As Crikey noted yesterday, the latest Mid-Year Economic and Fiscal Outlook further diminishes the fiscal justification for the government to abandon the stage three tax cuts it committed to before the election. What has long been dubbed unaffordable looks increasingly affordable with what will likely be two surpluses in a row and a substantial downgrading of forecast deficits from 2025.
Moreover, GDP growth — even when revised upwards yesterday — is still expected to barely manage 2% between now and 2025 as a result of the Reserve Bank’s obsession with home-grown inflation. Household demand growth is expected to be even weaker than previously thought. As a result, the tax cuts on July 1 will kick into an economy that’s decidedly tepid.
That the tax cuts are skewed too heavily to high-income earners is true; that there are better things to do with that money, even within the strict confines of tax cuts is also true — re-orienting them to lower-income earners will see a greater impact on household demand because higher-income earners will save more of the additional cash.
But there is a progressive case for the tax cuts within the broader context of what the Albanese government is trying to achieve. Under Albanese, Labor has ditched a risky, ambitious agenda for a cautious, centrist economic management model aimed at achieving multiple terms in government and making reforms a permanent part of the fabric of Australian life — more Medicare than carbon price. The selling point to voters is stable, competent government that provides certainty and delivers for working families — in contrast to the incompetence, culture wars, marketing and stunts that marked Scott Morrison.
Despite failing to sell its achievements, Labor has delivered on much of this agenda over 18 months: inflation is down, partly due to Labor’s programs; wages growth is up, also partly due to Labor; and the budget looks likely to rack up two surpluses in a row, because Labor resisted the push for more cost-of-living relief, knowing that would just add to inflation. It has also begun the process of rebalancing Australia’s anti-worker industrial relations system to make wages growth easier in the future.
The price of this success is the constant rain of criticism on the government, from progressives and the Twitterati who want more spending and bolder reform, and from business complaining about higher wages and industrial relations reform. Much of the media is either formally anti-Labor, obsessed with horse-race journalism rather than substance, or too cowed to provide balanced coverage. But the hope is that voters realise they’re being given a higher-quality government that plays fair with them, and will be inclined to keep it in power rather than return to the incompetent circus of the Coalition.
The stage three tax cuts are crucial to the strategy. Whether Labor should have backed them before the election or not is now irrelevant — they did, so the tax cuts have the status of an election commitment. Progressives urging Labor to dump them plainly have no memory or regard for what happened when Paul Keating merely shifted some of his L-A-W tax cuts into superannuation, or what happened when Julia Gillard allowed the Coalition to portray her carbon price as a broken promise, or what happened to the Abbott government after the 2014 budget. It takes a fairly low regard for voters to think they’ll readily accept more broken promises from anyone.
Progressives respond that Labor should make the case for full or part reversal of the cuts — explain how regressive the changes are, how the money should be redirected to better uses, that the cuts are unsustainable, convince voters of the need to amend or dump them.
This sentiment comes from the same place as the naive belief that if only Labor made the case for opening our borders to asylum seekers, Australians would embrace large numbers of boat arrivals, that somehow the problem is the messaging, that if only there was a politician capable of cutting through, any reform is possible. Well, good luck with that in a wholly fragmented media environment. If a government struggles to sell its clear achievements, selling the nuanced arguments about why middle- and high-income earners should forgo a tax cut is going to be impossible.
Rather than hand Peter Dutton a legitimate excuse to spend every day between now and the next election telling voters Labor can’t be trusted on tax cuts, Labor is far more likely to achieve its goal of multiple terms by delivering the tax cuts as planned, showing voters that the government can be trusted to do what it says it will, and that it can deliver for low- and middle-income earners with higher wages and lower inflation at the same time. In fact, it’s a no-brainer.
Are the stage three tax cuts worth keeping for Labor’s long game? Or is the cost still too large to justify? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
No doubt that Dutton & Co would go to town on Labor reversing it’s position on stage 3 tax cuts but if you extend this argument, Labor is similarly stuck with Aukus, more coal mines, no policy on reducing house prices, no action one gambling and poker machines and no change on a raft of neo-liberal policy that needs reform.
Labor has forgotten how to take the fight to the Libs and even when a change would be in the interests of 75%+ of Australians they simply fold up in the face of Dutton and Murdoch.
Perhaps it’s a mistake to think that Labor is secretly a progressive party keen to carefully implement change when all the signs are that it’s simply a regressive neolib vassal.
Labor could rescind the stage 3 tax cuts it supported under the last government and instead give them only to those earning less than $90k or average wage. No progressive would oppose a tax cut to those earning less than average and it would be ludicrous for Dutton to argue that the big end of town needs it. That won’t happen because Labor is every bit as captured as the LNP by the big end of town.
The Dutton approach is the same model as that of Abbott or Trump. Truth doesn’t matter. In fact truth has to be suppressed and eliminated.
We really are on the edge of a precipice here and we are simply sleep walking into disaster.
