by David Crowe
The second phase of the company tax plan, setting a lower rate for those with more than $50 million in annual turnover, was in limbo. Cormann asked Turnbull for another chance to coax Hanson and other crossbenchers into voting for the bill, more than two years after the government had first unveiled the cuts. Hanson was on record saying she could vote for the bill, but she had shifted her position so often it was impossible to be sure of her vote. Turnbull agreed to another attempt to turn the policy into law, but nobody could be sure where they stood with Hanson, who was being taunted by Shorten for betraying her supporters and befriending multinational corporations. Hanson hardened her position against the tax cuts at the last minute.
‘I haven’t flip-flopped. I said no originally, then I said yes, then I said no and I stuck to it,’ Hanson told the Senate on 26 June, redefining what a backflip meant.23 She added to the sense of volatility the next morning. ‘I will change my mind as many times as I want to ensure that I come up with the right decision,’ she told the Nine Network. Cormann had to concede he could not get the bill through the Senate. Even then, however, he could not bring himself to admit defeat.
Cormann deferred the company tax bill until Parliament returned in August but kept dreaming of victory. In his private meetings with Turnbull he argued for another chance to convince the Senate crossbench to vote with the government. The two had talked before about dropping the company tax cuts in June if they could not be legislated, but the passage of the personal tax cuts made Cormann more confident he could prevail with his other plans. The policy was a political liability, a load of bricks on an underpowered truck, but Turnbull let his Finance Minister have his way. The tax cut stayed.
The reversal in the Senate was nothing compared to the ruptures in the party room, where Turnbull and Frydenberg fielded complaints from critics of the National Energy Guarantee after releasing the draft detailed design paper on the scheme. The gulf between the left and right widened as soon as the paper was put to the states and territories for their approval, with Labor states pushing for a more ambitious cut to emissions than 26 per cent by 2030. That would never pass the Coalition party room in Canberra, where Abbott and others believed 26 per cent was too high. The guarantee was a compromise after years of dispute and now had support from Labor for the mechanism but not the target. ‘We want this thing to work,’ Labor environment spokesman Mark Butler had said in April. It was obvious that Abbott did not.
‘My worry is that the party room might be asked to back something which is effectively a carbon tax in disguise,’ Abbott said on 2GB on the eve of a party room meeting on 19 June. In an unusual move, the former leader turned up at a meeting of the Coalition backbench committee on energy to ask pointed questions about the guarantee and argue for at least one new coal-fired power station. Frydenberg told him his remark about a ‘carbon tax’ was unhelpful, but Abbott would not stop: in the full party room meeting soon afterwards, he warned about energy shortages at the Tomago aluminium smelter in New South Wales, which needed more baseload power. Frydenberg was ready for this and had spoken to Tomago’s chief executive that morning to confirm his support for the National Energy Guarantee. Kelly urged a slower cut to emissions and Queensland Senator Ian Macdonald questioned why emissions had to fall at all. Abetz entered the argument to call for a retreat on the ‘aspirational’ 26 per cent target, only for Frydenberg to quote Abbott’s own words from two years earlier: ‘Australia does deliver when we make a pledge.’ Abbott interjected to suggest government officials had not told him the full impact of the targets he agreed to in 2015, as if he had been misled by bureaucrats.24
Frydenberg, who had once aspired to a career as a professional tennis player, was alone on one side of the net with too many opponents on the other. He had to find Liberals and Nationals to speak up for the National Energy Guarantee and show it had the numbers in the party room, reminding everyone that the climate sceptics were a minority. Those who backed the policy in public over the next few days included Julia Banks, Andrew Broad, Mark Coulton, Trevor Evans, Tim Wilson and Trent Zimmerman, but there were signs of nerves among their colleagues. Some Liberals who were said to back the guarantee never responded to requests to declare their support in public.
