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Nationals Senator Bridget McKenzie has branded the Albanese government’s reported decision to shelve a new tax on high superannuation balances as a “humiliating defeat” for Treasurer Jim Chalmers, warning the move exposes deep fractures inside Labor over economic reform.
Speaking on Sky News First Edition, McKenzie said the government’s reported pause on the plan to tax unrealised gains in superannuation accounts above $3 million demonstrated the Prime Minister’s reluctance to back his Treasurer and reflected the influence of former prime minister Paul Keating.
“The opposition has been clear with our opposition to this thought bubble by the Treasurer for a long time,” McKenzie said. “Taxing unrealised gains, paper profits if you like, and not indexing it so that it’s also going to impact young people’s super balances over the next 40 years — it’s got hairs all over it.”
A Controversial Tax Plan
The tax measure was first unveiled in February 2023 as part of the government’s efforts to make the superannuation system “more sustainable and fair.” The proposal sought to reduce generous concessions available to Australians with balances exceeding $3 million by applying a 30% tax rate on earnings, including unrealised capital gains.
At the time, Chalmers argued the policy would affect only a small proportion of Australians — around 80,000 accounts, or less than 0.5% of the population — while delivering budget savings of about $2 billion annually.
“This modest adjustment is about fairness,” Chalmers said when introducing the plan. “It ensures the system remains affordable for the future and focused on its core purpose of providing retirement incomes.”
But the inclusion of unrealised gains sparked immediate criticism from the opposition, super industry representatives, and some economists. Detractors warned it risked penalising investors for paper increases in asset values that might never materialise, particularly during periods of market volatility.
Industry Super Australia, while supportive of reforms to address equity in the system, expressed concern over the complexity of calculating unrealised gains and the potential to undermine confidence in retirement savings.
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McKenzie Seizes on Political Fallout
McKenzie said the policy’s apparent retreat was evidence that the Treasurer’s ambitions were being curtailed by his own leader.
“This is, again, a humiliating defeat for Treasurer Chalmers,” she said. “The Prime Minister has once again sat on the Treasurer’s ambition to be a reformer. And I think we’ve all seen this story before. When prime ministers sit on treasurers, it doesn’t end well.”
She added that while Chalmers was focused on addressing “the structural issues in our economy,” Albanese was “more interested in holding on to power than dealing with the very real issues we’ve got across our economy that need to be dealt with.”
McKenzie described the situation as “very disappointing,” arguing it signaled the government would struggle to deliver other difficult reforms in the remainder of its term.
The Keating Factor
Reports in the Australian Financial Review said Keating, the architect of compulsory superannuation in the early 1990s, lobbied Albanese directly to block the measure. Keating has been outspoken in his opposition to taxing unrealised gains, describing it in private as a “dog’s breakfast.”
“Keating, the father of superannuation, has said it’s a dog’s breakfast, and he’s right,” McKenzie said. “The opposition is on the same page as former Treasurer Keating. So we think it’s great, if this report is true, that they are going to shelve the taxing of unrealised gains and the taxing of future balances for young Australians.”
The intervention placed Albanese in a difficult position, given Chalmers’ long-standing admiration for Keating. The Treasurer completed a doctorate on Keating’s economic reforms and has often cited him as a model for modern Labor policymaking.
But McKenzie noted the Treasurer also worked for Wayne Swan, who has publicly supported the policy. “Unfortunately, though, I think this has been a bit of Wayne Swan versus Paul Keating,” she said.
Broader Economic Context
The dispute comes as the government grapples with a slowing economy and persistent cost-of-living pressures. The Australian Bureau of Statistics reported this week that gross domestic product grew 0.6% in the June quarter, lifting annual growth to 1.8% — the strongest pace in almost two years but still below long-term trends.
Chalmers has highlighted the resilience of the economy amid global headwinds but warned structural budget pressures, including rising health and aged care costs, require ongoing reform.
“The big story in today’s data is the private sector recovery,” Chalmers said in a press conference earlier this week. “But we can’t ignore the structural challenges that remain in our budget and our economy.”
Opposition figures, including McKenzie, argue the government has failed to translate positive economic data into relief for households. “Australians are paying more at the checkout, at the bowser, and on their mortgages, and this government is distracted by policies that make it harder to save for retirement,” she said.
Political Stakes
The retreat from the super tax proposal could have wide implications for Labor’s reform agenda. McKenzie predicted it would erode trust between the Treasurer and Prime Minister, making future reforms harder to push through Cabinet.
“It doesn’t bode well for the relationship between the Treasurer and the Prime Minister going forward,” she said. “Nor does it bode well for the Treasurer attempting any further reforms in what we know is going to be a difficult time economically if the Prime Minister is going to continually sit on his ambition.”
Political analysts said shelving the measure could ease internal pressure on Albanese in the short term but at the cost of weakening Chalmers’ authority. Some within Labor see the Treasurer as a future leader, and his ability to deliver economic reform is viewed as central to his standing in the party.
Opposition’s Position
The Coalition has consistently opposed the policy, branding it an attack on aspiration. Liberal and Nationals MPs have argued the measure would not only hit the wealthy but also affect farmers, small business owners, and younger Australians over time as super balances grow.
“We’ve been very clear from day one that taxing unrealised gains is fundamentally unfair,” Shadow Treasurer Angus Taylor said earlier this year. “It creates uncertainty, discourages investment, and undermines confidence in super.”
McKenzie reinforced that position, saying the Coalition would continue to resist any attempt to revive the measure in a revised form. “This is about principle,” she said. “Superannuation should encourage saving, not penalise it.”
Keating’s Shadow on Labor
Keating’s influence within Labor remains strong more than two decades after leaving office. His interventions on superannuation and housing have shaped internal debates and often put pressure on successive leaders.
In this case, McKenzie suggested Keating’s criticism had delivered a decisive blow. “When the father of superannuation says a policy is a dog’s breakfast, it’s very hard for a Labor prime minister to ignore,” she said.
Chalmers has so far declined to respond publicly to reports of a policy backdown, but Albanese is expected to face questions when Parliament resumes next week.
What Comes Next
The reported pause leaves uncertainty over whether the government will attempt to redesign the policy or abandon it altogether. Treasury officials had been working on draft legislation for introduction later this year, but its future is now unclear.
For McKenzie, the episode highlights what she sees as a broader problem with the government’s economic management. “This government talks about reform but backs away whenever it gets difficult,” she said. “Australians need leadership, not more broken promises.”
Veteran political journalist Phil Coorey, whose report triggered the debate, has a reputation for accuracy in Canberra circles. Host Laura Jayes noted his reliability in closing the Sky interview. “Phil’s got pretty good form,” she said.
Reflection
The clash over superannuation highlights the difficulty of balancing fiscal responsibility, political unity, and public confidence in retirement savings. For Chalmers, the setback raises questions about his reform credentials. For Albanese, it underscores the delicate task of managing party elders, economic pressures, and an electorate wary of new taxes.
As McKenzie framed it, the episode is more than a policy dispute — it is a test of the government’s capacity to pursue reform in challenging times.
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