I do love how only one side in politics (the Coalition, the Brexit Party, and Trump Party) can act in completely insane, anarchic, populist, incompetent, dishonest, disdainful manner, and the other side of politics (Labor, Labour, the Democrats) must be disciplined and conservative at all times lest……voters freak out!
I mean if Trump is literally able to shoot someone on 4th Avenue then surely we can start having a few policies that are to only marginally left of Thatcher???
Jeremy Corbyn, nah Ed Miliband with a bacon sandwich, was seen as more of a threat than Boris Johnson.
Albanese is only marginally more popular than Scott Morrison….
The only way to counter extremists is to go…well….more extreme the other way.
If they bring a gun to a knife fight we bring the Green New Deal.
That’ll put the cat amongst the pigeons.
In a broader sense … If you’re “Progressive” to the extent that you want strong action on climate change, housing, poverty, the banks and a list as long as your arm, there’s no way you should be voting for Labor in the first place!
Yes, I’m sure if all the progressives began voting Coalition the Coalition would implement more progressive policies.
Can just imagine Dutton’s post-election conference call with the Merdochs: “Sorry guys, 4 million progressives just voted for us and we’re in by a landslide. Consequently, the men in my Cabinet have decided to reduce inequality, make the tax system fairer, stop punching down on minorities, increase transparency, and refuse donations from all the financial, mining, fossil-fuel and property interests that have been bankrolling us through our entire history. Further, we’re going to introduce anti-monopoly regulations that will allow a more diverse media landscape in Australia.”
What kind of ridiculous straw man is that? As if anyone who can spell would suggest progressives vote for those filth.
Oh, who do you suggest progressives should vote for then?
Yeah, you’re right – there is only Labor and Coalition in this country.
It’s more correct to say that, for the last 90 year, there have only been Labor or Coalition governments.
On pretty much every other planet in the universe, a split progressive vote hands victory to the Tories.
Alternatives ?
That’s up to you of course but I will not, in conscience, vote for any party that has a totally inadequate climate change policy, not to mention a portfolio of policies I don’t agree with. Obviously there are alternatives.
Please point us to where Labor promised:
Genuine question. No doubt that they’ve made noises about supporting homeowners and have waved through gas exploration permits (and coal? Not sure), but these weren’t stated as promises when asked specific questions during an election campaign as happened with the Stage 3 tax cut question.
Is this argument making any sense to anyone? Does Keane – normally an astute reader of politics, and an advocate for fairness – think that the beneficiaries of the Stage Three tax cuts are suddenly going to vote Labor? Are the conservative media suddenly going to say to their readers, look, Labor has kept a promise to wealth; everyone vote for them? Does Keane think that those of us on the bottom will rejoice at the sight of our betters being rewarded for being rich and continue to vote Labor out of the goodness of our hearts and the knowledge that Those Who Have can now Have More?
I cannot see this as being anything other than a cruel farce, and a disaster at the next election.
I think BK is saying that the media landscape in Australia is so lazy that the story will be a broken promise, not how Australia has benefited from better use of the money not lost in the tax cuts.
I wouldn’t say the landscape is lazy as much as certain parts of it operate from a fixed position. For instance; Labor denies the tax cuts and is ‘breaking their promise’, or Labor allows the tax cuts to go through, therefore they are ‘ignoring the struggling poor and contributing to inflation.’ This will always be a lose/lose. You might as well do the right thing and wear it, because the Opposition and their media cohorts will pound you whatever the decision.
Spot on, Frank. Murdoch is already criticising Albanese and Chalmers for paying down the debt (‘Jim keeps your cash’ – headline today in the Adelaide Advertiser) – makes a change from criticising Labor for being spendthrifts, notwithstanding the hypocrisy.
After all this time to upgrade the comments section, we’re still not allowed to use the ‘M’ word. I’ll try again.
Spot on, Frank. Mudroch is already criticising Albanese and Chalmers for paying down the debt (‘Jim keeps your cash’ – headline today in the Adelaide Advertiser) – makes a change from criticising Labor for being spendthrifts, notwithstanding the hypocrisy.
It seems that using the perfectly good and succinct word for those born out of wedlocks, but used almost exclusively to label manipulative mongrels, is still verboten on Crikey.
But Crikey’s censorship is still not as bad as SMH, where they have recently instituted a “reform” of the comments section that while it may exclude the one-line dropkicks, actually censors even more strictly those who express views contrary to their seeming policies of protecting their resident RWNJs article writers and commenters.
The complaints department, especially the editor promise to “look into it” but nothing changes. Hence my second withdrawal from subscribing to a paper I’ve been reading for 60 years.
“the media landscape in Australia is (…) lazy”
And so are the pollies. That’s the problem.
I have to agree. Most comments here are making valid suggestions for re-jigging/ improving the so-called Stage 3 Tax Cuts, including indexation of tax brackets to counter ‘bracket creep’. Yes, there will be the inevitable BS from Dutton and Co but isn’t this a fight worth fighting?? Why are Chalmers, Albo and the rest of the ALP actually in power? I thought it was about advancing a fairer society! They have the opportunity to give modest tax cuts to the majority, reduce the largesse and maintain a progressive taxation system. Remember this is a 6-year-old ideological LNP policy. If it goes through without change Dutton will claim it as his policy and mock Albo for being weak, which he will be. B Ks arguments are all stuck in the past- demographics/attitudes and perceptions have and are changing! It is really stupid and simply not worth it to keep a promise!
