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Does a broken promise matter in a broken system, and Angus Taylor’s migrant plan
00:27:50
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- [00:02]
A
I'm Jacqueline Maley and you're listening to Inside Politics from the Sydney Morning Herald and the Age this week on the podcast. We have so much to talk about and it's all very exciting. We're going to dive into the budget, which of course was handed down by Treasurer Jim Chalmers on Tuesday evening. And later we're going to talk about the seismic result at the Farrar by election. Joining me from Canberra, we have, as usual, our chief political correspondent, Paul Sakal. Hello, Paul.
- [00:26]
B
Morning, Jack. How are you?
- [00:27]
A
Good. How was your budget experience this year?
- [00:30]
B
I remember watching, as we were talking about before the podcast, Devil Wears Prada 2 on Sunday night and a bit of football in the afternoon and that's pretty much the last thing I can recall. It wasn't just in the crazy whirlwind of looking at budget documents and speaking to a range of lobbyists and other stakeholders at night at pubs. It's a, it is a crazy week in Canberra. How was yours in Sydney?
- [00:51]
A
You know, we get locked up, we eat a lot of junk food. I mean, in terms of the actual budget itself, I've come, I don't know, more budgets than I care to admit. And it was actually quite interesting and exciting, even though we had a lot of the. A lot of the measures were leaked out beforehand, maybe even more than previous budgets. But not since the horror sort of 2014 budget that Tony Abbott handed down where he, you know, cut a lot of services, has there been a budget, in my experience, that has actually sort of done so much heavy lifting and when people are really having a swing. So that was interesting. As I said, a lot of it was leaked out before. Did we learn anything new in the budget paper themselves that we didn't already know?
- [01:31]
B
It was an extraordinary amount of leakage and people in the Cabinet have been scratching their head as to how this has occurred. There's been a sense from people, some people have believed that these leaks have been deliberate, from the Treasurer or the Treasurer's office to front run or to get the conservative press onside because they've been leaked to the Australian. That's just untrue. It appears as if the source has come straight out of treasury and who knows the motivation. So we knew that the government was going to look at capital gains tax discount. We knew they were going to look at negative gearing changes. There was some questions about how exactly those, what the details would be around the tweaks. We knew that the government was also, again, because of a leak, that the government was going to provide a small Tax relief through something called the Working Australians tax offset. The Watto or waito depending on who you talk to.
- [02:19]
A
Yeah, I mean the pronunciation itself is controversial if the payment isn't Exactly.
- [02:24]
B
Reminds me of the Australian cricketer and famously bad reviewer of when he is being done for lbw, Shane Watson, who was referred to as Watto. So that's what I think of every time I hear this. What we didn't know about the Watto is that it's not just a one off, it's a permanent feature of the tax structure which will happen at tax time every year. The government can scale it up or down depending on the circumstances. And it appears to be a new mechanism Jim Chalmers likes is keen to use. Instead of actually tinkering with the tax scales or brackets, you can just increase this wato to target people in certain parts of the income bracket. So we didn't learn heaps that was new, but there nevertheless is a lot in this budget, as you say.
- [03:06]
A
Yeah, and we got detail around the CGT and the negative gearing changes. So negative gearing can still be applied to new builds. So obviously that's trying to encourage more construction of houses. And the CGT changes will be grandfathered as we thought as of June 2027. And they did sort of sneak in this minimum rate which we thought was quite interesting when we were looking at the budget papers. They're going to have a minimum tax rate of 30%. So you can't basically fandangle your affairs so that you're paying a really, really low marginal tax rate on your capital gains of that year. They've basically pitched it at 30% which is about what most people, most working people pay around the middle tax income bracket. So I thought that was interesting. I also, I want to get your take on this. The budget was framed very intentionally by the government as an intergenerational equity argum for younger people who are locked out of home ownership in particular and who are much less likely to take advantage of the tax breaks of CGT discount and negative gearing. But actually I feel like they snuck another agenda in there which was gearing the tax system away from accumulated wealth and people with assets and towards people who work for a living like you and I, the wage slaves. What do you think about that?
