Labor's surcharge headache exposes a government on the back foot
After furious backlash from small businesses, the electorate and some of his own colleagues, Treasurer Jim Chalmers has rapidly reversed two major government decisions. But is it enough?
Australia's fastest drivers are descending on Bathurst this weekend, but it's Treasurer Jim Chalmers setting records for reversing at speed. Fresh from a trip to Japan where he met with investors to sell Australia as an economic partner, Chalmers announced two spectacular government backdowns.
First, he revealed Labor would temporarily cover the cost of surcharges so the Australian Tax Office ban on credit card payments could be delayed by six months. Then he confirmed the government would scrap proposed changes to disaster recovery funding that would have resulted in the Commonwealth reducing its contribution from 75 to 50 per cent.
The Treasurer remained composed throughout the hastily arranged press conference on Friday — every government's favoured day for "taking out the trash" — but he was plainly spinning his wheels. Chalmers argued the two decisions showed the Albanese Government took feedback "very seriously".
By feedback he presumably meant 10 days of Labor getting absolutely rinsed on social media, talkback radio and any other platform the small business community could find. Messaging a mess from the start The surcharge debacle has been a source of political pain both in terms of public backlash toward the government and internal Labor grumbling about Chalmers.
Friday's announcement somewhat addressed the former, but the Treasurer's attempt to assert the ATO had made its own decisions was viewed by many colleagues as farcical. By Chalmers' own admission, the government knew the ATO was preparing to make a tough call and even asked for the initial two-month transition period.
Treasurer Jim Chalmers returned from Japan to angry small businesses, "concerned" colleagues and a confused electorate. ( ABC News: Ian Cutmore ) Nothing screams "independent decision" like a government being actively involved in discussions and then intervening to change the outcome when the backlash became too intense.
It also might have been easier for the ATO to make the case it could not justify foisting $200 million in surcharge costs onto the taxpayer, had the government not decided to take responsibility for what was a regulatory decision by the Reserve Bank. The messaging around the entire issue was a mess from the start, though Chalmer's ill-timed trip to Japan did not help.
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All week, senior government members variously defended the call to ban credit card payments on tax bills, urged the ATO to consult further or, by Thursday, outright raised "concern" with the decision. There was nowhere else to go but reverse if Labor wanted to avoid an unnecessarily bruising parliamentary sitting next week.
Transparency measure gets co-opted The confusion around the tax issue wasn't the only comms misstep. On the day the surcharge ban took effect, Labor MPs and ministers — including Prime Minister Anthony Albanese — cheerily posted to social media promoting the change as a cost of living measures.
But the accumulated fee charged by banks, card networks and terminal providers was always going to be passed onto the consumer. The ban on surcharges was about making the cost of accepting cards visible and more competitive, rather than a "surprise" at the end of a transaction. It was a transparency measure.
That's why the prime minister's Instagram video telling Australians they would save $1.6 billion a year in fees fell so flat. It garnered about 250,000 views this week — along with a barrage of negative comments — while videos and memes shared by influencers and small businesses criticising the move racked up as many as 2 million or even 6 million views apiece.
The satirical content suggested customers were in fact the big losers, because a cup of coffee had gone from $5 plus an 8 cent surcharge to $5.50 following the ban. It was a mark of how much the government was on the backfoot that not one Labor MP managed to argue that removing such a surcharge did not, by itself, justify a 50 cent price hike.
Sure, small businesses maintained there had been rising costs across the board that warranted the level of price increases, but that still doesn't negate the very basic maths. The electorate is angry Labor has been able to draw this nuanced distinction before. The government has ended temporary cuts to the fuel excise twice, making clear that any price rises beyond the restored tax would be unacceptable for consumers.
Chalmers was notably effective in 2022 when he also framed the end of the excise as a moment for an honest, adult conversation with Australians about budget pressures. Aside from the Treasurer's absence this week, the other factor now making it harder for the government to launch this kind of argument is the broader economic and political environment.
The electorate is angry. They are getting poorer and feeling under strain, and are no longer predisposed to give this government the benefit of the doubt. If a voter sees a social media post about Labor making their coffee cost 50 cents more, they are far more likely to accept the assertion and look for no further evidence.
On multiple occasions this year the government has been slow to react to backlash percolating on meme pages. The prevailing view inside Labor is that the small business community — and particularly those currently racking up millions of views on pithy Instagram reels — are not their core voters.
But the mistake is assuming the audience for those complaints is confined to the people making them. Discontent spreads quickly, explanations struggle to keep up, and Labor has increasingly been on the defensive over decisions of its own making. Like a driver at Mount Panorama who brakes too late at Conrod Straight, Chalmers has found himself in the gravel trap, having badly misjudged the conditions.
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