On January 27, 2024, Australian Prime Minister Anthony Albanese said that his center-left government would soon introduce legislation that would reduce tax cuts for the wealthy but give more benefits to low-income earners. Indeed, according to these laws, as of July 1, those earning up to USD 135,000 will fall into lower tax brackets. Tax benefits for some high-income earners will be cut almost in half, and these savings will be redirected to low-income earners.[1]
The Labor Government led by Albanese announced $23 billion in cost of living relief measures targeted for May 2023. However, the opposition claims that Albanese has ruined his credibility by breaking his promise not to change the tax policy. This policy was enacted by the previous government in 2019. Australians are under immense financial pressure due to high inflation, which accelerated to 7.8% in December 2022 and slowed to 5.4% in the third quarter of 2023.[2] Moreover, many Australians are struggling with the high cost of living.
Changes in tax policy can be seen as a reflection of the effort to tackle economic inequality. Increasing benefits for low-income earners is intended to support households under economic pressure. However, this is likely to cause unrest among the country’s wealthy, business sectors and those who do business with the state and have an active voice in state institutions. This could lead them to put pressure on the government. This could profoundly affect the balance of political power.
If these changes in tax policy reduce the tax advantages for the wealthy, they may create anxiety and opposition among them. This may lead to the emergence of new power dynamics in the political arena and politicians’ efforts to balance the expectations of different segments of society.
Moreover, Albanese’s policy change, breaking a pre-election promise, is a major point of contention in terms of the social acceptance and political credibility of his policy decisions. It is already known that Albanese, who was elected to office in 2022, has seen a serious decline in public support. Two polls published in December 2023 show that Albanese’s unfavorable ratings exceeded his approval ratings. Prime Minister Albanese’s popularity decline may reflect concerns about political leadership and the government’s performance. This could be an indication of demands for change in the political arena or the opposition’s ability to criticize.
Another point to note here is that Australia’s next elections will be in 2025. With such a short period of time left before these elections, the possibility of the current government dealing with internal problems and losing public support could result in a hardening of the government’s policies. At the same time, this could result in the government in Canberra evolving to a harsher and more repressive stance in domestic politics, both in terms of protests and executive decisions. This will create an important paradox. The tougher Canberra gets, the greater the opposition’s resistance and toughness. But a more passive and less proactive policy from Canberra. may increase pressure from the opposition. At this point, Australia faces an important test.
Criticism of the Albanese-led government’s ability to deliver on its pre-election promises could pose a significant challenge to political credibility and public perception. Such situations could undermine voters’ trust in politicians and affect the fate of the government in future elections.
Another important point in this context is the possibility that this situation may push Canberra towards a fragile foreign policy. The impact of domestic problems on foreign policy decisions is an important issue. It is possible that domestic unrest could have a negative impact on the country’s ability to realize its foreign policy objectives and create an obstacle for regional cooperation. In such a situation, Canberra may initially put its foreign policy on the back burner. However, given the current conjuncture and current developments in the Asia-Pacific, it can be inferred that this situation is also unlikely.
These domestic developments may also have an impact on foreign policy decisions. The government’s domestic instability or decline in public support could lead it to adopt a more timid or inward-looking approach to foreign policy. This means that it may face particular challenges in regional cooperation and international relations. At this point, it can be said that it is closely related to the path that Canberra will follow in both domestic and foreign policy-making processes.
As a result, factors such as political credibility and public perception should be taken into account, as well as foreign policy challenges and potential problems in domestic politics. Considering the upcoming elections, it can be predicted that the government will aim to act consistently in domestic and foreign policy by balancing the expectations of different segments of society.
[1] “Australia PM Vows to Introduce Bill to Reshape Tax Cuts Within Weeks”, Reuters, https://www.reuters.com/world/asia-pacific/australia-pm-vows-introduce-bill-reshape-tax-cuts-within-weeks-2024-01-27/, (Date Accession: 27.01.2024).
[2] “PM Stands by Tax Cut Changes for ‘Every Australian’”, The Canberra Times, https://www.canberratimes.com.au/story/8500507/pm-stands-by-tax-cut-changes-for-every-australian/, (Date of Accession: 27.01.2024).
