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The Morning Edition
‘Popcorn out’ for Farrer by-election, plus the RBA’s pointed comments on government spending
00:27:46
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- [00:02]
A
I'm Jacqueline Maley and you're listening to Inside Politics from the newsrooms of the Sydney Morning Herald and the Age. Joining me today as usual, we have our chief political correspondent, Paul Sakal from Canberra. Hello, Paul.
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B
Good morning. Great to be with you.
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A
How are you?
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B
We're good. The budget trees are deep red.
- [00:20]
A
Yep.
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B
Jim Chalmers is looking very serious. He's doing back to back interviews with 10 print reporters in a row. It's all heating up. This is what you live for in
- [00:29]
A
Canberra and this is what you live for. I think when you're the Federal Treasurer. One hopes you do anyway. But first I want to talk about something else, Paul. This Saturday, May 9th, I will be preparing an elaborate birthday party for an 11 year old. But other people, in fact the entire nation will have their eyes trained on the electorate of Farah, which is having a by election, a long awaited by election that's shaping up to be very interesting and we just wanted to check in on it because we haven't done that for a while for our listeners. So people will recall that the by election was triggered by the resignation of Susan Lee from politics. So the former opposition leader after she was ousted by Angus Taylor in a leadership coup in February. She's held the seat since 2001, so that's 25 years if my maths is correct. And before then it was a national seat held by nationals leader Tim Fisher. It's a lovely rural seat in New South Wales on the border of Victoria, and it's a seat that is basically a coalition stronghold and has been for most basically its entire existence. The coalition has held it by about a 10 percentage point margin more or less since the 1980s, although the independent candidate Michelle Melthorpe knocked a fair bit off Susan Lee's margin. It's probably not going to be a coalition stronghold for much longer, is it, Paul?
- [01:43]
B
It's almost certainly not going to be. And I'd rather be organising the 11 year old birthday party than Angus Taylor on Saturday night because he's going to have to put on a brave face and pretend that this is not the disaster it appears. He's been handed a pretty poor deck of cards. In truth, he took over the leadership in February. The coalition's primary vote was at literally historic lows, hovering in the late teens, maybe early twenties. There'd been two coalition bust ups. The national primary vote was in the low single digits, as you say, Jack, this is a seat that runs between Albury in the east and Pine Camp all the way at the South Australian border in the West. So it's a huge seat, has lots of little, small, little towns, but also the more slightly more cosmopolitan Northumberland regional city of Albury. Susan Lee has held this seat since 2001 when she won it off the nationals. Her primary vote is steadily eroded from the mid-60s in 2004 when it was, you know, the halcyon days of the Howard era. And in the last election she dipped down into the low 40% region, which was due to the emergence of a kind of centrist, maybe slightly progressive independent, Michelle Millthorpe, who's one of the now network of community independents that have bobbed up in regional areas with the backing of Climb 200, which funds the teal movement also. But these regional independents colour themselves in orange and they are a slightly different political makeup to the Teals, less progressive, more interested in regional issues, but still focused on climate change as well. And so it's right in that hitting zone for the coalition to lose a seat like that. But the big new factor is the emergence of one nation, which is hoovering up conservative coalition voters across the regions and the suburbs. And I expect there'll be a really big one nation vote at this election. Perhaps not enough to win. I think it's probably 50, 50 between this centrist, slightly progressive independent and one nation. But the Liberals and Nationals are likely to be a distant third unless they have a great final week of the campaign.
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A
Yeah, it's amazing though, isn't it, that what should be and has been a coalition stronghold is now like neither coalition partner is basically in the running to win this election. So yeah, we've Michelle Millthorpe who's a community independent and in many ways, even though she's slightly at, I think lower odds to win than the one nation candidate, who we'll get to in a sec, she is in some ways the bigger threat to the coalition because the thinking is if she wins, she's more likely to become a rusted on community independent, like other community independents in rural New South Wales and Victoria who stay for the long haul basically in that seat. Tell us a little bit about Michelle Millthorpe.