Frydenberg also called in executives from steelmaker BlueScope, mining giant BHP Billiton, the Business Council of Australia and the Australian Industry Group to tell government MPs directly that employers wanted the argument settled and the energy scheme put in place. Yet the attempt to hold the middle ground with the 26 per cent target became more difficult as the attack from the left grew stronger and a consensus at the Council of Australian Governments grew weaker. One of the key figures in the negotiations was the Australian Capital Territory’s Climate Change Minister, Shane Rattenbury, a Greens member of the territory’s assembly and part of a coalition government with Labor. Every state and territory had the right to veto the National Energy Guarantee, given the scheme involved state as well as federal law, and Rattenbury showed signs of doing just that.
‘Never thought I’d agree with Tony Abbott, but we both think the NEG as it stands is a dud policy, for totally different reasons — I’m here for the climate, he’s here for coal,’ Rattenbury tweeted. This was a sign that the centre might not hold in this new struggle over whether a government policy did too much or too little to reduce carbon emissions. Australian politics was repeating the deadly dynamics of the 2009 debate on an emissions trading scheme.
Turnbull and Frydenberg gained approval for the National Energy Guarantee in the party room the following Tuesday, 26 June, the second time MPs had endorsed the policy after their debate the previous October, but the majority decision came with warnings from conservatives that they could not accept the cuts to emissions. Abbott and allies including Abetz, Joyce and Kelly dismissed the advice from the business chiefs and urged government support for a new coal-fired power station. Their intransigence infuriated Liberals who feared they would lose their seats when the Coalition was behind in the polls and tearing itself apart. Ann Sudmalis, the Liberal MP for the New South Wales South Coast electorate of Gilmore, told Abbott to ‘pull your head in’ and accept the government plan. ‘We’ve got a good policy and this continued disunity is costing us in marginal seats,’ she said.
When it came time to sum up the debate, Turnbull said the meeting showed a ‘strong endorsement’ of the energy guarantee, but he added a proviso: any legislation to support the policy, such as a law to cut emissions by 26 per cent by 2030, would go back to the party room for another discussion. He had to pacify colleagues who were worried about the cost of action on climate change. The critics lived to fight another day.
Abbott emerged from the meeting to speak to reporters waiting nearby, a sign in itself that he was becoming more assertive in his objections to the policy even though he was outnumbered in the party room. Asked if he was ‘committed enough’ on the issue to cross the floor on the guarantee, he had a simple message.
‘The short answer is yes,’ he said.25
It was a critical moment. Turnbull and Frydenberg had accommodated Abbott and his allies at every stage: ruling out an Emissions Intensity Scheme, dropping the Clean Energy Target, drafting the National Energy Guarantee to avoid any explicit price on carbon. It was never enough. Abbott took every concession and asked for another, to the point where he would soon demand total surrender on climate change — and the leadership.
Abbott later denied any expectation that Turnbull would be removed. He flew to New York and Washington DC in early July for the Australian American Leadership Dialogue, where he caught up with Rupert Murdoch and discussed geopolitics with fellow political leaders. Back in Sydney, he went to dinner with Lachlan Murdoch and a small group of guests in Bellevue Hill that winter. ‘The tenor was pretty critical of Malcolm but there was not the slightest expectation, by anyone there, that he was on the verge of being deposed,’ he said.26
Yet the timing of the energy row, so toxic and so public, was disastro
us.
Australians were about to deliver their verdicts on the government at five by-elections in federal seats with about 480,000 enrolled voters between them, turning the 28 July polling date into the biggest electoral test for Turnbull and Shorten since the election. Every aspect of the government was on trial — its leadership and its personal divisions, its economic policies on company and personal tax, its unfinished prescription for energy and climate change.
The High Court had made the by-elections inevitable on 9 May when it ruled that Labor Senator Katy Gallagher had fallen foul of Section 44 of the Constitution by not taking ‘reasonable steps’ to renounce her British citizenship in time for the 2016 election. Shorten was caught out. He had insisted for months his MPs were safe from questions over their citizenship but now faced journalists who reminded him of his false claims.