- [04:26]
B
Well, you don't know about my personal finance.
- [04:27]
A
That's true. I don't. I don't know about the complex tax structures or trust structures under which you manage your enormous wealth, but I'm assuming
- [04:34]
B
it's a web, it's a Real web,
- [04:36]
A
There's Cayman Islands, you know, havens involved. Yeah. No, I'm assuming that you're a salaried. Salaried person. Such as.
- [04:44]
B
Yeah, it's a good assumption. Yeah. So you're right. This budget was pitched as a big moment where a progressive government wanted to address a long term trend towards that has seen the taxation of assets and wealth taxed at a lower rate than labour income. And so many economists in Australia have argued for a long time that the tax system penalises young people. Personal income tax scales are pretty onerous compared to many other countries. The higher tax rates kick in at relatively low income levels and the rates are pretty high as well. Paul Keating agrees with this. Bill Kelty, the Labor luminary, agrees with this. And many older people have been able to offset rental income losses and use trust to split income and get really big capital gains benefits from selling houses that have been propped up by housing bubbles over years. So all of those tax concessions have been reined in. And so the government argues that over time this will lead to more people at auctions who are younger being able to buy a house at a decent price because they won't be outbidded by an investor. They say that over the next 10 years, 75,000 new first home buyers who wouldn't have previously existed will come into the system. That sounds like a lot. But the overall rate of home ownership, the government believes, will increase from about 66% of Australians to about 67%. So it's hard to create huge change. They also estimate that the price growth of houses will be about 2 percentage points lower every year after these changes kick in. So if house prices were going to grow by 8% next year, they reckon they might grow by about 6. There were some estimates in our paper that could actually be more significant than that. And so overall, the whole political pitch of this budget is young people are having a crap time. And so these generous concessions that have existed for older Australians, largely older Australians, but also lots of 30 people in their 30s and 40s, will be struck out. The counter argument that you'll see the Liberal Party lean into very heavily in coming weeks is that by grandfathering these changes, particularly for negative gearing, you lock in the advantage that older people have had. They've also had inflated house prices that the gains that have already come into those assets and because of the transitional arrangements around capital gains tax, they'll still largely be able to sell that property and get a huge gain from it. So the big backlash will come from the Liberal Party to say you're locking out a whole generation of young people who wanted to take advantage of these arrangements and become wealthy and you've entrenched the advantage that older people have.
- [07:16]
A
Yeah, so that's what I wanted to get to next because I mean there's been so much coverage of the budget measures and we don't want to do that in detail on this podcast, but I do want to talk about how these measures and the framing of the budget might land. So already we have a sense of what the opposition response has been so far. I should say that we're recording this before we get the formal budget reply speech from Angus Taylor on Thursday night. But we know already that Angus Taylor, you know, the coalition is going to oppose the tax changes. They're going to go along with support. There's infrastructure money, infrastructure money for construction of houses, basically. So they're going to support that. What else do we know about how the coalition's responding to the budget?
- [07:58]
B
Yeah, listeners might remember maybe six or eight weeks ago Andrew Hastie, who's seen as a leadership alternative to Angus Taylor, was considering running a few months ago, went on Insiders on the ABC and when asked about some of these property tax concessions and attacks on big gas firms, said to David Spears, the host, we need to be open minded about these things. No one's going to reward us for a final last stand for neoliberal politics. Ok? There's no medal for that. Effectively what he was saying was that the boomer class that has made most of the money out of the big housing bubbles of recent decades are our constituency. But we need to grow. And so maybe we should have a think about rebalancing the housing market. That argument has not had much of a look in since labor actually revealed what they were doing. What you've seen is a Liberal party revert to their natural instincts around aspiration and lower taxes. And I don't blame them for that. By the way. There's probably not that much room for nuance in this debate when the government brings forward $100 billion in tax hikes on people who've made wealth over the next 10 years. You're the Liberal Party, you believe in lower taxes. The government didn't take these measures to the last election. I think they were left with very little opportunity really to do anything but oppose. They haven't actually full committed to repealing these changes if they win the next election, they have said they'll fight them hard and I think you'll see a new energy into the Liberal Party A kind of renewed purpose around what the party stands for, which is lower taxes and aspiration. If the party's been confused about that in recent years, this moment clarifies that. But there is still a question about in a few years, if they go to an election, do they actually commit to repealing them because that causes a huge budget black hole for them.
