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The backlash against Labor’s 2026 budget was so swift, so intense and so nearly universal that the government had just two options. The first was to tough it out, to “crash through or crash” in the words of Labor hero Gough Whitlam. Except that Whitlam conspicuously ended up doing the latter.
Hence, perhaps, Anthony Albanese and Jim Chalmers taking the second option: back down and look weak and tricky.
After more than a month of strutting about ‘breaking promises for the right reasons’, the pair have now executed a series of panicked U-turns. The small-business capital gains tax threshold has been hiked from a $2 million turnover to $10 million. Testamentary discretionary trusts, the ‘stealth death tax’, are suddenly exempt from the new 30 per cent minimum rate. Sweeping ministerial discretions that would have let Chalmers play God over who qualifies for what have been dumped. All announced with the sheepish air of men who have just been told the numbers are even worse than they feared.
“We back Australian small business and the important role they play in Australia: they’re the blood running through the veins of our communities and they’re vital for our economy,” Mr Albanese said on Thursday.
Small businesses are unlikely to forget that the PM spent the previous five weeks sneering at them as fearmongers and vested interests.
The speed of the retreat is the giveaway. If these changes were genuinely the “sensible, common sense tax reforms” Chalmers kept insisting they were, why fold at the first serious pushback? Business groups, farmers, accountants and even Labor backbenchers all said the same thing: the original package was a direct hit on the very people Labor claims to champion. The government’s response was not to defend the policy on its merits. It was to start carving out exemptions while pretending nothing fundamental had changed.
The timing is even more revealing. The backdowns landed hot on the heels of One Nation’s extraordinarily successful “Fire the Liar campaign” and the very day after Pauline Hanson’s barnstorming National Press Club address, in which she laid out a clear, unapologetic agenda that is clearly resonating far beyond the old One Nation base. One Nation is now regularly matching or beating Labor in primary votes. Albanese and Chalmers know exactly where the threat is coming from. This was not a statesmanlike adjustment. It was damage control dressed up as consultation.
Opposition Leader Angus Taylor has declared […] “This budget is in chaos, it’s in tatters, because the government simply got it wrong from the start. There’s no point going on with these carve-outs, scrap the bill, scrap the budget and start again.
“They are taking this country in the wrong direction and some of the very hardest working people in this country are being told they are not going to get the reward for the hard work they do every day.
“It is not good enough. Scrap the taxes, scrap the budget.”
Wilson Asset Management founder Geoff Wilson was blunter still. The changes are a “micro-step” that will do almost nothing to offset the damage. The treasurer and prime minister, he said, are “twiddling away while Rome is burning”.
They are. And the fire they lit is now licking at their own feet. Labor went to two elections promising not to touch negative gearing, CGT discounts or trusts. They broke those promises in the May budget. Now they are breaking the broken promises in the hope that nobody notices the pattern. Voters are noticing. The backdown makes the government look less like it is governing and more like it is negotiating its own surrender, one frantic concession at a time.
The prime minister and treasurer, whose body language appeared frosty on Thursday, keep providing Pauline Hanson and One Nation with ample content to drive anti-Establishment campaigns and frame them as “liars”.
Labor said they’d lower power bills by $275, but they didn’t.
Labor said they wouldn’t change stage three tax cuts and they did.
Labor said they wouldn’t touch superannuation concessions, negative gearing, CGT and trusts.
Albanese and Chalmers, who spend so much oxygen talking around the edges of truth on Labor’s reform agenda and fuel false expectations in the electorate, have now backed down on key elements of a budget full of broken promises.
If this is what ‘doing the right thing’ looks like after five weeks of tough talk, the next 18 months should be entertaining.
One Nation does not need to win government to force these kinds of retreats. It just needs to keep doing what it is already doing: saying the things the majors are too frightened to say out loud. Albanese and Chalmers have just proved how effective that can be.
