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KARA:

From Schwartz Media I’m Kara Jensen-Mackinnon, this is 7am.

The Labor party keeps saying this coming budget is full of hard decisions.

We know we are already in deficit, but services are underfunded and if we want to improve childcare, disability care and more – then money will have to come from somewhere.

Anthony Albanese has vigorously ruled out dumping the expensive stage three tax cuts. So what is left on the table for Labor to turn to?

Today, columnist for The Saturday Paper, Paul Bongiorno on whether Labor is brave enough to make big changes to the economy.

It’s Friday, October 14.

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KARA:

Paul, earlier this week we got a pretty stark warning from the Treasurer, Jim Chalmers, on the global economy. But the reason he was talking about it is because the government is actually still trying to put its budget together. So how is the government managing to do that when so much of the global economy is up in the air? And just how big are the stakes for the Labor government to get this right?

PAUL:

Well, that's a good question. And, Kara, there are difficult decisions to be made.

Archival tape -- Jim Chalmers:

“Tonight, I'll be leaving to visit the United States to meet with the chairman of the US Federal Reserve, the head of the IMF and the head of the World Bank…”

PAUL:

At the moment treasurer Jim Chalmers is in Washington DC for high level talks with global financial movers and shakers. On Saturday he'll attend the IMF's annual meeting and then will fly back to Canberra on Sunday.

Archival tape -- Jim Chalmers:

“It's an opportunity to take the temperature of the deteriorating global economy to properly understand what it means for us as the Government puts the finishing touches on the budget…”

PAUL:

In the final stages of putting together his budget, he's going to compare notes with his counterparts from the United States, the United Kingdom, Canada, India and Korea. And he says he'll have the latest thinking about the concerning international developments, which he will then factor into the budget. So the pressure is on economically, but meanwhile Labor is cruising politically. According to the latest results strategic poll in the Sydney Morning Herald, Labor is performing above expectations and the poll found the Labor Government is leading in 16 of the 17 policy areas canvassed and even on national security, where it trails by only one point…well, that's really statistically line ball. And with the budget looming, 36% of respondents say Labor is best to handle the economy, compared to 30% who prefer the Coalition. And pollster Jim Reid says it'll be some time before the Coalition is able to rebuild strengths.

But I have to tell you that Treasurer Jim Chalmers’ former boss Wayne Swan - and remember he was the treasurer at the time of the global financial crisis - well, he says everything should be on the table at a time like this. And you'd think that includes changes to policies the Labor Party took to the last election. Swan says and I quote, “not to review all of the policy settings in view of what is going on in the world would be the government sticking its head in the sand.”

KARA:

But one thing I suppose the government does seem to be sticking to, at least for now, these very expensive stage three tax cuts, to the point that there's actually been a concerted effort to tamp down any speculation Labor is about to shift their policy on that, hasn't there Paul?

PAUL:

Well, Kara, after reports last week that changes could be on the table for those cuts, the Prime Minister, Anthony Albanese, was emphatic on Sunday, saying three times that his position on leaving the enormously expensive stage three tax relief in place…well, it hasn't changed.

Archival tape -- Anthony Albanese:

“Our position hasn't changed-...”

Archival tape -- Anthony Albanese:

“Well, our position hasn't changed-...”

Archival tape -- Anthony Albanese:

“Our position hasn't changed. I've said that repeatedly and I stand by that comment…”

PAUL:

The reason was simple. He said, quote...

Archival tape -- Anthony Albanese:

“These are due to come in in 2024. We're producing a budget in October 2022.”

PAUL:

Well, some Labor insiders are scratching their heads as to why the Prime Minister allowed Chalmers and Finance Minister Katy Gallagher to fly the kite, questioning stage three on fairness and cost grounds, only to leave it up in the air. Well, the truth of the matter is, whether it's through trimming the tax cuts or something else, nobody can get away from the need for budget repair at a time like this. It is an urgent problem, and that means pressure is still on for changes to stage three as their start date in two years approaches, even if the Prime Minister has tried to put an end to the speculation for now.

