The Hills Hoist Wire That Sees Over the Horizon
Week of 3 July: the fuel tax creeping back at the bowser, the split that could re-elect Allan, and the 50-year bet that just paid off as our biggest defence export
It’s Christmas in July, if you believe the government and its merry band of spin doctors. Happy new financial year!
This week has delivered three stories that cut through the spin cycle.
First is the fuel excise creeping back into the price at the pump at the precise moment world oil prices are tumbling, so the one piece of relief headed motorists’ way in a cost of living crisis is quietly taxed straight back.
Second is a Victorian poll that should terrify anyone who wants the Allan Labor government gone, because it shows how a haemorrhaging right of centre vote could hand the worst government in the country another four years in office.
Then, the best saved for last, is the biggest defence export in our history, the payoff on a bet we placed half a century ago.
One of these stories is about the next month, one is about the next election, and one is about avoiding the next war.
The First of July Ledger
From Wednesday, the tax rate on income between $18,201 and $45,000 drops from 16% to 15%. That’s worth a whopping $5 per week for anyone earning over $45,000.
But the minimum wage jumped 4.75% to $26.44 an hour, taking a full-time week past $1,000 for the first time.
Paid parental leave now runs to a full 26 weeks, super lands within days of every payday rather than quarterly, and the $20,000 instant asset write-off is finally permanent.
Even Christmas in July is followed by a credit card statement.
The first of the month switched on the new tax on super-sized superannuation accounts, an extra 15% on earnings on balances above $3 million, rising to 25% above $10 million.
Let’s call a spade a shovel here. The issue with Div 296 was never that it targets the top end of town, it’s that the first draft tried to tax paper profits on assets never sold, and it took a two-year backlash to force the retreat.
However, we are now witnessing the unwinding of the fuel excise relief, and we’ve been here before. When the excise was halved during the 2022 oil shock, the sugar hit lasted six months and vanished just as quickly, and this one is going the same way.
Here’s the back-of-a-coaster maths the government would prefer you didn’t do. Last month you were saving 32 cents a litre at the bowser. From Wednesday that’s been halved to 16 cents, and in a month it goes to zero. On a 65 litre tank, that’s roughly $10 more per fill now and about $21 more from next month.
The timing is no accident. Global oil prices have tumbled since the Iran ceasefire and unleaded on the east coast is down around 90 cents from the April peak, so the tax is creeping back in precisely as the falls flow through, and the relief you’d otherwise be seeing at the pump quietly disappears into consolidated revenue.
Fill up once a week and the extra cost at the bowser swallows that tax cut twice over from day one, and four times over once the full excise returns. Four months of fuel relief has cost the budget almost $3 billion, and it’s now abundantly clear who this government’s most dangerous opponent really is. It isn’t the meandering opposition led by Angus Taylor. It isn’t even Pauline Hanson. It’s inflation.
Then there’s the fine print, where this government does its best work.
Take the new $1,000 instant deduction for work expenses, spruiked as money for nothing. Labor says the average worker will save $205. What it doesn’t say is that most workers already claim more than $1,000 in work expenses, so for the majority this gift is worth precisely zero, and it doesn’t even apply until you lodge your tax return a year from now.
The tax cut itself is drip-fed, 15% now and 14% from July next year, each instalment timed to land like a campaign pamphlet as the election drums beat louder. There’s even a returning classic for small business, with the loss carry back offset scrapped three years ago now reintroduced to great fanfare, the fiscal equivalent of regifting.
One item does deserve a genuine tick. Paying super with every pay packet instead of quarterly is good policy, worth about $5,000 at retirement for the average 25-year-old on the super industry’s own numbers, and long overdue.
The Reserve Bank has hiked interest rates three times this year, taking the cash rate to 4.35%. Headline inflation eased to 4% in May but underlying inflation accelerated to 3.6%, and the deputy governor said just this week the bank still has work to do. Every dollar the government redistributes from 1 July adds to the demand the RBA is trying to mop up, and the mop is your mortgage.
