CMAX Advisory closely follows political developments internationally and analyses implications for businesses operating in Australia. We develop a weekly report of the most important political and economic news in Australia, utilising our understanding of complex political issues and processes to inform companies of relevant developments and forecast likely outcomes.
Labor scraps a ‘political barnacle’
This week, Labor retreats on super reforms, the Liberals wrestle with identity and messaging, and the economy continues to cool as the Prime Minister prepares for a crucial meeting with US President Donald Trump.
The government this week abandoned its original proposal to tax unrealised gains in superannuation accounts over A$3 million and will instead impose a higher rate — 40 per cent — on earnings over a A$10 million threshold. Treasurer Jim Chalmers insisted the move was about “taking the superannuation system that Paul [Keating] created” and making it the “best version of itself”.
However, many commentators saw the shift as being driven more by politics than policy. The Prime Minister reportedly directed Dr Chalmers to find a way out months ago, believing the original policy had become a “political barnacle”. Initially resistant, Dr Chalmers eventually recast the new approach as a reasoned refinement.
In taking the hit and moving on, the Treasurer has preserved some revenue gain, brought Keating on side, and avoided a costly scare campaign. But the episode speaks to a broader reality: with a cautious Prime Minister and a nervous political centre, big tax reform is harder than ever.
The Greens were quick to denounce the retreat, with Treasury spokesperson Nick McKim labelling it “a capitulation to the wealthiest people in the country”. The concern from the Greens is that by exempting unrealised gains the policy leaves open the possibility that the richest 0.5 per cent can simply “hoard investment properties” without triggering tax.
But despite the strong language, Labor appears confident the Greens will come to the table, especially with the revised plan tied to a boost for low-income super contributions that directly addresses an equity gap created by the government’s income tax cuts and could be enough to win Senate support.
Labor may well end up relying on the Greens, with media reports suggesting the Coalition is set to vote against the changes. Shadow Treasurer Ted O’Brien has said the Treasurer’s backdown “fails to learn the right lessons” and accused him of “robbing Peter to pay Paul”. Other Coalition figures have indicated the party is unlikely to support any tax increase, regardless of its scope.
Paterson maps out a Liberal path
While Dr Chalmers was resetting Labor’s economic pitch, Liberal Senator James Paterson attempted a redefinition of the Liberal Party’s ideological course. In a widely discussed speech, the Shadow Minister for Finance rejected both a free market version of the Teals and a “Farage-lite” populist shift as options for the Liberals. He instead called for a platform grounded in free markets, national tradition, and fiscal restraint.
The speech, while not naming names, was seen as a repudiation of Liberal backbencher Andrew Hastie and others pushing a more populist conservative agenda: one that emphasises immigration cuts, net zero reversal, and industrial protectionism. Senator Paterson was blunt that a similar movement to Reform UK would have a similar political effect here, decimating the traditional conservative party.
However, Senator Paterson’s middle path of culture war engagement without economic populism is a narrow one and, as he admitted, the party remains locked in a “mass public therapy session”, uncertain whether it wants to be a modern liberal party, a nationalist movement, or something in between.
In trying to undermine Labor, both Senator Paterson and Opposition Leader Sussan Ley have turned their attention to Victoria. It was a core part of Senator Paterson’s argument that long-term Labor rule leads to stagnation and dysfunction. “If you want to understand what the consequences of an entrenched, long-term Labor government looks like,” he said, “just examine Victoria. Take it from me, it’s not pretty.”
Ms Ley, meanwhile, used a visit to Melbourne to reinforce the point, citing crime rates and repeat youth offenders as evidence that “the Allan Labor government … just doesn’t seem to be able to get a handle on this”. Law and order has proven a successful formula for the Liberals in Queensland and the Northern Territory.
Together, their remarks suggest a coordinated effort to position Victoria as the logical endpoint of Labor governance: one marked by budget blowouts, rising crime, and institutional drift. The calculus is simple: if federal Labor is allowed to become the “natural party of government,” the result will mirror what is happening in Victoria.
US meeting looms over critical minerals push
While Prime Minister Anthony Albanese officially had a week off, his 20 October meeting with Donald Trump is shaping policy behind the scenes. The government is accelerating work on a A$1.2 billion strategic critical minerals reserve that aims to reduce reliance on China and position Australia as a key link in allied supply chains.
Rather than stockpiling physical materials, the model under discussion would see offtake agreements based on projected supply, backed by price floors and other forms of government support. One source described it as “more like a financial instrument than a physical stockpile”.
The Prime Minister’s office is keen to present this as evidence of Australia’s strategic value and a point of leverage in discussions about AUKUS, tariffs, and regional security. China’s recent expansion of rare earth export controls has only intensified the pressure to act. Labor wants to land a concrete minerals agreement before the Washington meeting, both to reassure allies and to lock in momentum behind its Future Made in Australia policy.
Tariffs, AUKUS, and transactional diplomacy
It will not be an easy visit. Mr Trump’s trade agenda is as volatile as ever, threatening 100 per cent tariffs on Chinese goods, and he may skip the upcoming APEC summit altogether. Securing continued tariff exemptions, locking in AUKUS, and expanding minerals cooperation are all priorities for the meeting.
But Mr Trump also expects returns. A firmer defence commitment, more investment in processing, and a clearer plan for export resilience are all likely asks. Mr Albanese will highlight Australia’s role as a reliable partner — rich in lithium, rare earths, and mining know-how — but he will also want to avoid being boxed in by an unpredictable ally.
The visit also comes at a time when Australian public sentiment towards the US alliance is shifting. New polling from the United States Studies Centre shows that just 42 per cent of Australians now believe the alliance makes the country more secure, down 21 points since 2022. Meanwhile, 56 per cent say a second Trump term is bad for Australia, and more Australians now see the US as harmful rather than helpful in Asia. While support for the AUKUS agreement remains relatively strong, confusion persists about its purpose and benefits. It means Mr Albanese must not only manage an unpredictable president, but also a domestic audience that is increasingly wary of the partnership.
Economy cooling slowly and unevenly
Domestically, the economic signals this week pointed to a slowing but not yet slackening economy, although signs of softening are becoming harder to ignore. New data from the Australian Bureau of Statistics (ABS) showed unemployment rose to 4.5 per cent in September, up from 4.3 per cent in August, marking the highest rate in nearly four years.
The data is likely to reignite market speculation about a future rate cut. Although the Reserve Bank of Australia (RBA) has left the cash rate on hold at 3.6 per cent, Governor Michele Bullock has flagged concerns about renewed consumer spending and pockets of inflationary pressure. Market pricing now reflects a roughly 39 per cent chance of a rate cut next month, with a cut fully priced in by March.
RBA Assistant Governor Sarah Hunter warned earlier this week that Australia’s long-term economic “speed limit” is now just 2 per cent due to weak productivity growth, and that sustainable wages growth has been revised down to 3.2 per cent. “Weaker productivity growth means the RBA will be slower to cut rates in response to slower growth, and faster to hike when the economy expands more quickly,” she said.
The International Monetary Fund (IMF) echoed the RBA’s caution, slightly downgrading growth forecasts while maintaining expectations of stable unemployment and inflation. However, risks remain. The IMF cited global trade tensions, tariffs, and the possibility of an AI-driven investment bubble as threats to financial stability.
For Dr Chalmers, these are watch-and-wait conditions. He is meeting with global counterparts this week and is expected to reinforce the message that Australia is navigating a fragile global environment with care. But the path remains narrow and the domestic picture is becoming more mixed.
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