Archival tape -- Monique Ryan:

“I think people understand that the stage three tax cuts were legislated at a time before we had a trillion dollars in debt and before we saw the cost of living and inflationary pressures on the economy that we're seeing at the moment…”

PAUL:

One voice still calling for re-examination is teal independent Monique Ryan, who snatched the well-heeled liberal seat of Kooyong in Melbourne from then treasurer Josh Frydenberg. Even though some of Ryan's constituents would undoubtedly benefit hugely from the tax cuts, she says people need to understand that government's role is to respond to the challenges it sees before it.

Archival tape -- Monique Ryan:

“I think Australians are mature enough to understand that governments can sometimes need to change their mind. But if the government feels that it's not in a position to do that at this point, what I would suggest is that this is a time that it has a mandate to think about structural reform of the economy.”

KARA:

Okay. So then, Paul, what kind of options are available to the government for fixing the problems in the budget? Because the Labor Party keeps talking about these tough decisions they're going to have to make, but if that isn't dropping these tax cuts, then what are they talking about? What could they be doing to fix the budget?

PAUL:

Well, as we say, nobody can get away from the need for budget repair. The latest Deloitte Access budget monitor predicts the budget in two weeks will be awash in red ink, and continuing in deficit in the four years of the forward estimates. The report's co-author, Catherine Leigh, said if Australians want the Government to continue to fund existing programmes and to meet the cost of a long list of important spending priorities from aged care and child care to disability care and defence, they need to be prepared to pay higher taxes over time.

Now economist Chris Richardson, a former Treasury official, himself, says the right thing to do in this context is more than tweaking what he describes as the particularly expensive stage three tax cuts; he says there's another big issue that should be on the table, and that is taxing gas producers who pay, quote, embarrassingly little tax for a key resource.

Kara, consider this: the government of Qatar collects 20 times as much revenue from liquefied natural gas royalties - $26.6 billion - despite the fact it exports less gas than Australia; we collect just over $1 billion. Rationally, fixing this is a no brainer, but it raises the prospect of one of the Labor Party's greatest bogeymen from the past: and that is the cost of upsetting billionaire resource producers.

KARA:

We'll be back after this.

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KARA:

Paul, we've been talking about this budget, which is now being written during a whole lot of economic uncertainty. And we were talking about the idea of getting resource companies like gas companies to pay more tax. But there's a very strong political reason Labor might be wary of touching something like that, isn't there?

PAUL:

Well, that's right. There is a fraught history of Labor governments trying this kind of tax reform.

Archival tape -- Kevin Rudd:

“The Australian people own those resources and they deserve a fairer share from those resources to fund better super, better tax cuts for small businesses…”

PAUL:

When the Rudd Government floated what amounted to a super profits tax on resource companies, Australian resources billionaires howled about how unfair it was.

Archival tape -- News Reporter:

“This is the new face of the mining industry's campaign against the resources tax.”

Archival tape -- Ad voiceover:

“Some people would have you believe that only miners are concerned about the new mining tax. I'm not a miner, but I am concerned…”

PAUL:

When they launched a campaign against the government that was unprecedented in Australian political history with TV adverts and a full on assault through the mining companies allies in the media. That was a key reason for the decline in support for the Rudd government before Julia Gillard wrestled the leadership from him and led to the policy being scrapped.

Archival tape -- News Reporter 2:

“What a difference a Prime Minister makes in her eighth day in office. Julia Gillard has called time on a bitter two month battle with the giants of Australia's mining industry…”

PAUL:

But the Albanese Government shows much more cohesion and discipline than its Labor predecessor, with a united message and a united team. Well, there's cause to believe this government could take on some kind of bold super profits tax reform, and you'd think successfully sell the Australian people on its benefits. Well, economist Chris Richardson, though, accepts this is a hard ask for cautious politicians. But he says “the nation is better off if our politicians choose courage over consistency. Or if you like, I prefer hypocrites to cowards.”

