Aspirational agenda wedges ALP on tax cuts

The well-received, big-spending federal budget has recast the political contest, giving Scott Morrison a clear agenda and forcing Labor to retreat further into its small-target strategy for the next election.

Perceptions can change quickly but as things stand the ALP is being forced to respond to the Coalition’s robust advance into what should be its traditional voter base.

After being distracted by issues outside its core agenda, the Morrison government now seems firmly back on familiar turf.

The contest is being shaped by pragmatism on both sides. Where the Coalition was forced to pull back from modest reforms to industrial relations to avoid a rerun of the ALP-ACTU Work Choices campaign that helped carry Kevin Rudd to victory in 2007, Labor is walking away from the fight on climate change and tax cuts.

The ALP remains critical of the Coalition on climate but has abandoned the 2030 targets it took to the last federal election and will not tell voters where it really stands. Lack of clarity is hurting the party in the electorate. Labor MP Joel Fitzgibbon says feedback on the ground at Saturday’s Upper Hunter by-election was that voters do not trust Labor to do what it says it will do. Lack of trust is particularly acute in mining communities but it is something that Coalition strategists are working to extend across the board.

Labor has already dropped its unpopular policy to crack down on franked dividend credits, and has now shown itself unwilling to pick a fight with the government on tax.

As Geoff Chambers reports on Thursday, the ALP is moving to support the government’s $17 billion-a-year legislated stage three tax cuts and will not seek to extend or permanently entrench the $7 billion Low and Middle Income Tax Offset if it wins the next election.

Despite some in the Labor caucus wanting to carve out top-end earners or fully repeal the tax cuts for middle and high income earners, the shadow cabinet is expected to leave them in place.

Senior Labor MPs know that if they stand in the way of tax cuts, the Coalition would be quick to exploit the issue in the upcoming election campaign.

Opposing high income tax cuts would compound problems for Labor in the crucial high-earning mining communities which the ALP can no longer count on as its own.

As Paul Kelly wrote on Wednesday, as Scott Morrison declares his agenda to go after Labor’s traditional base with a pitch to aspiration, Labor is trapped between its twin constituencies.

Kelly says the Opposition Leader has moved Labor back to the political centre and ditched Shorten’s “tax and spend” agenda. But evidence is scant that Labor’s brand has improved.

Morrison, meanwhile, is formulating a strategy that will give him a serious prospect for re-election.

Progressive forces in the ALP and the media are again misreading the mood. Kelly says the economy and health, not the climate and women, will constitute the next election frontline.

Like John Howard, Morrison will target the Labor base vote with a message of robust economic recovery, more jobs and lower tax than Labor. His tactic is to drive a wedge through Labor’s competing identities of urban elites and trade and blue-collar workers in regional and outer urban electorates.

As former ALP senator John Black wrote on Tuesday, the Upper Hunter by-election result underscores the dilemma for Labor. Until the mid-1960s, the Labor Party and the labour movement basically were the same group in strong mining seats, such as the federal electorate of Hunter.

If you worked in the mines, you were in the union; and if you were in the union, you voted Labor, and so did your family and your neighbours. Black’s research shows that from 1966, the vote for Labor in mining seats began a long-term decline, with the profile for miners falling into negative territory in 1998. By 2019, male miners were as big a negative driver for Labor as they had been a positive driver in 1966. In other words, Black says, you were more likely to find miners in Coalition seats than Labor seats and the stats were significant to more than 99.9 per cent confidence levels.

In the 2019 election, the three seats with the largest 10 per cent-plus swings to the Coalition were Dawson, Capricornia and Hunter, three of the top eight seats for male miners as a share of the male workforce.

Mr Morrison’s pitch to aspiration will resonate well in mining seats and among the ute-driving tradies who helped to underpin John Howard’s success.

Tradies have already benefited heavily from the Morrison government’s accelerated write-offs for new vehicles, tools and equipment and the housing construction boom that was the backbone of the Coalition’s pandemic response.

The dilemma for Labor is exacerbated by debate over what it plans to do with the legislated tax cuts.

Highly paid mine workers will be significant beneficiaries of the stage three adjustments to the top marginal tax rates when they take effect.

As a result, there is growing momentum inside shadow cabinet to wave through the stage three cuts as legislated.

The alternative is for a cut-down and less-expensive version by keeping a 35 per cent tax rate and lower threshold for the top marginal rate.

Whatever it decides, the ALP must demonstrate it understands better than the Coalition what motivates its traditional base in the seats that matter.