Anthony Albanese’s tax cut lie one more shot in Labor class war

Prime Minister Anthony Albanese. Picture: AAP

The most dispiriting development in my 10 years in politics has been the increasing loss of trust in the political process and politicians. That’s why a lie repeated over 100 times by the Prime Minister and Treasurer – that they were sticking by the legislated stage three tax cuts – is of profound significance to every Australian.

Labor’s decision to drop the stage three tax cuts is the most egregious betrayal of trust I have seen in politics. This from a Prime Minister who promised “my word is my bond”. Some bond. Now we know his word means nothing. Australians now know any promise from this Prime Minister is worth nothing.

The tax cuts were a centrepiece of the last two elections, one where the Coalition won supporting them, and the second where both sides of politics said they supported the legislation (although that was clearly a lie from Labor). Moreover, the Prime Minister and Treasurer voted for the cuts in parliament.

This now joins a long list of broken promises, including lower electricity prices, cheaper mortgages and not touching superannuation or franking credits.

Many will say genuine reform is rare in this day and age, and I have sympathy with that view. But the legislated three stages of tax cuts are genuine reform focused on simpler, lower, fairer taxes, benefiting all Australians.

Anthony Albanese promised ‘my word is my bond’. Picture: NCA NewsWire / Martin Ollman

It said to every hardworking Australian who is trying to get ahead that they can count on paying no more than 30c in the dollar of tax (up to an income of $200,000). That is regardless of inflation and bracket creep, regardless of fluctuations in their income, regardless of advancement in their job or business.

It established hard work and aspiration as the centrepiece of our economy by allowing Australians to know they can keep more of the fruits of their hard work. It encouraged investment, risk-taking and a strong work ethic, from which we all benefit. It recognises that aspiration and incentives power a strong economy and ward off inflation. Australians who are encouraged to get ahead contribute to the economy, they create jobs, they drive productivity and higher real wages.

The modern Labor Party always misses the point that the best way to deliver prosperity for all is to have a strong, low-inflation economy. It’s not a zero-sum game where you divide up the pie and the pie stays the same. Higher taxes change behaviours, and in doing so create the conditions for slower growth and higher inflation. That means a smaller pie.

Labor claims it has analysis suggesting its changes won’t impact the economy or inflation. It should release that modelling and all of the assumptions behind it. If we now model the economy to ignore incentives, then we are going back to a dark era of socialist economics. I am deeply sceptical of the coherence of that modelling, but if the Treasurer is so sure he should release the detail.

Australians are hurting right now. Their real disposable incomes have collapsed by 8.6 per cent in the past 18 months through a combination of price increases outpacing wages, rising mortgage payments and rapid escalation in personal income taxes (27 per cent in 18 months driven by bracket creep and other changes).

The irony of Labor’s plan is that it will barely touch the sides for most Australians. Assuming all else is equal (which it isn’t), the benefits for those who don’t see a tax rise will be lost against a reduction of around $8000 in the standard of living of the average Australian since Labor came to office.

There are clear historical lessons from past periods of inflation and stagflation in Australia and elsewhere. The answer is to go back to basics – containing government spending and waste, aligning immigration with the capacity of the economy such as housing supply, encouraging competition not cronyism, rewarding hard work, investment and risk-taking with simpler, fairer, lower taxes, removing red tape and over-regulation. Bob Hawke and Paul Keating largely understood this, as did John Howard and Peter Costello. But Labor has moved a long way from that era.

The answer to persistent inflation and an economy that has shuddered to a halt is not to declare war on aspiration and start a class war. But having failed in his attempt to divide Australians on race in his failed referendum, Anthony Albanese now wants to divide Australians based on class.

The Prime Minister’s long-held socialist instincts lie deep, rejecting the view that aspiration makes the pie bigger for all. Zero-sum socialist politics and economics is his comfort zone.

Prime Minister, this is not how you strengthen the economy, fight inflation and unite our great nation. There is a better way. And it starts with keeping your word.

Angus Taylor is the opposition Treasury spokesman.