No backing out now for Labor. Chalmers has set the tone, and the goal, for term two
At base, this is about making the budget add up – people can ask for tax cuts, but only if taxes are raised elsewhere or spending is cut. Mostly, though, Chalmers has, quite properly, reminded us that tax reform is unavoidably a political project. 'Trade-offs' are, traditionally, the very essence of politics: something is gained and something is lost.
Crucially, this is a very different type of politics for the Albanese government. Labor's first term was not much about trade-offs. With a couple of exceptions, it was mostly about shepherding change through quietly: making sure that nobody was losing enough that they would complain. Now, it seems, the government will contemplate policies with much more dramatic impacts – impacts everyone will notice. Significant losses will be matched by equally significant gains. The political complexity lies in who bears the losses and who gets the gains. It was a strikingly bold – and potentially historic – moment for Labor.
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Two weeks ago, the Coalition's finance spokesman, James Paterson, insisted the Coalition was up for talking to the government about tax reform, including reducing taxes and then collecting 'that revenue in less distortionary ways'. That sounded a lot like higher taxes in some areas. But, he also said, the opposition would not help Labor 'increase taxes'.
'But isn't that tax reform?' asked the ABC's David Speers. 'You're gonna have to put something up to cut somewhere else.' Paterson insisted, 'We are not interested in increasing taxes'.
You can perhaps, if you squint, make sense of this – it will be up to new opposition leader Sussan Ley, in her own turn at the Press Club this week, to try. The likelihood is that Chalmers will face a version of what Keating faced: support for some bits, but not for the others that make them politically plausible.
Chalmers talked a lot about consensus in his speech. Reaching agreement would be 'everyone's responsibility'. It's an important point. It is also a useful point to make at this stage of the process: after all, it is Chalmers' job to push everyone towards agreement by making clear the government shouldn't be expected to do all of this by itself.
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But what if, in the end, there is not consensus? Or what if consensus forms only around a very limited set of changes? Chalmers declared, 'if we fail it won't be because of a shortage of ideas, options or choices. It won't be a shortage of courage – but a shortage of consensus.'
Ultimately, though, if there is not consensus, courage will be required. If you read Chalmers' words as a persuasive tactic, they are fair enough. If, on the other hand, the government thinks it has given itself an alibi, it is kidding itself. The goal has been set.
Political embarrassment would not be the only consequence of a retreat on tax reform. Keating's mentions of Medicare and superannuation are reminders that economic reform does not have to be only about tax. Instead, tax changes can take their place within a grander Labor project, alongside other concrete policies, the benefits of which voters more readily grasp. But it is hard to see how that larger Labor project works if tax reform fails.
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