Shorten had to accept that three of his MPs would resign and face by-elections: Justine Keay in Braddon, Susan Lamb in Longman and Josh Wilson in Fremantle. A fourth Labor MP, Tim Hammond, triggered a by-election in Perth by resigning for family reasons. The fifth contest was in Mayo in the Adelaide Hills, where crossbench MP Rebekha Sharkie had to resign over her citizenship status and recontest what had once been a safe Liberal seat.
The benchmarks for government success were simple but severe. Could it reclaim Mayo with a blue-blooded Liberal candidate, Georgina Downer? Could it win back Braddon, held by Labor with a margin of 2.2 per cent? The government’s chances looked best on paper in Longman, held by Labor by only 0.8 per cent. In a sign of its weakness, the government did not even attempt to contest Fremantle and Perth. The national opinion polls suggested the government had recovered some ground during the first half of 2018 but continued to trail Labor. The High Court decision had embarrassed Shorten but all the pressure was on Turnbull, who had to narrow the gap against his opponent over nine weeks of campaigning He had come close to defeat in the marathon general election. Could he campaign better this time?
Liberals gathered in Sydney for their annual federal council with six weeks to go until the by-elections and some cause for confidence among the hundreds of delegates who made up the party’s peak national body. A Sky News ReachTel poll suggested the government had a lead over Labor of 52 to 48 per cent in Longman and 54 to 46 per cent in Braddon, results that cheered the federal ministers, state premiers and party luminaries gathered at the Hilton Hotel, even if single polls of single seats were unreliable.27
The speeches were reassuring, but the manoeuvres behind the scenes showed there could be no truce between the party’s warring camps. The conservatives were on the march and wanted more power on the federal executive, leading to a vote to replace former Howard government frontbencher Trish Worth as one of four vice presidents. Worth, a moderate from South Australia and aligned with Christopher Pyne, had offended conservatives by describing Abbott as a ‘spoiler’ because of his criticism of the government. The conservatives replaced her with one of their own, Teena McQueen, in a vote that broke an agreement between the moderates and the nominal leaders of the conservatives, such as Cormann. The vote was 54 to 50 and the message was simple: those who spoke out against Abbott risked their positions.
Other votes showed the conservatives had the numbers. A motion to move the Australian embassy in Israel from Tel Aviv to Jerusalem was passed by 43 to 31 even though Bishop spoke against it. A motion calling for the ‘full privatisation’ of the ABC (with the exception of its rural services) was put by the Young Liberals and carried on a show of hands by a ratio of about four to one, even though Communications Minister Mitch Fifield spoke against it.
The motions had no binding force on Liberal governments but were pursued in the name of ideological or factional bragging rights, which meant they launched debates that were divorced from the real issues in the community and irrelevant to the party’s real challenges — not least the imminent federal by-elections, the coming Victorian and New South Wales state elections and the federal election due within a year. The 110 delegates in the Hilton ballroom, joined by fewer than 200 party members, were meant to be the vanguard of a party that was created to win and hold government, but they engaged instead in arguments among themselves.
The federal president of the Liberal Party, former New South Wales Premier Nick Greiner, had opened the council with a word of caution. ‘I think in some ways, across the party, we’ve occasionally been lazy and self-indulgent when we put our own internal tiffs, our internal arguments, over the wellbeing of the party overall,’ he said. The council ended with no sign anyone had heard his words.
One minister was so worried about the government’s fortunes, despite all the speeches about victory, that she chose this moment to broach the subject of the leadership succession. Concetta Fierravanti-Wells, the Minister for International Development, was a senior figure among the most conservative members of the party but no friend of Abbott and no enemy to Turnbull. Fierravanti-Wells had been a source of plain-speaking advice to Abbott when he was Prime Minister and had warned him of problems in his office including the capacity of Credlin to infuriate ministers and backbenchers. Now she offered the same frank assessment to Turnbull’s most trusted adviser, Sally Cray, on the changes needed in the government.
