Comment

Paul Bongiorno
Albanese moves cautiously on all fronts

It’s pretty simple really: success in a liberal democracy like Australia comes when a political leader is able to bring a majority of the population on board with their agenda and responses to a crisis.

Anthony Albanese, who entered parliament in the 1996 election that saw the Liberals’ John Howard win in a landslide, has proved himself an astute student of the Machiavellian arts as practiced by opponents and allies over the intervening years.

We are seeing the results of the prime minister’s learning in the way he has responded to the humanitarian crisis in the Middle East and in the careful way he and his treasurer are preparing the ground for what he proclaims is his commitment to “big reform”.

Building consensus and “not scaring the horses” frustrates impatient reformers and denies political opponents the opportunity of easy pointscoring. The economic round table, to be held in Canberra from August 19, is evidence of this approach.

Already rejected as a “talk fest” by shadow treasurer Ted O’Brien, who nevertheless has accepted an invitation to be one of the 25 participants, it is seen by the prime minister as laying important groundwork for ambitious reforms.

The timetable, however, is more in line with strategic patience for the implementation of ideas big or small that may come out of the three days of closed-door discussions in the cabinet room.

Treasurer Jim Chalmers tells The Saturday Paper he is looking for the round table to inform his next three budgets rather than rush to immediate decisions.

He is incredulous at the opposition’s criticism of his wide consultation in preparation for the discussions, “as if we shouldn’t involve people”.

Chalmers and Albanese deny there is any rift between them over the exercise, even though it does appear the prime minister was keener than his treasurer to hose down expectations.

Prime ministers have a habit of pulling rank on treasurers. A spectacular example was Bob Hawke in 1985 withdrawing his support for a consumption tax proposed by his treasurer, Paul Keating.

Even though Albanese has modelled himself on Hawke’s style of cabinet government, insiders say there is no basis to perceptions reported in the media in recent weeks that he was doing a Hawke on Chalmers.

The reports of friction were, however, concerning enough for the two men last week to discuss the need to kill off any hint of disharmony.

Chalmers’ ambitions for tax reform are tempered by the prime minister’s unwillingness to embark on a “big brand-new bargain” with voters three months after the election. The treasurer in fact shares this view especially – he, like Albanese, ruled out touching the capital gains tax discounts and the concessions on negative gearing before the poll.

The same goes for leaving the GST unchanged, even though there is one such submission to the round table suggesting raising the consumption tax to 15 per cent and offsetting it with an annual $3300 compensation payment to lower income earners and pensioners.

Both men reject increasing or broadening the GST, because as a direct tax it impacts more heavily on poorer Australians who have no discretionary spending than it does on wealthier Australians with more disposable income.

Former treasurer and Labor Party president Wayne Swan says the bulwark of a prosperous economy “is a fair set of industrial laws backed by a progressive tax system”.

It’s a certain bet that the participants will come to the table with predictable versions of their traditional vested interests, but Albanese says some will be in the national interest “and we’ll take all of them on board”.

The round table started out as a productivity summit, charging the Productivity Commission with collating submissions through its prism of improved economic performance and greater government efficiency.

Chalmers insists this is still primarily the focus, made all the more acute by the Reserve Bank of Australia on Tuesday downgrading its assumptions for productivity over the next two years.

Governor Michele Bullock showed some impatience with journalists at her media conference for their reaction to the Monetary Policy Board’s 25 basis points rate cut – the third in just over six months.

Bullock said the bank does not model productivity and its assumptions have no impact at all on employment and inflation. She even admitted the board had got it wrong, overestimating productivity while still hitting its employment and inflation forecasts.

Economist Stephen Koukoulas says this is because it is getting harder to define productivity as the economy moves from being predominantly goods-based to services. “How do you measure the productivity of a teacher, a nurse or even an economist?” he asks.

Koukoulas suspects the slide in productivity measures in many developed countries and in Australia since 2016 could mean it is being misrecorded and that the productivity performance is better than currently indicated.

Chalmers agrees the changing economy is a factor in the productivity drop, but challenges still need to be addressed to make it more dynamic and to produce new skills. He nominates regulatory reform and better planning approvals.

In a week that produced some of the best economic news in five years for wages growth, and interest-rate relief for millions of borrowers, Opposition Leader Sussan Ley baffled ministers with a statement accusing Albanese of losing focus on “the worst cost-of-living crisis in a generation”.

She said the prime minister “seems more focused on foreign conflicts than the crisis in our own backyard”. She was referring to Albanese’s announcement on Monday that Australia would recognise the state of Palestine at the United Nations General Assembly in September, having received commitments from the Palestinian Authority in regard to disarming Hamas and recognising the state of Israel’s right to exist. The 22-member League of Arab States had also made these assurances.

Albanese revealed he had had a long and “civil” conversation with Benjamin Netanyahu last Thursday, telling the Israeli prime minister a political solution was needed and not the military action that has led to “the devastation in Gaza” . He told Netanyahu, “too many innocent lives, Israeli and Palestinian” have been lost in the recurring cycle of violence over the past 77 years.

Netanyahu on Sunday held a rare news conference for Jerusalem-based foreign journalists. He told them most of the Jewish community is against the Palestinian state because they know “it will bring war”.

“To have European countries and Australia march into that rabbit hole, just like that, fall right into it and buy that canard is disappointing, and I think it is actually shameful,” Netanyahu said.

Albanese responded on ABC TV that “frustration” with the Netanyahu government’s reluctance to listen to its allies had led to Australia’s decision. He said the Israeli leader was in “denial about the consequences that are occurring for innocent people”.

Midweek, Australia joined 29 foreign ministers, including all G7 member countries except the United States, in a statement that declared “the humanitarian suffering in Gaza has reached unimaginable levels” and called on Israel to lift all restrictions on the safe delivery of aid.

Albanese revealed he has spoken to the prime minister of Japan, Shigeru Ishiba, and government sources say it is a matter of when, not if, Japan will join in the recognition of Palestine as a way of building pressure on Israel and the US.

After a virtual meeting of her shadow cabinet, Ley announced it had resolved to oppose the government’s decision to “unilaterally” recognise the state of Palestine “outside of a proper peace process”. On returning to government, she said, the Coalition would repeal it.

Ley said there could be no recognition without peace, no reward for Hamas and no breaking with our closest ally, the US.

If the opposition was counting on President Donald Trump to punish Albanese for Australia’s position, it was disappointed.

The Sydney Morning Herald reported the White House declined to criticise Australia’s announcement, citing an official who noted that while Trump was not going to recognise Palestine himself, he had an open mind on the issue.

Trump has said he saw such recognition now as “rewarding Hamas”, but the official reported that “the president is not married to any one solution as it pertains to building a more peaceful region”.

Minister for Foreign Affairs Penny Wong at the weekend spoke with US Secretary of State Marco Rubio as a courtesy and, according to the State Department read-out, he made no issue of the news with her.

Rubio on New York radio was asked about Australia, Ireland and other countries moving on recognition. He said they are doing it “primarily” for domestic political reasons: “they’re getting a lot of domestic pressure to do something”. He said the action was “largely meaningless”.

Wong says she knows “the distress, the anger, the horror many Australians feel”, and the best way to respond to it is to work with other nations in applying pressure for a permanent ceasefire and the release of hostages.

This article was first published in the print edition of The Saturday Paper on August 15, 2025 as "Moving cautiously on all fronts".

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