- [09:40]
A
Yeah, I know. I mean, Tim Wilson has been questioned about this. I thought he was sort of saying that they would repeal them. But maybe we can check in on that next week as well, because I'm sure we'll still be talking about it and see if they're positioning.
- [09:51]
B
If we have to, we will.
- [09:52]
A
They're using caveat of language, so it'll be interesting because journalists will push them and we'll try to get a response from that on that. There's two sort of tranches, I suppose, or two elements to their attack on Labor. One is the broken promises line. So obviously Anthony Albanese has been loath to call his commitment or his statement, as I think he said, that there would be no changes along the lines of the ones they've just introduced. He said that during the election campaign. Been loath to call it a promise and therefore a broken promise. Obviously it's been framed already by the opposition as a broken promise and even a lie to the electorate. Do you think that that will gain much traction given, you know, if these changes turn out to be broadly supported by the public?
- [10:36]
B
Well, the government's banking on the public reaction being similar to the one that occurred when it rejigged the stage three tax cuts in the middle of the last term. The difference here is that the stage three tax cuts allowed all Australians to still get some benefit from that tax rejig. All Australians still received a tax cut, but they became less generous at the top end and they became more generous for middle and lower income earners. So there weren't many losers out of that. This time there is a bunch of people who will feel like they wanted to invest and now can't, and people who are already investors, except if they're in the grandfathered part of the equation, will feel like this is an attack on their wealth. The government hopes and thinks that there's a bigger part of the electorate who don't believe they have any access to asset wealth, who don't intend to become investors because they're just trying to get their foot in the door and that those people will reward the government. So there's this cleavage that occurs out of this policy where aspirational Australians who are not tied to labor on progressive social values, you might see some of those voters in the middle drift back towards the coalition. But labor believes the numbers suit them here and that most Australians think that the system is broken and a big change like this won't hurt them. On the language, the government said before the budget that if they were to change their mind, as we all reported they were going to, you'd hear an explanation from them after the budget on why they did so, and they would be upfront with the Australian people about the reason for the change in decision. On budget night and in the day after, there wasn't that much new language on why this move was necessary. They were making the same arguments before the budget, really as after, which was that the system's broken, we need major change, and a big rejig of the system was required because most Australians feel dislocated. Albanese and Chalmers have acknowledged that their changes are controversial, but when asked about the broken promise, or as you say, the lie, they've not used that language, not acknowledged the legitimacy of that kind of language, and instead have reverted to this much more bland line around a change in decision or a change in mind. We've come to a different view. So they're not then, that they have said that they'd be upfront, but they're not in a, you know, you know, full way acknowledging what they've done here?
- [13:01]
A
No. Well, I think they're, I mean, not having any special insight into it. But I, I just keep thinking back to the broken promise, the liar charge that was levelled against Julia Gillard when she introduced the carbon tax, which, you know, I guess some people were hurt by it. But overall, anyway, putting aside the merits of the actual policy, it was allowed to be framed as a lie and as a broken promise. And I think that they're probably. They've learned a very harsh lesson from that and they're like, whatever the actual objective truth of the situation, we're not going to call it that. So we're not going to let. We're not going to sort of play along with that narrative. So.