- [04:24]
B
Yeah, you're spot on. That's some of the thinking inside the coalition is that it might be better for one nation to win this seat because David Farley, the candidate who we'll get to, has been a bit of a train wreck and may flame out in Canberra. Whereas Michelle Millthorpe is a more, seemingly a more reliable, well known entity in the community, has a big network of independent supporters behind her. She's a former teacher, sex assault victim and advocate. She's had to tread this delicate balance between labelled a teal by the coalition. Not without any basis, I should say. I know several teal campaigners from Kooyong and Goldstein and Victoria who've actually travelled up to Farah. I know her research has been done by people linked to the teal movement and she's certainly been funded by, in part by Climate 200 and the Regional Voices Fund which has also funded other climate 200 independents as well as teal. So there's not zero basis in that claim. However, to portray her as some raging lefty is also misleading because she's talked about the need to revitalise our oil refining capacity. She strikes a kind of balanced tone on climate change, but she. Yeah, she's. I think you're right, Jack. She's in the $3 region in the betting. I think One Nation's around a $80 or old $90. So pretty, pretty solid favourite and extraordinarily the Liberal candidate, something like $15, which
- [05:45]
A
exemplifies the times just for any hunters among our listenership. Our colleague has done some great reporting on the one nation candidate, David Farley, who I think is shaping up, if he does get elected this Saturday, he could shape up to be one of the great, perhaps short lived, you know, political characters in our colourful history. Tell us a little bit about David Farley.
- [06:05]
B
Well, you're right. Every day there's been a kind of really eye catching story about David Farley the past week. This is a relatively old, I don't know how quite early. I think he's in his mid-60s. I should know the answer to that. I don't mean to be disparaging about his age. He's had a really successful business career. He's an agribusinessman. This is a guy who's been profiled in the afr, has had a profile, a case study of his business in a Harvard Business course unit. So he's well known in the political world in that part of New South Wales. And Rob Harris, our colleague, the national correspondent, has done some extraordinary reporting and I suspect if the Liberal candidate does have a total upset win, Rob Harris might surely need to be passed some brown paper bags under the table from the Liberal Party because it will be
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A
down to Rob, that kind of thing.
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B
Not that we do that kind of thing.
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A
David Farley, I mean he's a bit of a political chameleon. I don't know if he was ever a member of the Labor Party, but he's given to Labor Party campaigns. He's sounded out the possibility of being a Labor candidate under the Albanese government. And he was knocked back primarily because he extraordinarily misogynistic remarks I would say in my opinion that he made about Julia Gillard, calling her a non productive old cow or likening her to one. He was also floated as a replacement for Barnaby Joyce in the Senate in 2013. He's earlier praised his opposition, Michelle Millthorpe. He's made a lot of comments about immigration and even foreign aid that are sort of contrary to the one nation platform. So who, I mean, who is this guy? Like he's kind of all over the place. He's all things to all people.
- [07:41]
B
Well, I think that would be a fair criticism that the Liberal Party is pumping out in all their advertising. And the extraordinary part of this, one of the extraordinary parts of this story from Rob Harris is that David Farley did not inform Pauline Hanson or Barnaby Joyce that this information was going to emerge. Rob's story was going to be published. This is about a fortnight ago now. And instead of informing the people who he's who are leading his party that this very damaging information was going to be put forward, those individuals read about it when the story was published. And so there was a phone hookup that night between. Don't know if Joyce was on it, but Hanson was on it. Her chief of staff, James Ashby is also a well known figure, was on it and Farley was on it. And he said, look guys, yeah, I did have a look at Labor, I didn't really like what I saw. And he's managed to, in explaining himself further inflame tensions with the leaders of his party. And yeah, as you say, Jack, this information is that he tried to be a Labor candidate as recently as 2022. He then donated to the Labor Party campaign in the seat of Aston where Peter Dutton lost the Liberal seat in 2023 for the first time as an opposition in modern history. He's also flirted with the National Party and at the last election in 2025, he endorsed on Facebook Michelle Millthorpe, the candidate he's coming up against now. She was a good woman and a straight shooter and Nationals. People on the booth this week, including Darren Chester, the deputy leader, has been telling people that David Farley actually was handing out how to vote cards for Michelle Millthorpe. So honestly, maybe we need more people
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A
like him in politics who can see all sides of every argument.
