In a funk: How economic pain is straining the PM and treasurer’s relationship

Given Albanese’s “extraordinary dominance” of his party, the Australian National University’s Marija Taflaga said it was notable that a narrative had formed on Chalmers’ “full responsibility” for economic woes.

“If we’re going to give Anthony Albanese the strategic credit and foresight for crafting a very carefully calibrated narrative pitched at a disparate coalition of voters, then we’ve also got to give him the credit, or lack thereof, for his choices around how to frame the economic narrative,” the senior lecturer said.

Central to the growing criticism of Chalmers internally is a deteriorating relationship with his colleagues. “He has bitten off too many heads, been too sensitive and unwilling to listen,” says one MP. “I think many colleagues are now too scared to raise issues with him.”

A handful of senior MPs say they are tired of Chalmers’ internal style, which has become increasingly “surly”. One described it as a “tortured genius act that nobody buys”.

They cited his isolation from other ministers and said he spent little time gauging the views of cabinet colleagues about the government’s economic policy or message, which they said was falling flat.

Ministers say Albanese has been tense this week, under extreme pressure to get through to summer without Labor’s primary vote drifting any further below its current 27 per cent, nearly 8 points off its election result, and into more perilous territory.

Several of Chalmers’ closer colleagues say the year of budget reform has taken its toll, and they say he is sensitive to the personal coverage of him in partisan, conservative media that has contributed to a fall in his popularity rating. But Chalmers, colleagues say, is politically gifted, a strong salesman who has been a key asset to the government. Nobody in the cabinet works harder and longer than Chalmers, allies say, often giving cover to Albanese when times are tough.

But they say the 48-year-old, who revealed years ago that he’d given up alcohol because he drank too much, has since become more introverted and isolated.

“He’s in a funk,” one says.

The departure of his long-time chief of staff Claudia Crawford, to have her first baby, is also said to have added to Chalmers’ anxiety. Her replacement – his longtime friend Sam Crosby – is seen as a more political figure, whose most pressing job is now viewed as restoring fractured relationships within his Right faction.

Communications around several issues, including the ATO’s credit card ban, have been sloppy. There is a blame game within the government on the surcharge ban, with suggestions of a paper trail proving Treasury and Chalmers knew much more about the ATO’s move than they let on, and others saying Albanese’s office was negligent in how it managed the supposed cost-of-living benefit.

Criticism of the cabinet’s economic agenda is two-fold. The first relates to the government’s economic model. Labor’s brand, labelled “inclusive prosperity” by some internally, has relied on near-record levels of spending.

Economist Saul Eslake said it was lazy to suggest the government was spending in a totally wanton manner. He said there was huge pressure to spend on “necessary” areas such as defence and disability and ageing, the latter two subject to royal commissions that demanded more investment. These pressures didn’t exist in the Howard era.

But, Eslake said, Labor “should have been running budget surpluses” to bank the $400 billion revenue upgrade that economist Chris Richardson has said had made Chalmers one of the luckiest treasurers in history. The Coalition and the Greens’ decision to block a change to the private health insurance rebate this week, worth $3 billion, proved how difficult it is to bank savings.

Pro-market Labor figures Bill Kelty, a key influencer in the Hawke-Keating era, and Lachlan Harris, who advised Kevin Rudd, have also issued urgent warnings to Labor on its economic trajectory.

While savings might be tough for a centre-left government with an eye on equity and social fragmentation, John Curtin Research Centre executive director Nick Dyrenfurth said the “economic warning signs make the task before the government urgent”.

“Inflation must come down without a needless hit to jobs and growth,” Dyrenfurth said. “The Morrison–Frydenberg years left a legacy of fiscal profligacy. The Albanese government made a start on repair, but left the job half done. Now Jim Chalmers should finish it and make it a whole-of-government effort.”

Former treasurer Wayne Swan, Chalmers’ mentor, says the pressure from colleagues and right-wing press comes with the job.

“It is the burden of a treasurer to get caught in the crossfire of structural reform,” he said. “Big changes are never easy.”

Tensions between prime ministers and treasurers are hardly new. Malcolm Fraser replaced Phillip Lynch with John Howard. Bob Hawke famously fought Paul Keating and dumped John Kerin after six months. Howard and Peter Costello endured years of rivalry. Tony Abbott faced pressure to remove Joe Hockey after the disastrous 2014 budget.

Taflaga says the current tensions as part of “general life cycle of the prime ministerial treasurer relationship”.

Howard offered a more colourful explanation at former treasurer Josh Frydenberg’s book launch this week.

“When I was treasurer, I thought prime ministers were a pain in the neck. And when I became prime minister, I thought treasurers, occasionally, were a pain in the neck.”

But such is the mood internally that some MPs now openly speculate that Health Minister Mark Butler, coming into frame as a future leader if Albanese can organise a neat handover to a left-winger, could replace Chalmers as treasurer next year. Senior figures dismiss the prospect as highly speculative and politically untenable.

“Unless we sort our shit out, that chat will only increase, I suspect,” says one top minister.

Chalmers is something of a lone ranger who has fewer defenders than a prime minister focused on factional dominance of a majority Left faction. Key leaders of the Right are also in the prime minister’s grip. Albanese has protectors across the cabinet, from Penny Wong to Tim Ayres. Labor sources point to the lack of criticism of Gallagher, an Albanese ally, as evidence of the factional nature of some of the criticism.

Those close to him say Chalmers has avoided obvious coat-trailing and tried not to curry favour in caucus in a way that would invite leadership speculation, and is paying the price for letting relationships drift.

Supporters of Chalmers say he will weather the current storm of economic news and suggest midterm turbulence will ultimately lead to greater focus on Albanese, whose own popularity has fallen but who still retains a winning position.

“There will be a reckoning for the prime minister,” one Chalmers supporter said.

The danger for Labor is that while its two most powerful figures wrestle over the economic narrative, voters are reaching their own verdict.

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