- [13:37]
B
And I won't say with a camera in front of me at any point that, yes, we did break a promise because that becomes an election ad for the Liberal Party.
- [13:44]
A
Yeah, I'm just not going to give them that line. And then I'm going to focus on the merits of the policy itself. So I want to talk briefly about the economic settings that were in the budget because, you know, very, very high up in budget Paper one, you know, under the economic settings sort of heading, they talk about the different scenarios and how the Iran war, whether or not it ends up soon or not soon, has the capacity to blow out of the water. All of the projections that the government has like spent, you know, sort of the next hundreds of pages detailing on one scenario they said that if, you know, treasury is modelled that if crude oil reaches $200 a barrel, which a lot of economists and commentators say is highly possible, inflation will spike up over 7%. Unemployment goes up to 5%. Productivity growth as well is very sluggish on the government's own figures. So productivity growth we know is a huge sort of drag on the, or low productivity growth. And the government itself is saying it's only going to be about 1.5% per annum, which is pretty low. And GDP growth is not, is not that great either. 1.75% this coming year, 2.25% the following year. So I guess a lot of people have pointed out as well that there's a trillion dollar debt, like gross debt in next year's projections. The interest on that debt is the second biggest impost on the budget, I think, after the ndis. So the broader picture here is that the government maybe has not done a lot to address the deficits and the interest bill that future generations will have to carry is huge. How much is the coalition going to sort of talk about that as well as the actual sort of tax cut policy?
- [15:22]
B
Well, I think you've gone to the nub of what the coalition's argument will be. Angus Taylor, when he was shadow treasurer at the last election, put forward this policy under the Dutton administration to index tax brackets. That would mean that every year. So the bracket creep is not as severe. Bracket creep is when you push up just through wage rises into higher tax brackets. Those brackets would go up every year in line with either inflation or wage growth. So people are not just artificially paying more tax over time. Australians pay much more income tax now than they did in previous years. And the budget shows that the reliance on income tax from wage earners will just continue to grow over time unless there's substantial change in the way we tax labour income. So the coalition will say that the government's changes artificially, you know, through, they would say, virtue signalling, signal to younger voters that the government's on their side. But in the long run, because of our high tax, high spend economic model, that government outlays will inevitably be funded by higher taxes on wage earners because there's no other option so on Thursday night, you'll see Angus Taylor say that the coalition wants to do something substantial to reward work, to incentivise aspiration and make a structural change to the way we tax labour income.
- [16:41]
A
Yeah. And we should say as well that Jim Chalmers has sort of left open the possibility of extending the wato, or the WATO, that $250 tax back for earners or cash back, I should say, for income earners. So both parties are looking at doing something on income tax for wage slaves by the next election. The government and Jim Chalmers didn't mention immigration at all in the budget. It just didn't come up. But Angus Taylor will make it a central part of his budget reply speech. We know that. And he's going to explicitly link immigration to housing, so you've written about that this week, that basically he's going to say the immigration take should exactly match the number of houses built, which is slightly illogical because, you know, more than one person lives in one house, generally speaking. I just want to. I want to get your reflection, I suppose, on the immigration part of the budget. The budget reply. They keep talking about mass migration. We also saw a story this week that they're going to say that people who are non citizens shouldn't be able to access any welfare benefits. How do you think those immigration lines are going to land?
- [17:45]
B
I think they're more examples of the step change in the immigration debate in Australia just in a short period of time after the last election. Andrew Bragg, who's the housing spokesman and a moderate Liberal senator from New South Wales, said that one of the lessons out of the Dutton administration was that the Liberal Party shouldn't be. I think his language was, shouldn't be blaming migrants for things like the housing crisis. So he was uncomfortable at that time with directly linking the housing shortage to our really quite high levels of migration compared to the oecd, which is not untrue to point out. Australia does have very high levels of migration over the last 20 years, not just in recent years, but as one nation has risen as the right faction within the Liberal Party has increasingly influenced its policy making process, particularly since the leadership change from Susan Lee. You've seen the party become much more comfortable elevating the issue of migration, as Pauline Hanson does. You're seeing policy making processes look to parts of Europe. Countries like Sweden, Denmark, Britain in some respects are more openly talking about making the housing and citizenship process more difficult for new arrivals to make it that, you know, a person needs to take longer to go from permanent residency to Citizenship to get access into benefits, schemes to crack down on the numbers of migration. And so you're seeing that become much more front and centre in the coalition's language and agenda.
