It might have been hard to discern amid the howls of confected outrage this week. The point about the Albanese government’s change to superannuation tax was not that it was a shocking move by a radical government. Quite the opposite.
The Liberals’ changes to super in 2016 were much broader. This week’s decision marked the Labor government as being cautious and incremental. Even responsible. The point of the change was to save $2 billion a year to help repair the yawning deficit left behind by the Liberals. Not to spend on Labor mates or some new handout.
Illustration: Jim PavlidisCredit:
And it happened just three days after Anthony Albanese became the first prime minister to march in the gay and lesbian Mardi Gras. What does the cumulative tally of decisions tell us about the evolving shape of this prime ministership?
Let’s hit the “mute” button on the hysteria machine for a moment before it cranks up again for next week’s parliamentary sitting.
The superannuation system was created by Labor in the Hawke-Keating years to make sure “working people can enjoy a dignified retirement”. It’s run a bit amok in the years since. It wasn’t ever supposed to be a tax rort or a wealth-management system for the rich, but that’s what it’s become for many.
It gives people tax breaks worth $50 billion a year. Of the dozens of ways the government could have tightened the system, it chose one. Just one.
And the nub of it? The wealthiest 0.5 per cent of super owners will be moved from a very concessional rate of tax on their super onto a less concessional rate. It only applies to people with more than $3 million in super. And moving from 15 per cent to 30 per cent. Which is still a fat discount on the top marginal income tax rate of 47 per cent.
On top of this kid-glove treatment, Albanese has layered two further political protections. It won’t take effect for another two years. And only if the Albanese government is re-elected. The Liberals have promised to repeal it if they win. So if you don’t like it, vote Liberal.
The Liberals pounced on the decision like a starving man on a steak. They needed something to work with. The fleet of refugee boats that they were predicting a few weeks ago stubbornly refuses to show up. So super is fair game.
Peter Dutton’s complaints are fourfold. He says the government should get its hands off superannuation – the money doesn’t belong to the government but to the people who earned it. Very true.
But this isn’t about savings. It’s about tax concessions. These are favours that society bestows on particular groups for very specific reasons.
The new senator from the Jacqui Lambie Network, Tammy Tyrrell, said: “The point of $3 million is if you’ve got that much squirrelled away for your golden years, you don’t need other taxpayers passing around the collection plate for you.”
Second, the Coalition and the Murdoch media instantly declared this to be “class war”, setting aflame the envy and resentment of the poor against the rich. If you want a real class war, just follow America’s lead. Allow capitalism’s natural tendency to inequality to run unchecked until the losing class decides it wants to wreck the entire system. That’s what Donald Trump offered and it’s what he tried hard to deliver.
Albanese’s government has delivered a very minor reform to adjust one detail of the system. It’ll assist the budget bottom line a little. And make the system a little fairer.
How many people will actually change their votes because of this? Property developer and shopping centre owner John Gandel, with estimated net worth $6.2 billion, complained this week that the change was “unfair”. Let’s hazard a wild guess – he probably doesn’t vote Labor.
In direct impact, the change will affect some 80,000 people initially. Over time, as more accounts accumulate more value, more people will be pushed above the $3 million threshold and start paying 30 per cent.
How many? Over the next 50 years, about half a million people, on the Treasury’s estimate. This is Dutton’s third objection – that the change gradually will engulf more and more people. But, of course, if the threshold becomes too restrictive, it can be changed at any time.
Dutton’s most valid criticism is that this change is a broken promise. It’s true that this prime minister pledged to make no changes to superannuation. The government makes excuses – “we didn’t realise the extent of the problem until we took office”. But let’s be straight – Albanese broke an undertaking.
And this is the political potency of the decision: it raises the question of whether Albanese can be trusted. It’s enough for the Liberals to base a scare campaign on.
Albanese’s best defence is that it doesn’t take effect until after the next election. So he’s taking it to the people. Let the voters decide. This is a sound rejoinder. It was John Howard’s successful manoeuvre around his broken promise that he would “never, ever” introduce a GST.
And Labor plans to portray Dutton as the guy defending the privileged at the expense of everyone else. That’s a fight Labor is willing to have.
The government has real vulnerabilities – notably, inflation and the cost of living. But this week’s change to super is not one of them. In sum, the super decision is consistent with Albanese’s intention to govern from an expanding centre. He is prepared to make modest housekeeping reforms but nothing more adventurous. The response this week will help make sure of it.
If Treasurer Jim Chalmers was planning any bigger tax changes, he’ll only be attempting them as proposals to take to the next election. The superannuation sound and fury this week has had a cooling effect on any reformist urges.
Strikingly, this government is being much more financially disciplined than its predecessor. This week’s exercise is one proof point. A bigger one is its October mini-budget, in which it saved rather than spent 99 per cent of the revenue upgrades it enjoyed courtesy of surging commodity prices.
Opinion polls show the voters have noticed; Labor has neutralised the Liberals’ decades-long brand advantage as better economic managers.
“That’s a turnaround on the traditional situation where the Coalition automatically was seen as better economic managers,” says James Walter, professor emeritus at Monash University.
Prime Minister Anthony Albanese and Treasurer Jim Chalmers.Credit:Alex Ellinghausen
Craig Emerson, an economic adviser to Bob Hawke who went on to become a minister in the Rudd and Gillard governments, says: “There’s an institutional conservatism to Albanese. He doesn’t want to revolutionise the system.”
Emerson points out that Albanese spoke of the “legitimacy of aspiration” in his 2018 Whitlam oration. This was the time when then-leader Bill Shorten was planning some sweeping tax increases. “Albanese takes the Hawke-Keating approach – there’s nothing wrong with wanting to do better for yourself and your family.”
He’s been shaped over the decades by the fact that while he’s been fighting the Liberals on the right, in his own inner-west Sydney seat of Grayndler he’s been fighting the Greens on the left.
At the same time, Albanese has embraced progressive social causes. “He’s been pretty conservative on most matters, but when the prime minister marches in the Mardi Gras parade and talks about justice for Indigenous Australians with the Voice being the first step, they are sufficient flags for progressive voters, and gender issues also fit in this category.”
If you take a step back, you can see Albanese assembling a range of constituencies left, right and centre. Unions and business, women and young people, gays and lesbians, environmentalists and miners – he took his cabinet to Port Hedland recently to show support for the resources industry.
Albanese models himself on Hawke in his centrism and Howard in what Michelle Grattan memorably described as his “awesome ordinariness”. It’s no coincidence that they were the two longest-serving prime ministers in Australia’s post-Menzies history.
Emerson refers to the Labor 2022 election review, of which he was co-author. It set out the aspiration for Labor to replace the Liberals as the “natural party of government”.
This is exactly the vision that Albanese has been advocating inside Labor since he took the party’s leadership. It’s the vision that guides his government day by day. Emerson says: “Hawke-Keating was a five-term government – that’s a pretty good aspiration and that’s available, especially with the problems in the Liberals.”
No wonder they’re outraged.
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