The government calls it cost-of-living relief. The Reserve Bank sees it for what it is, more demand from a government that can’t control its spending.
One Nation Comes for Victoria
Now to the scariest poll of the year, so far.
The Financial Review’s Redbridge survey of more than 5,500 Victorians has One Nation on 27% of the primary vote, ahead of both Labor and the Coalition on 26% each. That’s One Nation leading both major parties in a mainstream Victorian poll for the first time, five months out from the state election in late November.
Naturally, that support lives mainly outside urban Melbourne, and out there it’s not even close, with One Nation on 34% in rural seats, 31% in regional ones and 28% in outer metropolitan Melbourne. The vote isn’t exactly soft either, with 62% of those pledging allegiance to Pauline saying their vote is locked in.
One Nation currently holds a single upper house seat in Victoria, has no state leader and not one confirmed candidate. A party with no leader and no candidates is topping the primary vote five months out from polling day. That’s the size of the strife Victoria is in.
If any state was going to resist the orange wave, it should have been Victoria. John Howard once consoled the Victorian Liberals after a drubbing by dubbing the place “the Massachusetts of Australia,” the most progressive, multicultural corner of the country. Yet it’s Victoria where One Nation now tops the primary vote, and the union movement’s own research explains why.
A Victorian Trades Hall commissioned paper warns that One Nation’s path to power runs straight through the working class, through the production workers, service workers and small business owners whose loyalties have come loose from the major parties.
Redbridge has mapped where it lands, with 34 seats it believes are in play, from Labor’s outer suburban heartland in Werribee, Melton, Frankston and Cranbourne to Coalition-held regional seats like Shepparton, Mildura and Morwell. Even the Premier’s own Bendigo East electorate sits on Labor’s internal risk list, and party headquarters has left her to her own devices to fund the local campaign.
That is not a detail you leak about a leader you intend to keep.
Jacinta Allan’s net favourability has sunk to -42. Rarefied air, the ignominious stench of which has only been shared with John Cain and Anna Bligh in the history of Australian state politics. Of the 34 state premiers who have gone to the people with a negative approval rating, just five survived, and the best of those weren’t carrying anything like Allan’s baggage. Redbridge’s own read is that Labor needs to find at least another four points of primary vote just to have a pathway, and nothing in the Premier’s circumstances suggests where those points might come from.
Why is she in so much trouble? It’s not just the hangover of the most punishing and brutal lockdowns anywhere in the world during the COVID pandemic. Nor is it the anti-business tax regime that is driving the population to states north of their border.
It’s in no small part because Victorians have watched the CFMEU treat the $100 billion Big Build projects as a private ATM, watched reports that the government knew union standover tactics were inflating costs and directed contractors to pay anyway, and watched a Premier who ran transport infrastructure for nearly a decade fail to answer what any of it has cost them. Her colleagues know it.
A spill fizzled out a fortnight ago when her deputy Ben Carroll declined to make a move, but parliament returns from its winter break late this month, and the party room knows that’s their last window. Labor headquarters has already written off nine of its own seats and privately fears being reduced to around 30, and that’s before fully pricing in the looming orange wave reported in the Fin’s poll yesterday.
Before Jess Wilson’s Libs get too cheerful, the same poll carries two warnings for them. The first is that the Coalition’s primary vote went backwards, and on 26% it cannot govern alone. Its path to power now likely runs through One Nation’s backing with confidence and supply. The second is the three-way count where they must finish in the top two to survive.
A divided right is how an unpopular Labor government survives, and Victoria wrote the manual on that. The DLP breakaway locked Labor out of Spring Street for 27 years, and the party doing the splitting spent most of them watching from the sidelines. The maddening part isn’t just that this one should have been in the bag long before now. It’s that the ground is still there for the taking. When the same poll asked which parties are focused on the right issues, the Liberals netted out at +7, the best of anyone, while Labor came dead last on -17.
