Super backflip breaks dam for Abbott

Nicholson cartoon

THE Tony Abbott-led Coalition's buckling before Labor's increase in the superannuation guarantee from 9 per cent to 12 per cent is a great victory for the Gillard government and signals the Coalition's admission that its political strategy is off the rails and needs correction.

With the superannuation guarantee tied into Labor's mining tax package, the next question for the Coalition is obvious: will it recommend a replacement tax for the mining tax that Abbott is pledged to repeal?

Once Labor's mining tax is legislated, Abbott's repeal policy becomes unsustainable. How can he campaign to have no mining tax whatsoever when the big three miners accept the principle of such a tax anyway? At that point his policy becomes absurd.

Assuming the latest Newspoll is correct and not a rogue poll, Labor is trailing only 53-47 per cent in the two-party-preferred vote with Abbott's dissatisfaction rating at a record 57 per cent. Labor can win from here.

Many politicians and much of the media have badly missed the trend of the past three months. Abbott has been busy entrenching his negativity and offering no message of hope or coherence while the gradual recovery that Julia Gillard has long predicted has begun.

It may not endure. However, the idea that Labor's primary vote would stick below 30 per cent was always remote. The Coalition has assisted Gillard's mini-recovery by its own blunders, notably Abbott repeating his technique of "rejection and repeal" on issue after issue beyond the point of public tolerance.

Gillard's further triumph yesterday of winning passage of the Labor-Green carbon pricing scheme only makes Abbott's rethink imperative. His real policy goal is repeal of the carbon package. For Abbott, this is the repeal that matters, not the mining tax. The campaign against the carbon tax is the absolute key to Abbott's political future.

Can Abbott sustain his anti-carbon tax campaign? Yes, he can. Indeed, he has many pluses: power prices for homes are guaranteed to rise significantly; our domestic carbon price is very high by world standards; the economic tribulations in Europe and America will last for years, keeping global climate change action on the backburner; and Gillard's carbon policy is a core breach of trust with the public.

Why is Abbott vulnerable? He is vulnerable because he has become Dr No, rejecting policies on populist grounds regardless of principle and past Coalition belief. By opposing virtually everything, he cheapens his case and credibility for opposing what matters.

The retreat to accept Labor's superannuation policy is deeply illuminating. This constitutes one of the Coalition's greatest policy reversals since it lost the 2007 election. Superannuation is highly sanctified ALP-ACTU territory. The policy's origins lie with Paul Keating and Bill Kelty and it is a near-unique Australian model of mandated contributions to private superannuation funds.

For Labor, this edifice is one of its glories. In his July 1991 speech campaigning for leadership, Keating said the objective should be a 12 per cent contribution rate by the year 2000. His 1996 pre-election strategy was to lift super savings to 15 per cent from the legislated 9 per cent, and after his defeat Keating lamented that he did not legislate this figure.

The incoming government led by John Howard and Peter Costello, wary of such Labor-loving compulsion, kept the contribution rate at 9 per cent and never increased it over 11 years.

But the dam wall has broken under Abbott in strange circumstances. With the Henry tax review opposed to this action, Labor defied Treasury advice and in May last year linked its new mining tax to an increase in the SG rate to 12 per cent to be reached in stages by 2019-20.

The Coalition, unsurprisingly, opposed this policy -- until late last week when faced with its passage through parliament.

This means if Abbott wins the 2013 poll, at which point the SG rate will be a modest 9.25 per cent, he will preside over its steady increase towards 12 per cent. (The schedule for the entire lift to 12 per cent is included in the bill now before parliament.)

Why did the Coalition change? There are several explanations but the most convincing is politics. It was fighting on too many fronts. It was pledged to abolish too many Labor policies. It was locked into perceptions that were too negative. It faced the prospect of unpicking enterprise agreements that included super contributions as a trade-off. So, it quit the battle.

This meant abandonment of Liberal thinking that super contributions should reflect individual choice and the embrace of Labor boosting national savings via compulsion. Many senior Liberals are angry, not just opposition finance spokesman Andrew Robb. Much more will be said about this.

The point, however, is the belated recognition that Abbott has gone too negative for too long on too many fronts. He should have spent the final third of this year offering a message of hope, but he didn't. When the correction came it was sudden and revealing.

At what point did things start to go wrong? That's easy. It was when Abbott rejected Gillard's bill to save offshore processing and anchor this power in the executive where it belongs.

Labor's mining tax is strictly a third-best option. It is compromise piled upon compromise. The original tax destroyed Kevin Rudd's leadership and this tax originates in the fix Gillard negotiated with the big three miners to save her political neck.

This tax has a big hole. It does not replace state royalties (as Henry advocated) and Labor is pledged to credit any state royalty increases, with NSW and Western Australia having already announced such increases.

While Treasury estimates it will raise $11.1 billion over the forward estimates, it concedes these estimates are highly volatile and the opposition scoffs at this figure being raised. There is scepticism throughout industry about how much the big miners will pay.

Abbott is on firm ground on abolishing the tax. He is on weak ground, however, saying Australia doesn't need such a tax. The opposition should argue not against the mining tax but for a better mining tax.

Abbott has taken the first step along this path by pledging to keep the SG 12 per cent policy. His future political problem is obvious: Labor is using the mining revenue to cut corporate tax, assist small business and help 3.6 million low-income earners with super concessions. What does Abbott say to these people when he has no such revenue from the mining tax?

In short, the politics of the mining tax change once it is legislated. With the big miners accepting the tax, the Coalition needing the revenue and Abbott wanting to make carbon pricing the absolute focus of his negative "repeal strategy", the logic is for the Coalition's rethink to take another big step.