- [19:17]
A
Yeah. Okay. Speaking of immigration and relatedly, the advance of One Nation, we have to just check in on fara, which as we know happened last weekend. Although it seems like it was a really long time ago, it was a resounding result. It happened really quickly, David. The One Nation candidate, member elect, got 57.6% of the two party preferred vote and then the runner up, the Community Independent, Michelle Millthorpe, got 42.4%. So neither the Nationals nor the Liberals were even in the top two. They just weren't really in the race. How bad is this for the Liberal Party and for the coalition more broadly? I mean, how was it received within Liberal Party ranks?
- [19:56]
B
It was a pretty shocking night and a real blow to the morale of people in and around the coalition. Angus Taylor always knew he was going to lose this election. When Susan Lee quit, it was a horrendous time for the party, polling at record lows, but nevertheless the Liberal Party believed it would poll somewhere around the 17, 18% region. They ended up around 12 or 13%. And the national Party didn't break into double digits, so tallied together, they weren't even as high as the Independent who came in second place. The pictures from the night, I'm not sure if you were watching Jack, were pretty stark as well. The Liberal Party event was in this big community hall. There were about 25 people huddled around the speaker and the One Nation event, which was at a pub just down the road, was so full of energy they were chanting Aussie, Aussie, Aussie. And playing pub rock and it felt like a bit of a moment. Barnaby Joyce, who I was told wasn't drinking on the night, was just looked like a man who was full of energy and joy and was at like a rock concert. So it did. It was a. Is the moment on the national stage where one nation was able to say, hey, this is real, we're on here. Because the South Australian election result was just that, a state election result there also, just to counter that there were people in the Liberal Party are quite sober about their situation. They knew they'd go poorly. They're under no illusions about how difficult the path back will be. But it was just a moment that made people realise, wow, we actually need to start from scratch here, build up a really bold policy agenda, act like a startup and be agile and, and move in directions that People don't expect. Which I think is why Angus Taylor will announce a fair bit of policy on Thursday night in his budget reply.
- [21:36]
A
Yeah, well, at least his budget reply has the ability to take the shine off that Farah result. Kos Samaras I was listening to the other day, he's a former labor pollster who now runs, I think, and owns Red Bridge Polling. He was talking about a scenario in which labor basically kind of owns the young metropolitan voter through, you know, policies like they've announced in the budget. And then the regional voters become basically owned by one nation. So the coalition falls away and one nation rises very much in the regions. The counter to that is Barnaby Joyce and other people saying that actually they're going to come for labor seats. So Barnaby Joyce after that resulting Farrow very explicitly said we're coming for western Sydney and there could be some seats that they could pick off there potentially, or they could have a run in. What's your feeling on that? How worried should labor be about them coming at some of maybe those outer urban or suburban seats?
- [22:31]
B
Well, I mean, the lesson from the UK is that the populist right can eat into a weakened centre left party. Starmer looks like he might force the end of Keir Starmer's prime ministership over there. And that's occurred in different parts and in different elections across the Anglosphere. Anthony Albanese has succeeded in keeping labor so voting coalition pretty wide. As you say, labor dominates and the coalition has suffered horrendous losses, not just in the teal seats, which we talk about a lot, but middle suburbia. They've been pushed into really almost unwinnable positions in a bunch of seats where they previously had really healthy margins across the middle suburbs of Melbourne, Sydney, Adelaide, Perth. The only place they still hold those middle and outer suburban seats in significant numbers is Brisbane, where the LNP brand is strong.