Which makes it all the more remarkable that the party has spent the week consumed by the Moira Deeming and Matthew Guy saga instead of prosecuting the case against the most unpopular premier in living memory. It was easy to sympathise with Deeming through her long war with former leader John Pesutto, a fight she ultimately won in court. But the appalling episode of levelling haphazard assault allegations at a colleague and failing to withdraw or apologise even after their dismissal by police is simply beyond the pale. The CCTV showed no assault at all, and still no apology came.
Deeming had been sounding out One Nation about a new political home, and Pauline Hanson went on 3AW to slam that door shut, saying she wants “a person with integrity and honesty” and doesn’t see one. The party winning over every disaffected conservative voter in the state looked at Moira Deeming and said, umm, no thanks. When Pauline Hanson is the one calling your honesty and integrity into question, it speaks volumes.
The harder discipline test for the Libs comes afterwards, though. Every day between now and November that they spend talking about themselves is a day gifted to Pauline, and there aren’t enough days left to be giving any away. This election was the Libs’ to lose. The recruitment of my erstwhile boss Brian Loughnane as state president was a masterstroke by Wilson, but even with his considerable ability and experience, he has his hands full.
Polling this far out measures a mood, not a result. The more exposure and pressure Pauline and One Nation face, the greater the expectation that they answer the same simple question the Coalition seems to stumble on.
Where are your policies?
Because it’s not enough to just point and criticise, even at governments as bad as those led by Albo and Allan. Credibility counts too.
The Best Story Canberra Never Tells
Credit where it’s due, and here it’s due in spades. Last week in Canberra, Australia signed its largest defence export deal on record, a $2.5 billion agreement to supply Canada with Jindalee over-the-horizon radar to guard its Arctic approaches, with delivery starting this week and the radar operational by 2029.
Better still, that’s just the deposit. The agreement covers the first of two radar systems Ottawa has planned, and when Canada first announced it was buying Australian, the full program was valued at up to $6.5 billion.
Canada, needled by Washington and shopping from friends it can trust, looked hard at the American alternative and chose ours, because it was better, smaller and faster to build. Even the US military backed the choice. At least 300 high-skill Australian jobs come with the deal. Most countries would celebrate an achievement of this scale. We buried it in defence estimates.
Now the part worth savouring, because it tells you how real capability actually gets built.
Australian scientists first tried bouncing radar off the ionosphere in the 1950s and failed, because the electronics of the day weren’t up to it. They kept at it. In the early 1970s an experiment between the Woomera Rocket Range and Broome, 11 months of soundings along an 1,850 kilometre path, proved the sky over our continent would carry the signal.
In 1974 the Whitlam government approved a pilot radar on a budget so lean the project was named Jindalee, an Indigenous word meaning bare bones. By 1976 it was switched on outside Alice Springs and detecting its first aircraft, and in December 1977 it was spotting ships off the northwest coast, something it wasn’t even designed to do. The experimental antenna that grew from it stretched 2.8 kilometres, its steel run off the line at the Hills Hoist factory. Behind that wire sat millions of dollars of top-secret Australian software, and behind the software sat something rarer still. Patience.
Kim Beazley promised the project would be treated reverentially no matter how tight the defence budget got, and every government kept that promise, through cost blowouts and a full network that arrived six years late in 2003. Approved under Gough Whitlam, switched on as a national network under John Howard.
Plenty of nations tried this technology, superpowers among them, and built systems at vast cost that were abandoned or mothballed within years. Ours endured, and on Defence’s own assessment it remains the most advanced system of its kind in the world.
The tech is seriously impressive too. Jindalee doesn’t see over the curve of the earth so much as around it, bouncing its signal off the ionosphere and back down onto whatever’s moving below. Because the beam comes down from above, all that hugging-the-deck flying you see in the Top Gun movies achieves precisely nothing, and there’s no hiding behind mountains or in valleys either.