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B
He's a nuanced thinker.
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A
Yeah, that's right. He's a nuanced Guy, this goes to the sort of the crux of the one nation problem, and by which I mean the problem that one nation has actually cohering as a party and actually getting up candidates, finding candidates and then keeping candidates that will be voted to the lower house. Because no one nation candidate has ever been voted as a one nation candidate to the lower house. Even Pauline Hanson wasn't. People may Forget that almost 75% of their state and federal representatives don't complete or have never completed their first term. So it's. Even though it's sort of emerging as this incredible political force at the moment and really threatening the coalition in particular, when it comes to their track record, they're not very good at staying the course in representation and they're not very good at selecting candidates who actually get along within the party structure. I mean, David Farley kind of looks like he's heading in that direction if he does get elected.
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B
Yeah. There is fear inside one nation at the moment that because Farley is a difficult to control character who's been really successful, he's got strong views. People, people respect Farley for his business acumen. He's got a lot to him as a person. But as a political candidate, as you say, clearly not an ideal pick. And so there's worry in one nation at the moment that if he does win, as they expect he will, then he might drift away from one nation over time and become another statistic of the drifters away from Pauline Hanson. But the fact that he is still in the box seat is telling in and of itself. Right. Because it shows that Pauline Hanson's brand at the moment she's polling at plus 20 and plus 18 in two of the leading national polls. The Prime Minister is in negative territory. Angus Taylor is in negative territory. She's in some polls. By far the most popular politician in Australia. Her brand is carrying David Farley. And by elections like this, it's two years away from an election. So for the coalition trying to convince voters there that you need to stick with a party of government to get rid of labor, it's a difficult sell when voters know the election's so far away. It's been seen by many voters as an easy protest, consequence free. Give the major parties a kick. Oh, yeah, Pauline sounds OK at the moment. She's telling it how it is on Islamic extremism and migration and the things that are to my bugbears. And so I'll give them a go because, you know, what's the coalition done for me lately?
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A
Yeah, it is still a Historical anomaly, though, for a third party to pick up a seat in a by election. Usually the by election swings to the party that's not in government as a protest. So I just want to talk about what this means for the coalition because they're usually seen as a referendum on the government, but labor is completely sitting this one out. They've grabbed the popcorn. They're going to be watching it just like we are on TV on Saturday. And it's such an interesting contest because it's really a microcosm of the. The pressures that the coalition is under from, you know, community independence, teal independence on the one hand and on the left and one nation to the right. What has the libs campaign been down like down there? And also how heavily involved has Angus Taylor been in it?
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B
Well, yeah, as you say, Labor's not there. That's probably shrewd politically because they had little to win from it. But it does go to the point that labor is disconnected from large parts of regional Australia as well. A big, healthy Labor Party with connections into slightly more conservative parts of the world, primary industries would have contested this election. And there is a kind of deception that goes on at the moment because labor just doesn't contest seats where Climate 200 campaigners are a chance of winning and all of their votes tactically drift to the Climate 200 candidate who portray themselves as non progressive. Anyway, to your actual question, Angus Taylor's been keen to emphasise from the get go that this is going to be a really difficult fight. There's a view among people close to Taylor, there's contested opinion on this that Susan Lee left this seat in a state of total disarray, that there were no contact lists of voters, that she was just not attending school visits and hospital visits and all the things a local MP does for many years. She was in the seat for 25 years.
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A
It sounds like a very self serving argument for the Liberals who know that they're going to lose the seat. I mean, certainly it has appeared to me that the Liberal candidate, Raisa Butkowski, forgive me if I pronounced that incorrectly, is there doesn't seem to be any love lost between her and Susan Lee. But then also there's probably not many people in Susan Lee's position who would do a particularly conciliatory handover. I'm gonna say.