KARA:

Okay, sure. But as he suggests there, anything like a resource tax would mean Labor would need to backtrack on some of their election promises, wouldn't it, Paul?

PAUL:

Well, true. During the election, Anthony Albanese promised not to raise these taxes under pressure from Morrison. But while this was strategically smart at the time, we're in a very different economy now to 2018 and senior ministers have publicly pointed out conditions have continued to worsen in the five months since the May election, ignoring economic reality. Well, it would be a mistake. Could even be a disaster. But Labor is still shaken, as we say, by what happened to the Gillard government and the carbon tax lie peddled by the Opposition that helped bring her down. But in my view, to ascribe Labor's defeat at the end of that term, when you might remember it was led by a returned Kevin Rudd. Well, it's myopic. Gillard wasn't breaking a promise when she introduced a price on carbon. It was not to raise revenue. The job of a tax. The purpose was to put a price on carbon pollution to reduce it, which was successful. It was the internal ructions and instability of that government that I believe was a much bigger culprit in its defeat.

KARA:

Okay. But if we know anything about Prime Minister Anthony Albanese, it's that he's this cautious and kind of calculating politician. Do we really think that he has the appetite to so quickly change course and make changes to tax policy, whether it's these stage three tax cuts or a super profit tax or anything else that could help the budget so soon after an election?

PAUL:

Well, Kara for now, it does appear the ghosts of broken promises passed and the lessons from the last era of Labor government. Well, they're spooking the old uneasy government, but in two weeks time it does have to deliver its first budget and we'll learn a lot more. The Prime Minister is determined not to give his political opponents the chance to skewer him on the issue of trust just after an election where integrity and government featured heavily. He's also keenly aware of the entrenched view in the electorate of his predecessor, Scott Morrison, or as he became known as Scotty from Marketing, who said one thing but invariably did another. Well, this damaged Morrison fatally. But it's true, Scott Morrison provided plenty of ammunition himself.

Though, as Opposition Leader Anthony Albanese boasted about Labor's success in putting the then Prime Minister's untrustworthiness front and centre of the political debate. And it's obvious Peter Dutton, well he's itching to copy Albanese's success. And he's already claiming Labor has broken a key election promise to cut power prices. But that's disingenuous. The promise may look shaky, but it has a 2025 delivery date. And picking up on Chris Richardson's point, can we seriously suggest that the government riding high on its performance, if it did the right thing rather than the political thing, well, then its support would suddenly collapse in favour of a weak Dutton opposition, pushing blatant distortions to attack it.

KARA:

Paul, thank you so much for your time.

PAUL:

Thank you, Kara. Great to work with you. Bye.

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KARA:

Also in the news today,

Victoria’s emergency commissioner Andrew Crisp has warned the risk of flooding due to the state’s current rain event could last for more than a month.

Crisp said another rain band was developing, and would push across the state from the west in the middle of next week, telling Victorians, quote: “we’re in this for a while”.

The Campaspe, King, and Ovens rivers have been identified as locations of major concern, with an additional alert raised for residents along the Maribyrnong River in Melbourne’s west.

And conspiracy theorist Alex Jones has been ordered to pay nearly 1 billion US dollars in damages to the families of 8 victims killed in the 2012 Sandy Hook shooting.

Jones has already been found liable for defamation, after he spent years falsely describing the shooting. He now faces a third trial later in the year, in a lawsuit filed by the parents of another child killed in the shooting.

Jones’ company ‘Free Speech Systems’ has filed for bankruptcy protection.

7am is a daily show from The Monthly and The Saturday Paper.

It’s hosted by Ruby Jones, and produced by me, Kara Jensen-Mackinnon, Alex Tighe, Zoltan Fecso, and Cheyne Anderson.

Our technical producer is Atticus Bastow.

Brian Campeau mixes the show, our editor is Scott Mitchell.
Erik Jensen is our editor-in-chief.

Our theme music is by Ned Beckley and Josh Hogan of Envelope Audio.

I’m Kara Jensen-Mackinnon, this is 7am, see you next week.

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