Yes , and like AUKUS, set up to wedge Labor (which they fell for at the time, in opposition). From memory LNP wasn’t going to give th lower level cuts unless stage three was included in the legislation?
Correct.
Is reforming the tax system a “broken promise”? Or can Labor successfully message their way out of the scare campaign?
I would suggest proceeding with the tax cuts but alter the quantum, then institute a major overhaul of the entire system, which should remove Howard’s corrupt largesses and it could be sold for the good of the country, with no election promises broken, and to the raucous cheering of 90% of the populace.
“Why are Chalmers, Albo and the rest of the ALP actually in power?”
Tis.
They’re making so many concessions to Dutton, you’d be forgiven for thinking he’s the one running the country.
Or you could describe it as out-sourcing Labor policy to Dutton.
I think you need to revise your views on what the average Labor voter looks like in 2023 and the same goes for the average Greens voter too.
Our richest people live in our biggest cities, usually in the most central parts of those cities, how many urban seats does the Liberal Party hold these days? That’s right, none.
Political allegiance is now defined by educational and cultural factors, it’s no longer capital vs labour.
You’re correct, “it’s no longer capital vs labour.”
Which means that, in an increasingly unequal economy, Labor is (correspondingly) less able to guarantee the votes of the less well-off. Which means media proprietors and their corporate backers are better able to leverage “culture wars” to secure the votes of the less-well off to serve the big-end-of-town.
BK is merely painting the political landscape the way it is, not how we’d like it to be. It is, of course, terrible that we’ve sleepwalked our way into the current situation over many, many years but it is what it is and wishing it was different won’t change anything.
The masses are tied over a barrel for the vultures to pick apart, and half of them are saying please sir, may I have some more.
Labor, with the noble exception of the Shorten platform, has increasingly seemed hell-bent on being part of the problem for decades. I don’t see them wishing they could be more decent; I only see them making some occasional pretty noises to those of who wish they would be.
If Labor really gave a rat’s, we’d see them using their platform to make the case not just for decency, but something approaching a halfway sustainable future. They’re wilfully steering this bus off the cliff.
BK is advising people to lie down and take it.
Makes perfect sense. I bet that after these cuts come in, Labor will make various adjustments down the track to increase tax on wealthier Australians and feed that back to those more in need. I say patience, it’s early days yet and this is what Keane is highlighting.
Hooray comments are back!
The indexation of tax brackets against CPI/Wage Growth could be implemented instead. This would bury bracket creep and remove one argument for tax cuts for aspirational voters. It seems odd to give largesse to the rich 10% in order to retain the voters in the 90%.
Why were they gone? There are no improvements for us.
Speaking of no improvements, it’s hard to understand how this transparent excuse for a nominally slightly leftish government gets such an uncritical pass from BK.
LNP deserves to never hold office again; ALP deserves to never hold a majority again.
Is it ? Is it really ? 😀
Yes, but it would remove the ability to score cheap political points by claiming to fix bracket creep – hence the reason this incredibly obvious step is never taken.
(Though I would argue basing tax brackets on a multiplier of the median income is better than indexing to CPI)
Temporarily Embarassed Millionaire Syndrome.
I could never quite get my head around that TEMS business; I can’t process it as anything other than crypto-bootlicking.
I believe in a progressive taxation system – the more you earn, the more you pay. Drop brackets and have a sliding scale. Simple. The argument not to give Spud ammunition is just playing into the LNP’s hands. The ALP is becoming too conservative. We need vision, not fear of being wedged by the LNP, to shape government thinking.
This is precisely the same logic we laugh at when Credlin and the Sky News numpties peddle the “LNP isn’t conservative enough” drivel. Australian federal elections are won at the Centre. The End.
Where is the ‘Centre’? Do you mean the middle of the Overton window as defined by the MSM, or the middle as defined by the political compass results of the Australian populace? Huge gulf between the two.
ALP and Australia are conservative, more so with an ageing population and above median age voters dominant many own homes, super eggs & socially conservative, but different from below median age….
Taxing the wealthy appropriately and closing the tax loopholes for corporations creates the fiscal space for the government to spend. Labor’s reluctance to tax its big donors is why we can’t have nice things. The unnecessary obsession with balancing the budget and achieving surpluses means more pain for the little people.
Shut up and eat your gruel, and keep slaving for the Man.
I never understood the obsession with surpluses. What are you hoarding this money for? Money is there to be spent where and when it’s needed. There is plenty of areas in Australia where money needs to be spent. Tax cuts at the top is not one of these areas.
Finally the elephant gets looked at. Big Money pays no tax and here we are arguing about the scraps. Bear in mind that more equitable taxation systems have been proposed. As far as I’m aware land taxation appears to work. But the fossil fuel giants are laughing all the way to the Bank of Bahamas.