housing issues – from a large increase in Commonwealth Rent Assistance to a string of initiatives to get more homes built – have dominated much of Chalmers’ attention.

Chalmers, aided by livewire Competition Minister Andrew Leigh, is acting on the growing international and domestic evidence that has linked slowing productivity with the growth in market concentration and businesses actively seeking to prevent competition.

Competition has been absent from the political agenda since the global financial crisis. Chalmers and his economic team are pressing ahead with reforms that could deliver long-term financial benefits while causing a huge political storm with vested financial interests.

But that fight is in the future. It’s yet to happen.

Next month’s budget is likely to contain major reforms to aged care where years of inaction by both sides of politics has left the Albanese government facing some politically dangerous but economically necessary choices.

Chalmers himself is fond of a term for those who pine for the days of yore: Austalgia, a homesickness for Australia’s past, in his particular case for Keating’s economic reforms of the 1980s.

If Keating were in politics today, Chalmers believes, he would be focused on the same things he is: growing productivity, but not through changes to the industrial relations system or adapting to globalisation.

Today’s productivity battlegrounds are in energy transition, investing in human capital and the digital transformation of the economy.

“We have a 30-year productivity problem, and we have been here for two years; it can’t be fixed overnight,” Chalmers says.

Prime-time?

Chalmers is widely regarded as Albanese’s most likely successor and it’s easy to see why: he’s a working-class boy from Logan, sounds like a normal human being, has a photogenic family, the outsider’s background and the insider’s understanding of the Labor Party.

He has said publicly that if he ends up serving as treasurer in a good Labor government, he’ll be fine with that – but few believe him.

His opposite number, Angus Taylor, has in the past two years put fewer questions to Chalmers in parliament than any shadow treasurer since 2004 – a clear acknowledgment of the treasurer’s command of the portfolio. Asking Chalmers to the dispatch box is the political equivalent of giving Sam Kerr a penalty kick.

As Keating observed in a recent profile of Chalmers in Good Weekend: “In the end, to become the authority figure in cabinet, the cabinet has to believe you have the answers.”

Before the 2022 October budget, Chalmers made no secret of his desire to overhaul the stage 3 tax cuts inherited from Scott Morrison’s government. But he was shut down by Albanese, who feared the political blowback from breaking an election promise so early into the government’s term.

Credit: John Shakespeare.

By December last year, however, the economic and political ground had changed enough that Chalmers was able to revisit the expensive tax cuts which now deliver billions of dollars in relief to the 10.5 million people earning less than $135,000 a year.

Ultimately, this is just a rejig to income tax thresholds and rates. It was never “tax reform” when the original plan was unveiled by Morrison, more simply returning bracket creep to workers. When Chalmers delivers the budget on May 14, the cuts will be portrayed as helping Australians deal with cost-of-living pressures. But that still doesn’t make it tax reform.

Former Treasury official and current assistant economics professor at The George Washington University in the United States, Steven Hamilton, says part of the problem is that it’s unclear what either Chalmers or Albanese truly believe in. He says there is a general consensus about the changes required to improve the entire tax system but Chalmers has not publicly argued for real reform.

“Howard wanted the GST as treasurer. It took him to become prime minister to implement the idea. What is the equivalent for Chalmers and Labor?” Hamilton says.

“They haven’t tilled the soil. Their public comments since they took their current positions after the 2019 election, 5 years ago, don’t provide any hint whatsoever as to what they think are the burning problems and the solutions needed to solve them. They just haven’t done the work.

“They’ve been too busy trying to win to take the time to consider why they want to win, beyond bigger pay cheques and more staff.”

Hamilton says if Chalmers does grab the reform nettle, it could take years before anything is implemented.

“The next election is perhaps a year away. Whatever they decide to do would then be taken to the next, 2028 election and implemented thereafter. Best-case scenario, if they started the groundwork internally on this right away, is a reform implemented five years from now,” he says.

But Chalmers pushes back at any suggestion that he and the government have been sitting on their hands, citing everything from the Reserve Bank overhaul to the 60-day dispensing policy for pharmaceuticals.

He clearly believes he has found the answers – or at least some of them – and is plotting a course for the Australian economy.

It will, however, take some time. And that’s a luxury the treasurer is keenly aware that Labor governments don’t always have.

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