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B
Yeah, no, exactly. Why would she? Right. She was rolled less than a year
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A
into her child and that. Sorry to interrupt you, but that sort of says everything you need to know about the internal cooperation of the Liberal Party and The culture of the Liberal Party right now, they're kind of not all pulling in the one direction, right?
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B
Totally. And haven't been for a long time. I mean, this by election couldn't have come at a worse time for the Liberals. Susan Lee left the party with very little policy because she abandoned policies after the last election because she was from the more. She wasn't really a moderate, but she was backed by the moderates. She never really had a clear run. But even, you know, her own supporters wouldn't say that she ever, you know, really set the party on a trajectory to grow their voter base. She was kind of paralysed from the get go. And so with the Liberal Party polling in the high teens, the National Party had also gone through a hugely tumultuous period. Eventually, David Littleproud succumbed to that pressure and hand it over to Matt Canavan. Surprisingly, the party's still trying to rebuild itself, regain internal unity. It's totally broken trust with voters after both a terrible election result and a period of, you know, coalition split. So it doesn't have a clear policy agenda yet. It doesn't have a period of internal unity to prove to coalition voters that it is a serious party of government. One nation is ascendant. One nation has zeal. And around it, Pauline Hanson is talking as if she's, you know, in a farage Trumpian moment and she's about to take the country over. There hasn't yet been an elong elongated period of scrutiny to bring Hanson down. So it just really couldn't have come at the worst moment. And so Taylor, to answer your question, has been in Farah a little bit. Matt Canavan actually, hilariously has literally been camping out in Farah with a swag wearing a beanie and things to exemplify that he is not abandoned Conservative seats. Taylor has been more circumspect because he knows the party's on track to lose. But if they have a result that doesn't have a, you know, if they're in the mix, I think the Liberals will portray that that is a strong result, which is a sign of the parlour state they're in.
- [15:47]
A
Yeah, okay, we'll be interested to see what happens. It's going to be. It is actually going to be a really fascinating one to watch. Yeah, I want to switch gear now and talk about our hip pockets because that really was the big news of the week. The RBA board obviously met and decided to lift interest rates by 0.25 of a basis point. So our cash rate is now 4.35%. RBA Governor Michelle Bullick acknowledged that this was going to be incredibly painful for a lot of Australian families and that, you know, she sort of talked about the income shock, but she also talked about the underlying pressures in our own economy. She said all Australians were going to be poorer or were poorer because of the income shock of the oil crisis. But she also had some pointed words for governments, Australian governments, didn't she, Paul?
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B
She certainly did. This was a really difficult decision for Jim Chalmers and Labor. We talked last week, Jack, with Shane Wright, our good friend, about how difficult a decision this would be for the Reserve Bank. This week, the last vote was split 5, 4. So a more contested decision in the board. This decision was 8:1. So nearly unanimous.
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A
Yeah.
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B
And what Michelle Bullock had to say was troubling for the country and troubling for the federal and state governments. She said that, yes, the inflation shock caused by the war had made their decisions more tricky.
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C
The developments in the Middle east remain highly uncertain, but under a wide range of possible scenarios, the conflict adds to global and domestic inflation and might prolong
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B
this inflation shock inevitably will. However, the decisions that the bank are making, she said, are largely driven by the sticky underlying inflation that had emerged late last year and in the early part of this year across various sectors of the economy. Because once our economy started to rebound last year, just a little bit through business investment, primarily data centres and other things, our economy is so constrained on the supply side because productivity has been so poor for so long, and this labor government has been in power for four years to try and start to fix that, it started to run too hot. And so these interest rate rises are to deal with that inflation primarily, as well as what's been driven by the war, too.
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C
When inflation is already too high and the economy facing capacity pressures, it doesn't take much additional spending to make the job of returning inflation to target more challenging. This means spending will need to grow more slowly for a time to help restore the balance between demand and supply.
