Jim Chalmers thinks Australian voters will cop big things done slowly and little things done quickly, but not big things done quickly or little things done slowly. This is the treasurer’s theory of governing.
Chalmers made a serious attempt last year to tweak the stage-three tax cuts. The treasurer’s first significant budget repair foray was authorised, but then curtailed, by a prime minister who didn’t want to get bogged down in a public slanging match with Peter Dutton about broken election promises only a few months into a new term. Albanese’s verdict on stage three, round one, was too much, too fast.
The treasurer’s second major foray into structural budget repair, launched just over a week ago, focused on the fiscal viability of tax breaks on superannuation. Chalmers knew he would shortly be releasing a new statement quantifying the massive costs to the budget of various tax concessions, so he moved along in 24-hour increments, amid cacophonous contention, bumping towards the landing point he and Albanese outlined on Tuesday.
Before we hit the landing point, let’s be very clear.
The new tax expenditure statement makes a compelling case for a treasurer to get out the axe and start swinging.
The latest assessment from Treasury says the concessional tax treatment of superannuation now costs the federal budget about $50bn a year. About 40% of the benefits of tax breaks on super goes to the top 10% of income earners.
This revenue-sapping largesse doesn’t stop with super. The cost of 10 of the biggest tax breaks (think negative gearing, capital gains, franking credits and the rest) is now about $150bn a year.
Let those numbers roll around your head for a minute or two.
The evidence validates action.
But on Tuesday, rather than unleashing the fiscal equivalent of the Texas Chainsaw Massacre to help pay for nuclear submarines and all the services Australians say they want, Albanese and Chalmers announced, in substantive terms, a cautious hop forward. From July 2025, superannuation on balances above $3m would be taxed at a rate of 30%, up from the current concessional rate of 15%.
Let’s loop back now to where we started – with Chalmers and his theory of governing. What we saw on Tuesday was Labor closing in on fiscally unsustainable tax concessions. By definition, this is a Big Thing. So, the movement was slow.
Think of Tuesday as a proof of concept exercise. If the government can telegraph a direction of policy travel and the world doesn’t end, then maybe further advances are possible. Bit by bit. Budget by budget.
Albanese and Chalmers have opted for their new super tax arrangements to take effect from the middle of 2025. They could have started from budget night. Delaying the implementation isn’t about policy, it’s about politics. The delay gives the government an alibi against inevitable accusations of broken election promises.
Albanese gave voters the impression before the last federal election Labor wouldn’t be doing anything significant to super. Given this signal is tricky to unpick, the prime minister and treasurer opted to push out the timeframe for implementing their policy shift until after the next federal election.
As Albanese told journalists on Tuesday: “We’re putting forward this proposal today as something that we will legislate for, this term, but something that won’t kick in until after the next election. There’s a very conscious decision, so that it’s very clear that everyone can see what we’re doing here, which is about consistent with the commitments that we’ve made.”
Just in case we were all too thick to grasp this new strategy, the prime minister circled back to it.
“There will be no changes, no changes, this term,” Albanese said. “Even this change, what we are doing is pointing towards 2025. Now, we can’t be clearer, not just in our words, but in our actions. That’s what counts. We’re being very clear here by our actions, what we intend to do.”
So the implementation timing speaks to caution; the need for political boilerplate.
But the most interesting thing about Tuesday was the extent to which Albanese and Chalmers gave themselves room to move.
The prime minister and treasurer copped the predictable rule-in rule-out game. Would they care to rule out pursuing more tweaks or surgery on super taxes or other generous concessions in future budgets? Albanese and Chalmers edged around all the trap doors. Nothing was ruled out.
Albanese insisted there would be no changes “this term” – but that was already obvious given Tuesday’s change had a start date of July 2025. Chalmers noted at another point the government’s “focus” was superannuation, and super was “the best place to direct our efforts”. This is indicative, but a measurable distance short of definitive.
Coalition frontbenchers stormed the barricades shortly afterwards, declaring in great triumph that Australians needed to lock up their tax lurks, because Labor had ruled nothing out.
Liberal frontbencher Jane Hume, during an interview with Sky News, declared somewhat rashly Labor was back in the business of “class welfare”.
Whether Labor is back in the business of class welfare remains to be seen.
But on Tuesday, the government climbed carefully on to the starter’s block.