- [23:21]
A
Wrong.
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B
And that's off the back of younger voters. That's off the back of new migrants who are in the workforce and second generation migrants in the workforce who don't necessarily share Labor's progressive social values, but see labor as modern, in touch with their material concerns and putting forward a brand of governing that is inoffensive and stable. Whereas the coalition has been, you know, not talking about the issues that people in the suburbs on childcare, cost of living that resonate in recent years. So the one nation threat will be significant to labor in some of its outer suburban seats. We don't know how one nation will go at a federal election yet. So so much yet to be tested. But at some of these, in some of these labor seats in the outer suburbs of Melbourne and Sydney, there already is a combined far right Christian Party vote of up to 10%. In some of these seats through various micro parties, one nation will Hoover that up. If they hoover up maybe half of the Liberal Party vote in these areas, they could be a threat. But yeah, and it's something labor is
- [24:28]
A
alive to in Sydney and in Melbourne too. I think a lot of those outer urban seats or fringe seats have high migrant populations as well. And who knows how that might play with a one nation candidate, depending on how they present themselves. Paulina Hanson is now saying she's not anti immigration, she's anti mass migration, whatever that means. So the government's budget, the budget is basically an opportunity for the coalition to get some airtime, as you say, to retreat to that very safe place for the Liberal Party, which is defending tax policy and being the party of lower taxes always and the party of aspiration. So a lot is riding on the budget response for Angus Taylor, even though I would say not a lot of people in the general community kind of take that much notice of it. If he doesn't do well or if the criticisms on labor don't land. Will Angus Taylor's leadership be in peril, do you think?
- [25:19]
B
Well, the basis for Angus Taylor's leadership was outlined on the morning of the leadership spill by his key ally, James Patterson, the senator. And his quote was, if we don't change, we'll die. And the number of people who have been flocking away from the Liberal Party meant that it was in an existential crisis and had to reconnect with its base. Angus Taylor has stopped the rot. Their polling numbers haven't continued to decrease. He's pushed up the primary vote a few percentage points. They're in the low 20s in a bunch of different polls now, pushing up into the mid-20s. But One Nation seems entrenched in that mid-20s primary vote, higher 20s in some polls. And that's not a tenable position for the Liberal Party getting closer to the election. There'll be a Victorian election in November where Jess Wilson, the opposition leader, will be trying to get on top of quite a tired labor government down there. And I think that will be symbolic as to where the Liberal Party's at across the country. There'll then be a New South Wales election at the first part of next year in March, I believe. And if the Liberal Party's polling at its same level federally now as it is then one nation looks dominant and the Liberals aren't winning at a state level. Inevitably, questions will start to be asked about whether Angus Taylor has enough energy and is eye catching enough to take the party forward. He hasn't achieved much cut through yet, but there is a broad sense across both moderate and right faction parts of the federal parliamentary party that he deserves a chance, that he's trying to bring stability and unity to the show, that he's had an OK but not hugely inspiring start and that time is needed.
- [26:50]
A
Yeah, so they're giving him clear air at least, which is more than his predecessor got. Paul, that's been a fascinating chat as always, and next week I think we're going to have former opposition leader Bill shorten on and hopefully we'll have a bit more sense then of how the government is selling its budget and how successful the coalition is able to be in attacking the budget, basically and all the measures. So have fun. Until then, stay cool and I'll see you next week.
- [27:15]
B
See you next week.
- [27:20]
A
You can read all of our political news on our websites theage.com au and smh.com Today's episode was produced by Chee Wong with help from Debbie Harrington. Our executive producer is Tammy Mills, and our podcasts are overseen by Lisa Martin Muxworthy and Tom McKendrick. Before you go, please follow Inside Politics and leave a review for us on Apple or Spotify. I'm Jacqueline Maley. Thank you for listening.