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In the past month, and in response to abject polling and some of the most difficult circumstances in their history, the Liberal and National parties have taken the extraordinary step of installing two new leaders. The last time that happened was in April 1990, when John Hewson replaced Andrew Peacock and Tim Fischer replaced Charles Blunt just after a disastrous election in which the Coalition easily won the popular vote but lost to Bob Hawke’s Labor.
Angus Taylor and Matt Canavan looked comfortable together on Thursday in their first appearance together as the new leaders of the Liberals and Nationals, jabbing away at Labor about potential fuel shortages and the need to ease costs on business.
But it is not yet clear if Taylor or Canavan have grasped the depths of the challenges ahead beyond the threat posed by a surging One Nation on their right.
The Coalition parties’ dire position means that Jim Chalmers will never have a better chance to make long-term structural changes when he hands down his fifth federal budget in two months, as my colleague Shane Wright wrote this week. Usually, at this point in the political cycle, speculation about the government’s plans would go into overdrive, with strategic “drops” of future announcements landing on the front pages of newspapers.
Those drops have barely started. While they will be ramped up, the next eight weeks before the budget lands will provide two tests of how the Coalition is faring and how to restore its political fortunes.
The first test will be the South Australian state election on March 21, in which incumbent Labor Premier Peter Malinauskas is widely expected to secure a big victory. Liberals from that state talk grimly about the party being all but wiped out and fear One Nation will snatch at least a handful of seats. It won’t be pretty.
The second test will be the Farrer byelection on May 9; One Nation candidate David Farley and independent Michelle Milthorpe are the frontrunners and the downbeat Nationals expect to finish fourth behind the Liberals.
The two elections take place against the backdrop of an ongoing war in the Middle East in which Australia is now a participant, causing the global economy to experience big spikes in petrol prices and a rise in inflation, which inevitably corrodes living standards.
Usually, that would help an opposition and hurt an incumbent government, but it is far from clear that voters cranky about the cost of living will give their vote to the opposition. One Nation is doing a better job of capturing those disaffected voters.
Taylor and Canavan, in parliament for more than a decade, are both still on their leadership training wheels. The combination of a state election, a byelection and a war halfway around the world will pull focus from Chalmers’ budget, cleverly scheduled for three days after the Farrer byelection so its result can’t be framed as a verdict on the budget. There will be a lot less clear air for the opposition to critique Chalmers’ budget drops.
This combination of distractions suits federal Labor to a tee. It is the perfect opportunity for Chalmers and Anthony Albanese to do what the prime minister has proclaimed as one of his central missions since before he even took office: embed long-term changes in the federal budget, such as reducing the capital gains tax discount and limiting the use of negative gearing as a tax break, both of which would reflect the party’s values of equity and fairness.
Chalmers has spoken about the need to find more savings by winding back the generous tax breaks for leasing an electric vehicle, which were introduced by Labor.
After a potentially disastrous loss in South Australia followed by a possible loss to an independent or the One Nation candidate in Farrer – held by the Coalition since it was created in 1949 – Taylor and Canavan will face a Labor budget including decisions they are deeply opposed to on political and ideological grounds. Both men would welcome any reduction in the EV tax concession but if Labor proceeds with changes to CGT and negative gearing tax breaks, they have signalled a fight.
This is a mistake.
Labor is setting a political trap for the Coalition and Taylor and Canavan are walking straight into it, exactly as Chalmers and Albanese hoped, by dealing themselves out of negotiations and relevance. Apart from the economic arguments around making these tax changes – they do divide economists – the Coalition misunderstands the political mood if it opposes them.
Arguing to keep the tax breaks, which disproportionately favour older Australia, is fundamentally arguing for the status quo. But Australians, particularly younger ones, are disenchanted with the status quo. It is generationally unfair.
That is one of the reasons One Nation is stealing so much of the Coalition’s primary vote, and it is one of the fundamental reasons why, if Labor presents winding back the tax breaks as a change to the status quo – and a measure that makes the system fairer – it will probably win the argument.
Labor’s huge majority in the House of Representatives means the Coalition’s opposition to these changes is symbolic but meaningless. Once the proposed laws reach the Senate, the argument will switch to the Greens arguing for Labor to go further before it passes the laws. Rather than agreeing to changes with Labor, the Coalition could be left watching on.
Part of Angus Taylor’s pitch for the leadership was that he was a John Howard-style Liberal. Both Taylor and Canavan should keep in mind two things about John Howard. There are people who will vote in Farrer and in South Australia who were born after the Howard government fell in 2007. The invocation of the Howard era carries a lot less weight with a lot more Australians than it did a generation ago.
Also, Howard began the process of rebuilding the Coalition’s credibility during the long Hawke-Keating era by negotiating with Labor, rather than raging impotently from the sidelines.
Having claimed the leadership of their parties, Taylor and Canavan need to decide whether they want a seat at the negotiating table.
James Massola is chief political commentator.
James Massola is chief political commentator. He was previously national affairs editor and South-East Asia correspondent. He has won Quill and Kennedy awards and been a Walkley finalist. Connect securely on Signal @jamesmassola.01Connect via X or email.From our partners
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