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B
So what that means is that when the government says that the war is the sole cause of this, that comment from Michelle Bullock shows that to be a slightly misleading comment. Now, the war has obviously had a huge effect, and you're right, she did talk about the income shock caused by the war, and the government will continue to emphasise that. But there's more to it.
- [18:30]
A
The actual comments that she made, you know that the governments need to think about whether or not there's ways they can help the inflation problem by looking for ways to constrain demand and the extent to which governments make up the shortfalls for household by giving them more money, it makes it harder to dampen demand. Now, she could have been talking about state governments as well. And the Victorian government has just spent a whole bunch of money and has a huge deficit. But it was a week before, you know, the federal budget. So no prizes for guessing really who she's got in her sights with those comments. The Reserve bank is independent, but it is quite unusual for a governor to give such a direct instruction to a treasurer to a government. So I just kind of wanted to point that out. Chalmers, in response said, you know, the government wants to be helpful, not harmful in their role in the fight against inflation. But at the same time this week we had some reports that the government is going to give some tax relief to individuals working Australians. What do you know about that?
- [19:28]
B
Yeah, this is a report in the Australian whose journalist Matthew Cranston, their economics correspondent, has got an incredible source inside treasury because he's just getting pure budget leaks and ruining every surprise that Jim Chalmers had for us. So this report, and we think it's largely accurate, is that there'll be a tax offset either paid this year or next year. We're not quite sure. Somewhere in the vicinity of $200 to $300 as a kind of, you know, just repayment on your credit, on your tax.
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A
Yep. Only for salary earners. Only for wage earners.
- [19:58]
B
That's right. Not for people who are making passive incomes on investment. So this story was published on the same morning that Michelle Bullock made a call on interest rates and gave her press conference. As you say, her comments were quite blunt. She would not describe them as an instruction to government. She would say that all she was doing was pointing out how the components of consumption across the economy and demand government public spending being one of them. And if government public spending is too high, that makes it more difficult for her to do her job of constraining demand to bring inflation down. So she was pointing out economic facts. But the pertinent point about that is that for many months now she's faced these really tricky questions in her every couple of month press conferences when she makes decisions to call out government spending, which has been at a record level nearly from the federal government for a few years, outside of pandemics for about the last 40 years. But she's been, she's decided not to weigh into that debate even by pointing out the economic fundamentals of it. She made a decision this week to do that. There's been quite a lot of pressure from some of the financial commentators for her to weigh into it. But her decision to do so, which, you know, most economists would say was totally appropriate for her to do, has been controversial inside the Cabinet. There's been some ministers who would have liked her not to make those comments ahead of such a sensitive federal budget where there is so much scrutiny on the spending level. But Jim Chalmers has been saying, and we reported on Thursday, that deficits will actually be smaller over the next four years. There's the huge savings measure on the ndis. The government is probably not going to do major stimulus, even though they might do the tax offset. But you know, Chris Richardson, the economist, has a rule of thumb that $7 billion in public spending by the government equates to about 1 interest rate rise in terms of how much money it puts in the economy. This is probably going to be 3 billion and it might be next year. So we're not talking huge money, but this is all about signal, so.
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A
Yeah, that's right. So people, wage earners being given a little bit of their own tax back in the, you know, a few hundred dollars over the course of a year is not going to make us all go out and buy flat screen TVs and Lamborghinis. As much as I would love a Lamborghini, I think you.
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B
Well, I think frankly you deserve one. Yes, I do, but for what? I was just going to say that weighing against the views of Econom and the opposition, who will, you know, at all times say that the government needs to hold back, there's huge political imperative at the moment to protect households through a, you know, generational oil crisis. People were doing it tough before that. I mean, there are savings buffers have been built up, have been built up since the pandemic. Unemployment's not high at all, but no one's having a great time of it at the moment. So the government, while there's a lot of pressure for them to take heat out of the economy, on the other side, the Prime Minister's trying to protect his voting coalition and keep trust with different groups. And there is a huge imperative in their minds to do what they can without going too far to keep people on site. And the fuel excise cut was one part of that. This tax offset might be another and maybe there's some more. So the balance is hard.
