editorial; Tax and IR mark political moment and challenge for Anthony Albanese and Peter Dutton

Events of the first sitting week of the new parliamentary year mark a defining moment in the life of the Albanese government and the federal opposition. The ALP was able to change the mood from despair at the defeat of the voice to parliament referendum that cast a long shadow over the Prime Minister before the summer recess. To achieve it, it was necessary for Labor to break its election promise not to wind back the legislated stage three tax cuts. To reinforce the message of ascendancy, the federal government was able to exploit a sympathetic Senate crossbench and push through the second tranche of industrial relations reforms that deliver on its power bargain with the trade union movement. Both the tax changes and industrial relations law changes will have long-term ramifications politically and for the economy.

As Paul Kelly writes in Inquirer on Saturday, Labor’s comeback is politically devastating for the Coalition. More significant is the fact that the economic balance has been shifted against productivity, aspiration and meaningful, sustainable gains in standards of living. Labor, Kelly writes, champions personal income tax redistribution, regression to a more regulated, complex workplace relations system that prioritises trade union power, the relentless march of renewables, and big-spending social agendas represented by the NDIS.

Reserve Bank governor Michele Bullock warned of the likely economic consequences of the government’s agenda; higher interest rates for longer unless the nation’s terrible post-pandemic productivity performance is improved. Treasury, meanwhile, has blown the whistle on how involved the Albanese government was in redrawing the stage three tax scales. Talks were held before Christmas but the Prime Minister and his most senior colleagues insisted for weeks afterwards that the election promise not to make changes was secure.

Peter Dutton has been given a gift of Mr Albanese’s dented credibility. The calculation must be that the damage of breaking a promise and lying to the public will outlive the immediate benefit of a few dollars extra for wage earners. This is particularly so when modelling shows the extra money will be quickly reclaimed by government through bracket creep. This is what the stage three cuts that were legislated were designed to address. One thing is clear. The Opposition Leader will not be able to follow Mr Albanese’s small-target strategy as a pathway to government. He must fight for the values that define the conservative side of politics and offer a better alternative for voters at the next election.

This will not be an easy task given the populist bent taken by the ALP. The tax changes make it clear Labor has re-embraced a class war ethic that pits the more wealthy against the rest. Labor has exploited the crude calculation that there are more winners than losers, ignoring the reform intent of the stage three tax changes as they were legislated. It has opened the door to more broken promises, with the Greens determined to campaign on a rollback of negative gearing and capital gains tax concessions for investment properties. The Greens-conceived changes to industrial laws, which allow workers to ignore contact from the boss outside defined working hours, is another class war play.

The business community has been outgunned by the federal government. After showing themselves to be out of touch with community sentiment on issues such as the referendum, business leaders have been exposed as incapable of protecting their core corporate interests. As Labor continues to rebuild the influence of the trade union movement and the investment funds it controls through compulsory superannuation, business can expect things only to get worse.

However, the idea that the Coalition cannot run a reform agenda unless business leads the way is nonsense. It is almost 20 years since the Howard-era WorkChoices agenda that promoted workplace agreements and flexible bargaining. And the Coalition must confront the fact that it has failed since that time, including during a decade in power, to build on that agenda.

Mr Dutton must take an ambitious IR policy to the next election. He must appeal directly to voters and explain why policies that create risk for business, increase costs and reduce flexibility are not in the nation’s best interests. Tax and IR must be at the centre of the contest between the major parties, a contest firmly focused on the aspirations of middle Australia and the reforms needed to promote enterprise, increase productivity and restore personal choice to the centre of government decision-making.