Prime Minister Anthony Albanese has made a big call on a small change to superannuation that is cleverly designed to keep most Australians happy while driving his opponents into a conservative ditch.
The result is a solid policy move to increase tax and a sharp political move to wedge Opposition Leader Peter Dutton.
Albanese and his cabinet ministers could have gone much harder to scale back the tax concessions on super after releasing Treasury figures showing that 39 per cent of the benefits go to the top 10 per cent of people by income.
Treasurer Jim Chalmers had made a strong case for change, but ministers were rightly worried about imposing budget changes they had not told voters about at the election. Any sudden change left Albanese exposed to claims of a broken promise.
The decision in cabinet on Tuesday morning was a brilliant way to square the circle.
First, it is sound policy because it raises revenue with a fair and equitable change. People with more than $3 million in super will continue to gain a concessional tax rate on their fund earnings, but it will be 30 per cent rather than 15 per cent. Nobody stops them keeping as much money as they want in their funds, as long as they pay the higher tax rate. Only 80,000 people will incur the higher tax rate.
Second, it cuts short a ferocious argument about superannuation. Every day of debate increased the risk of frightening people about their super when they were not being targeted with any changes. Labor could have dragged out the debate but instead chose a quick, decisive tax increase.
Third, it challenges Dutton to make up his mind about who he represents. Does he stand for battlers in the suburbs – the voters the Liberals so often say they represent – or is he fighting for people on big incomes with $3 million or more in their retirement funds?
Dutton has just been wedged. He cannot accept the Labor policy, but at least two members of his party room, Bridget Archer and Russell Broadbent, think it is worth considering. As a champion for people with the very biggest super funds, Dutton could end up losing voters in the middle ground.
Labor knows how this works because it has been wedged so badly in the past. Former prime minister John Howard made the most of Labor’s divisions on refugees and another prime minister, Scott Morrison, won an election by fuelling fears over the sheer scale of Labor tax increases. The lesson: being bold backfires.
This is why the modesty of the new proposal is so essential. A wedge must be thin at the edge. This super change leaves 99.5 per cent of people untouched, so it divides Liberals and pushes Dutton to the right while he defends the other 0.5 per cent.
It is also proof of the old saying that good policy leads to good politics.
Albanese has left future options open – as he should. None of his statements on Tuesday ruled out further tax reform, which means negative gearing and capital gains tax might be addressed in the future. This is the right message: the entire point of the tax expenditures statement is to start a debate about what the country can afford.
The debate can continue and Albanese and Chalmers can consider their options before they go to the next election.
Albanese said last May he had no intention of changing super but has now found a way to make decisions as leader in a way that solves the inevitable question of broken promises.
The government is doing something that Broadbent suggested on Monday: seeking “the permission of the Australian people” for a change that Albanese did not announce before the election. The law will be passed in this term, but the change will take effect after the next election. Those who do not like it can vote against it.
This creates a template for the future. One year from now, for instance, Labor could propose another budget change that is put to a vote in this parliament but takes effect after the next election. Let the debate begin on all those options.
Albanese has crafted a political wedge he can use again.
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