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A
It's really hard. And I mean particularly, I would say for low income households because the costs of fuels, the cost of housing and the cost of groceries, they're all the things that you really worry about and if you're in a low fixed income, there's not a lot you can do about them. Just lastly, it already looks like the opposition is going to attack Anthony Albanese hard on breaking a promise at the last election because he ruled out in a debate he had with Peter Dutton during the election campaign, he ruled out changes to negative gearing and to capital gains tax.
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B
Hmm.
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A
Now it looks like they're going to. They are going to make changes to those tax breaks.
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B
They will.
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A
Do you think that that will be a potent attack line? The Broken Promise attack line? It killed Julia Gillard's leadership in extremely different circumstances. You know, these tax changes, as we've discussed earlier on this podcast, Bill shorten took, you know, similar measures to the 2019 election and got killed on the basis of his waging a class war, allegedly. Are they going to be able to survive that attack campaign from the coalition as it's shaping up?
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B
Well, they've made a calculation in the cabinet and the Prime Minister's made. And the Prime Minister is a cautious and highly shrewd operator when it comes to calls like this. If there's one thing his colleagues trust him for, it's making calls like this about whether he can survive political firestorms, whether he can get away with a measure and how he times things and how he strategises political thrusts like this. So he's made a call that he can. The 2019 measures that you referenced from Bill shorten are very similar to these. Bill shorten had lower approval ratings. Scott Morrison was a new entity who cast himself as a, you know, daggy dad who was looking out for battlers and mums and dads who had aspiration. There was also more older people voting at that time than there are now. The housing crisis was not as starkly, you know, not, not so sharply in focus. So the government believes that the demographics and politics have changed to the point about the broken promise and the opposition's attack. This puts them into obvious political terrain. You're in opposition, you believe in lower taxes, you should hold the government to account for their broken promises. So they'll do all those things. How much hay will they actually make? Well, is anyone listening to the opposition at the moment? Even they would admit not really. Do they want to be speaking only to their quite narrow boomer, asset owning voter class, or do they want to be broadening a little bit? Andrew Hastie would say they should broaden a little bit. Angus Taylor would say, yeah, we'd like to Broaden, but I've got my principles on this stuff. So the lie attack is. It should be potent because you go to an election and there's some clips of Anthony Albanese in the election campaign getting really snippy with journalists saying, I've told you 50 times, I'm not touching negative gearing, stop asking me why do I have to say it again? And then there's tabloid headlines this week. Brandon him a liar in massive headlines. And people in the Cabinet feel aggrieved by those headlines. But without impugning the Prime Minister's direct character, there's some basis to the claim that there was a. A broken promise here.
- [26:08]
A
Yeah, there's a big difference between a broken promise and a liar. And certainly Julia Gillard on the carbon tax always regretted that their government and she allowed herself to be framed as a liar when in fact what she'd done was break a promise. Now, I mean, Anthony Albanese, I think, obviously, as you say, he backs himself in to explain this to the electorate, just as he did with the Sage street tax cuts, and to come out and own it and say, yep, I did say that and I've changed my mind because the circumstances are so different now. So it'll be interesting to see whether or not he's successful. And Jim Chalmers obviously, I think is a pretty good communicator, so he'll be selling his budget hard in the weeks to come. Paul, what are you going to be doing on Saturday?
- [26:48]
B
All I know about my Saturday is I'll be at home on the couch in the evening watching Sky News's, you know, between 10 and 15 person panel trawl through the faro results. And because I'm a sicko, that excites me.
- [27:02]
A
Well, I'll probably be doing the same from the shelter of my bedroom, having made a three layer Funfetti cake. Wish me luck on that.
- [27:08]
B
Good luck with that, Jack.
- [27:10]
A
See you next week.
- [27:11]
B
Bye.
- [27:15]
A
You can read all of our political news on our websites, theage.com or 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 Muxworthy and Tom McKenzie. Before you go, follow Inside Politics and leave us a review on Apple or Spotify. I'm Jacqueline Maley. Thank you for listening.
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D
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