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ANGE:

From Schwartz Media, I’m Ange McCormack. This is 7am.

For someone who’s been accused of breaking an election promise, Anthony Albanese isn’t hiding.

The prime minister and his front bench have been out selling their new tax cuts, giving interviews and addressing the National Press Club.

So what makes the government confident they’ve made the right call? And how does it set up the political chessboard for the first week of parliament?

Today, chief political correspondent for The Saturday Paper, Karen Middleton on the decision to reset the Albanese government.

It’s Monday, February 5.

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ANGE:

Karen. Recently, Anthony Albanese made one of the most significant political decisions he's made as prime minister. It was changing Labor's position on the stage three tax cuts, of course. What do we know about how he's feeling about this major call that he's made?

KAREN:

Yeah, well, I spoke to him last weekend about this Ange. He was on the mood. He's not really had a lot of rest during the summer.

Audio excerpt – Anthony Albanese:

“I did have four days off, in, in December, which was cut short due to..”

KAREN:

Surprisingly, to me, he's quite upbeat. You know, this, this was a big call to make, as you said, the biggest call he's made so far and quite risky. And I think he quite relishes the fight.

Audio excerpt – Anthony Albanese:

“And I am prepared to argue the case and have been doing so, and we'll do so in the Parliament as well.”

KAREN:

I get the sense that he feels like he's got something to fight for now that he's a point of conviction. You know, it goes squarely back into Labor's territory of fairness and equity. And after, perhaps a difficult end of the last year, they have now got something they can argue for. That is a values based proposition. And so on the whole, he seems in a pretty good mood.

ANGE:

And this change in policy to some may have felt kind of sudden because it was announced before Parliament returns from summer break. Let's go back to how this decision was made. What have you been able to learn about how this all came together?

KAREN:

Well, all through last year, you know, obviously people are under huge economic pressure. The cost of living is going up and up. So the government was feeling the pressure as well. By the end of last year, the politics had got really difficult, overlaying the existing economic problems that the country was facing, and they really felt they needed to do something both to reset the politics, but also to respond to people's concerns that even though they had done a bit to try and alleviate the cost of living, people felt they hadn't done enough.

So they went into the Christmas break with that very much in their minds. Now there's a question about when they started thinking about this, and whether it might have been actually quite a long time ago, and that really was all about how they deliver it, rather than if. But certainly the end of the year crystallised that, and the politics and economics came together and required that they do something.

So they tasked the Treasury at the end of last year to come up with some options for further cost of living relief, but they had to do so without boosting inflation, because the battle against inflation is the big battle that they're fighting at the moment. So anything they did to give people more money or more help had to be done in such a way that it wasn't going to push other prices up. And that's a hard call.

And Treasury came back to them over the summer and said, look, we've looked at all the options and really your only option is to rearrange those state three tax cuts so that they stay within the existing cost envelope, roughly. So you're not pumping more money than people are already expecting into the economy. You’re just changing the emphasis from the top end to the bottom end. Treasury insisted that this was a fiscally responsible way to go because it was largely revenue neutral.

But the government had to make both an economic and a political calculation. They wanted something that was going to be positive or at least neutral for the economy, positive for people's hit pockets and positive for the government in a political sense. So they're always making a calculation that is both economic and political. And both of those things were in play when they made this decision.

ANGE:

Yeah. Let's talk about the political calculation that was on the government's hands here. What were they weighing up and what tipped them into believing that this was the right thing to do politically, or at least made them believe that they could kind of cop the criticism that would follow.

KAREN:

Well on the upside the first thing they calculated was that it would put the Coalition in a difficult position. These tax cuts are legislated. They are already legislated. The ones the Coalition were putting forward from five years ago. And any change would have to be legislated as well, which means they need to get support in the Parliament.

The Coalition would have to decide how it was going to respond, and so the government figured the Coalition would then be in exactly the same position that Labor had been in, in opposition going into the 2022 election, but going all the way back to 2019. And that is well, do we support these and give the government of the day effectively a political win, being able to take credit for tax cuts all the way, block them and then be the party that says no, people can't have more money in their pockets. It's not a very palatable choice. So that was the primary calculation.

And the Prime Minister, when I spoke to him on the phone last week, you know, he said to me, look, this, this is reminding people that the Coalition have become the “Noalition”.

