Grattan on Friday: Turnbull’s taxing battle as fractious session grinds towards end

Malcolm Turnbull and Bill Shorten help with the cyclone clean-up efforts in Bowen, Queensland on Thursday. Gary Ramage/AAP

Probably it was appropriate they did it. And it was best they did it together. But seeing Malcolm Turnbull and Bill Shorten dash off early on Thursday to cyclone-ravaged north Queensland, then fly back for a slightly delayed Question Time, did invite a little cynicism about gesture politics.

Especially when the two leaders, in their brief respite from tearing shreds off each other, posed together with large brooms, just long enough for the cameras but too briefly to make any difference to the sweeping.

On the other hand, maybe there is some positive parable about the strength of our democratic system, a touch of reassuring tonic in face of the negativity and hostility that characterises this parliament.

The government started the session’s final week with another poll showing it would lose an election held now, and another snafu.

The latest embarrassment was the failed attempt to ratify an extradition treaty with China. The bungling over the treaty, which has been hanging around signed but not ratified since 2007, annoyed China and brought criticism within Coalition ranks of Foreign Minister Julie Bishop, who is usually well dressed in teflon.

Hard on the heels of the visit by Chinese Premier Li Keqiang, the government had expected to smooth through the ratification. But a backbench revolt materialised, former prime minister Tony Abbott weighed in, and Labor flagged opposition.

Turnbull quickly cut his losses to minimise diplomatic and political damage. It was the only sensible course. The government stressed it had not dropped its support for ratification, just put it off, but don’t hold your breath.

The motives of those government MPs against ratification were mixed. There were understandable concerns about such an agreement, given how China’s institutions operate. But there was also an element of stirring, especially in the Abbott intervention, which follows his many other forays. One government source went so far as to claim that “the single biggest challenge the government has got is Tony Abbott”, adding grimly: “he is very good at what he does”.

The treaty row won’t have any significant impact on the domestic fray, unlike three other issues dominating this week: penalty rates, Section 18C of the Racial Discrimination Act, and company tax cuts.

Labor succeeded in getting through the Senate its private member’s bill on overturning the Fair Work Commission’s cut to Sunday penalty rates; it was supported by One Nation (after Pauline Hanson did a backflip), the Nick Xenophon Team (NXT), Derryn Hinch, and Jacqui Lambie, as well as the Greens.

The bill will die, but the issue is burning the Coalition and a gift for Labor.

Labor received another break with the government’s submission to the Fair Work Commission on the minimum wage. It urges the commission “take a cautious approach, taking into account the uncertain economic outlook and the need to boost employment and job creation, particularly for young people and the low-skilled”.

It didn’t help when the normally sure-footed employment minister, Michaelia Cash, botched a radio interview, unable to answer a question about a line in the submission.

The fate of the government’s push on 18C was a mixed bag, without surprises. The rewording, the focus for the Liberal conservatives, was voted down by the Senate, but the government will emerge with changes to the complaint-handling process. The conservatives will continue their pressure to keep 18C on the agenda, giving Labor ammunition in Liberal marginal seats with large ethnic votes.

For the government the week’s most critical issue is the A$48 billion ten-year company tax cuts package, which was still in play when the Senate adjourned just after midnight Thursday.

It’s been clear the government has no hope of legislating the whole package, but could apparently secure cuts for businesses with turnovers up to $10 million. Ahead of the Senate vote, Treasurer Scott Morrison on Thursday declared that passing the $10 million turnover version would be “a significant achievement for this government”.

But economist Saul Eslake, writing for The Conversation, has pointed out “there is no evidence at all to support the notion that preferentially taxing small businesses will do anything to boost ‘jobs and growth’”. It is cutting tax for the large businesses that has the main impact on growth and jobs.

This week a notable new feature entered the battle – competition between the two small crossbench blocs, the NXT and One Nation, for ownership of the outcome.

The NXT has long supported the $10 million threshold. Then at the start of the week Xenophon flagged he’d consider going beyond that if the government agreed to an energy intensity scheme – something it firmly ruled out last year. Meanwhile Hanson on Monday announced she supported cuts for companies with up to $50 million turnover.

Seizing the opportunity, Finance Minister Mathias Cormann in particular has thrown massive effort into trying to get the NXT up to $50 million, which would be a major win and morale booster for the government. Negotiations were complicated by Xenophon returning to Adelaide on Wednesday after a death in his family.

When he touched down again in Canberra on Thursday evening, a stressed Xenophon was under enormous pressure. Talks went on late into the night. If the NXT moved to $50 million, it would be following One Nation – not a good look without a big trade-off.

When the Senate adjourned, debate on the tax package hadn’t even started. As the sitting stretches into Friday, not even Xenophon knows where it will end.

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