On the sidelines of the council, Fierravanti-Wells spoke to Cray about a transition in the deputy leadership. Her suggestion was to find a new role for Bishop outside Parliament and clear the ground for Peter Dutton to become deputy, giving the conservatives a stronger voice. Fierravanti-Wells raised the idea with others, including Turnbull, from this point onwards. The idea did not emerge from a vacuum, given that ministers and advisers would sometimes speculate in earnest about Bishop’s prospects for a senior position at the United Nations and, more wildly, as the next Governor-General of Australia, but it never took hold with Turnbull. If those were the terms of a settlement with the conservatives, there would be no deal.
Ten days out from the end of the Longman by-election, Liberal National Party candidate Trevor Ruthenberg was ridiculed on the front page of The Courier-Mail for having wrongly claimed a defence force medal for active service. He apologised, but Labor made sure voters remembered the lapse, while the LNP could only regret its own stumble in vetting and checking its candidate.
The Liberals were outnumbered in this onslaught. They accepted they could not win Mayo, were pessimistic about Longman and thought there might be a chance in Braddon, yet the public polling created the impression in the media that voters might swing to the government. It was an unlikely scenario, at odds with much political history, but it began to shape expectations. Turnbull took a question in Devonport on the Thursday before polling day that built on those expectations and set him a political test. It was one he did not need.
‘Do you acknowledge that these by-elections are also a test of the two leaders?’ a journalist asked.
‘By-elections are a test of policies, they’re a test of leaders, they’re a test of candidates,’ Turnbull replied.28 ‘There are many issues and people vote with different matters in mind.’ His enemies remembered that response for the way it linked his position to the results he could not control. They’re a test of leaders.
No amount of spin would save Turnbull from the numbers on 28 July. The by-elections ended with voters turning against the government in two of the seats it contested, with a 2.6 per cent swing in Mayo and a 0.1 per cent swing in Braddon in two-party terms, but shifting ferociously in Longman. The Liberal National Party primary vote fell by 9.4 per cent to 29.6 per cent in the Queensland seat, a shocking low for a major party in an electorate it had held only five years earlier. In a trend that deepened anxieties among conservative Liberals and Nationals in Queensland, voters increased their support for Pauline Hanson’s One Nation to almost 16 per cent even though the party founder did not bother campaigning on polling day. Hanson was on the luxury Queen Elizabeth cruise ship in the Irish Sea while her face adorned cardboard cut-outs at polling stations across Longman, yet her party’s vot
e rose by 6.5 per cent.
Shorten made sure to be in Caboolture when the Longman results came in. He had lost the argument over the citizenship of his MPs but emerged triumphant when it counted most, enabling him to declare victory in ‘four from four’ contests. Labor celebrated a swing to its candidate, Susan Lamb, of 3.7 per cent at the by-election on a two-party basis, which added to a 7.7 per cent swing at the general election and meant the seat was no longer considered marginal. Labor trounced its rivals in Fremantle, where it gained 73 per cent of the two-party vote, and Perth, where it gained 63 per cent and saw off a threat from the Greens.
‘Tonight is another signpost into the destination that matters for Australians: a Labor government after the next general election,’ Shorten told a crowd of supporters on the Saturday night.
Turnbull took until the next day to respond.
‘I see that Bill Shorten is punching the air as though he’s won the World Cup,’ Turnbull said in Sydney on Sunday morning.29 ‘The reality is that the Labor Party has secured an average or conventional swing in a by-election to it in Longman and has not secured any swing at all in Braddon, at this stage it looks like it will be a line-ball result. So there is not a lot to celebrate for the Labor Party.’
There was some logic to his argument, given the Braddon result was so close and history showed governments often lost by-elections, but it did not spare Turnbull from questions over his position. He insisted the outcome in Longman was in line with the average swing against governments over decades.30
‘There is nothing remarkable about it at all,’ he said.
Turnbull was looking at a small swell on the surface when the real danger was below the waves. It took days and weeks for the scale of this danger to become real, for the alarm and chaos to take hold among Queensland members of the Coalition who feared they would be wiped out. Turnbull was right — the swing in Longman was average. Yet ministers and backbenchers were about to respond in an extraordinary panic.