Audio excerpt – Karen Middleton:

“Is there an argument that actually this, the argument, the controversy isn't such a bad thing for you?”

Audio excerpt – Anthony Albanese:

“This is reminding people that the Coalition have become the ‘Noalition’, that they oppose every cost of living measure that we've put forward. they oppose the energy price relief plan, they oppose the cheaper medicines...”

KAREN:

And then he went on to really have a crack. And he said,

Audio excerpt – Anthony Albanese:

“They're not an alternative government. They're just a protest group. And I think this issue has highlighted that.”

KAREN:

He insisted, as they do, that this is not about politics and that the opposition was obsessed with the politics. And the government, in fact, was looking at doing the right thing by people. Now, politicians always say that. They always say the other side are obsessed with politics. The truth is they have to focus on the politics. Because if you don't focus on the politics and the politics fail, then the government fails.

They acknowledge privately when you talk to a range of government people that this is not without its political risk. And of course, the biggest risk for them is to their credibility. On the point of breaking a promise. They don’t like to use that language, Ange, they don’t like to acknowledge that's a broken promise. But of course it is.

Some people acknowledge within government ranks it could go either way politically. It could still go badly for them.

ANGE:

Coming up after the break - how will Labor justify its broken election promise?

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ANGE:

Karen, we've been talking about the risks of this tax cut package the government have announced, and I want to ask you about the attacks it has faced because of it. What are some of the criticisms and are they legitimate?

KAREN:

Well, this point about credibility, I guess, has been the biggest. The Coalition has said you can't trust this government and you can't trust this prime minister. And having credibility as a prime minister, as an individual, and your reputation with the electorate is a is an important thing.

We saw under the last government how Scott Morrison's reputation sort of slowly eroded from him having a great deal of support to gradually people starting to doubt whether he was the guy they thought he was. And then when that starts to happen, you know, there can be one thing that occurs. For Scott Morrison, it was really the Hawaii trip, I think. And suddenly people go, right, we're not happy with you anymore.

So that's a risk for Anthony Albanese that the Coalition is not too successful in saying here he's not the guy you thought he was because he's said he doesn't break his promises, and now he has. And the critics in the Coalition will go very hard on that. Then there are people who think there should be greater, more structural tax reform. People like Allegra Spender, who is an independent, a teal MP.

Audio excerpt – Allegra Spender:

“tweaking is not going to fix it. We need ambitious reform, but the major parties aren't saying or doing enough of what's needed. Which is why I'm here.”

KAREN:

And she talked to the National Press Club last week and she's very big on let's do more and this is a wasted opportunity.

Audio excerpt – Allegra Spender:

“A little bit here, a little bit there. It doesn't deliver the reform we need and we need...”

KAREN:

The Greens are saying these tax changes don't go far enough. It's still not generous enough to the bottom end. It's still too generous to the top end, in terms of the Coalition. The shadow finance minister Jane Hume I think she was on Sky news last week. She was talking about very much about the integrity piece and saying, you know, this is an agenda the government's always had. They didn't tell you the truth, but they are trying to expand this also to take in other things that are tricky for the government.

Audio excerpt – Jane Hume:

“Quite clearly, this was always on the agenda. His integrity is shot and his cabinet, like lemmings, have followed their line Prime Minister off an integrity cliff. We can never believe them again. Whether they promise to not touch negative gearing, not touch taxes on the family home.”

KAREN:

But interestingly, Ange, I get the distinct impression and in fact, people have said this to me privately, that the government quite likes having this fight. And you would think that that's counterintuitive. But their argument privately is, look, while people are arguing about whether these tax cuts are a good or a bad thing, they remember that the tax cuts are there.

Audio excerpt – Nine News host:

“If we're going to talk about holding a position, then, Peter, what's your party's position? I mean, the Coalition is at odds over what decision to make here? whether to support these tax cuts.”

Audio excerpt – Peter Dutton:

“Well, no we're not. We're working through the figures. There are big numbers here. And our argument is it should be…”

KAREN:

Governments don't usually get a lot of bang for their buck with tax cuts. And this government figures, if people are still arguing about it, if the opposition is still grumbling about it, even if they wave the tax cuts through, then at least they stay in people's minds.

And maybe we will get more political credit than we otherwise might. So it's an interesting spin on the politics, but they seem convinced that it might work for them.

ANGE:

And we are quite far off the next federal election. But we're very close to a by-election in Dunkley on the 2nd of March. This is the seat that has become vacant after its Labor MP, Peta Murphy, passed away last year. It's just one seat, obviously, but what could that contest tell us about the public's reaction to the tax cut changes?

KAREN:

Well, it's naturally going to be seen in that context, isn't it, because these changes were made in such close proximity to Dunkley? The Coalition have said this is just a cynical ploy. They've done it because they're going to voters in Dunkley and. I want to dangle this to them.

And in fact, I think the timing is associated with Dunkley. But when I talk to people privately in the government, they say, look, we had to do it before Dunkley once we decided to do it, because if we left it till afterwards, we would have been accused of hiding and being tricky. So I think there is truth in the timing being associated with that in at least in that context.

Dunkley is important because by-elections are always important, And we always study them in the middle of the government's term because it tends to be a swing against a government in the middle of the term if there's a by-election.

They did very well with the Ashton by-election and they won that from the Coalition. That was the first time in like 100 years that it happened. But they're not expecting that there'll be a major swing to them. They think there'll be a swing against them and possibly a sizable swing. They still would have a slim majority in the Parliament without it.

Governments don't want to lose any seat, and they'll be certainly fighting hard in Dunkley, because not only does it affect the mathematics of their electoral strength, it's a psychological thing. You know, if there's a very large swing, it will be seen as a vote against the tax cuts. And then the government is on the back foot. So, you know, they would much prefer there wasn't too much negative about that result.

ANGE:

And finally, Karen, it seems that Labor's strategists are confident that they have made the right decision here. They believe the message that more taxpayers are going to be better off is cutting through, and the attacks aren't landing.

But we've seen before how popular policy can turn. So just how much is this decision and how it's being executed going to define whether the Albanese government does win a second term?

KAREN:

Well, potentially it could be quite significant in either direction if it does cement the idea that they can't be trusted, that their word is not their bond, as opposed to what the Prime Minister has said in the past, then that could be in a more long term way, very dangerous and difficult for them. Equally, it has served as the circuit breaker that they were looking for after the last year.

The end of last year was diabolical. You know, they had advocated very strongly for the Voice to Parliament, and the referendum was a decisive no. That was a blow to the Prime Minister. Then we saw a really ugly last session of Parliament and the High Court decisions that throughout the idea of indefinite detention of refugees and asylum seekers, the government had to scramble to respond to that. They ducked on the back foot.

And really, the Coalition came out much stronger, got a lot of political momentum, and the government really looked damaged at the end of the year. They needed something to break that. There was some speculation about a ministerial reshuffle. You know, I talked to some people about that and somebody said to me, you know, the Prime Minister is not really a reshuffle guy.

He's done this instead. This is the refresh. He's also made some changes in his media office, and he'll be hoping that the combination of those things takes them into the new year on the front foot and in fighting mode. And, you know, remember, this is the guy who said so many years ago, I like fighting Tories. That's what I do. He's also making policy now that he's the Prime Minister.

But he does relish a fight and this has given him something to fight for. But I think he and the wider party feel that they believe in. And that's no small thing psychologically going into the year. That could be the last year before an election. So we'll see how they go when the Parliament resumes.

ANGE:

Karen, thanks so much for speaking with me today.

KAREN:

Thanks, Ange.

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ANGE:

Also in the news today,

The United States announced it had bombed a total of 85 targets across Syria and Iraq over the weekend, in retaliation for the killing of three US soldiers in Jordan, which the US blames on Iran-backed fighters.

Iraq’s prime minister, whose government depends on US support, condemned the attack, saying in a statement that the bombings will have “disastrous consequences for the security and stability of Iraq and the region.”

And…

Northern Ireland’s top political office is now held by an Irish republican who favours unification with Ireland for the first time in its 100-year history.

Michelle O’Neill, from the Sinn Féin party, was finally elected first minister after the UK-supporting unionist party, the DUP, ended two years of refusal to participate in power-sharing arrangements like electing a speaker and first minister.

I’m Ange McCormack, this is 7am. Thanks so much for listening. We’ll be back again with more tomorrow.

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