Today, JORN keeps watch over roughly 15 million square kilometres of sea and sky, about twice the land area of Australia itself, spotting ships and aircraft up to 3,000 kilometres out from antenna fields at Longreach, Alice Springs and Laverton. The $1.2 billion mid-life upgrade being rolled out across the network right now will make it ten times more sensitive again and keep it in service into the 2040s.
From the Hills Hoist factory to the biggest defence export in our history. That arc took 50 years to draw, and it’s why Canada is buying.
Jindalee isn’t the exception, either. It’s the pattern, and we never string the stories together.
Take the Collins class subs. Mocked for their birthing pains in the 1990s, the six Osborne-built boats matured into one of the finest conventional submarine fleets on earth, and their stock in trade is precisely the quiet work you never hear about, slipping into the waters to our north to intercept communications and shadow foreign navies. Who could forget the legendary tale of redemption at the RIMPAC 2000 war games, when HMAS Waller “sank” two American nuclear submarines and slipped undetected to within torpedo range of the aircraft carrier USS Abraham Lincoln, close enough to photograph her through the periscope?
Their surveillance of Chinese submarines in the South China Sea has been reported for years, carrying on a signals intelligence tradition that runs all the way back to the Oberon boats creeping up the Chinese coast during the Cold War. When allied navies talk about what Australia brings to the table beneath the waves, intelligence is the currency.
Then there’s the newest chapter, and it might be the best one. When Palmer Luckey, the Silicon Valley wunderkind who invented the Oculus Rift virtual reality headset, founded defence company Anduril in 2017, it could have stayed a purely American story. Instead, Anduril picked Australia for its first factory outside the United States, and together with the ADF, co-funded Ghost Shark.
This extraordinary drone submarine, which fits inside a 40-foot shipping container, can dive to 5,000 metres, spend weeks at sea undetected, and carry torpedoes or seed the seabed with sensors guarding the undersea cables our entire economy depends on. The first prototype arrived a year early. One of them swam 1,000 nautical miles and came home like a homing pigeon.
They are now being built by the dozen at a secret Sydney factory drawing on 42 Australian suppliers under a $1.7 billion contract, and the plan is to sell them to allies across the region. Concept to full production took three years, which in defence procurement isn’t just fast, it’s unheard of. Anduril is now worth around $48 billion, and Australia is in on the ground floor.
Ghost Shark matters because the Virginia-class boats don’t arrive under AUKUS until the early 2030s, and even then, a handful of nuclear submarines cannot cover a coastline our size. The answer is a hybrid fleet, a small number of state-of-the-art manned boats doing the high-end work and cheap autonomous drones doing the rest. An adversary might chance sailing warships around a country with six submarines, as we discovered last year. But it thinks very differently about a country with six submarines and 100 unmanned drones lurking.
That’s deterrence we can manufacture, and it’s the piece that bolsters AUKUS before the nuclear boats show up.
In the air it’s the same story. Ghost Bat, developed by Boeing Australia with more than $2.3 billion of government backing, is the first combat aircraft designed and built in this country in half a century. It has test-fired air-to-air missiles, the newest version carries weapons internally, a factory is going up outside Toowoomba to build it at scale, and Germany has confirmed it’s under consideration for its air force.
Japan is joining the flight testing, and Canada’s procurement chief, fresh from signing the radar deal, says he wants a look at Ghost Bat next. That’s what happens when you sell one world-beating product, the customer asks what else is on the shelf.
The RAAF’s stated ambition is three unmanned aircraft for every manned fighter. Boeing’s Australian operation is stacked with ex-Supercars engineers, including some seriously talented people who used to work for me at Dick Johnson Racing. World-class radar, drones and subs, engineered and made in Australia. This is what our future looks like. More of it.
Which begs an uncomfortable question. Jindalee can spot a ship 3,000 kilometres over the horizon, yet the same country spent the first half of this year counting its petrol reserves in days, like a ration book, and masking pump prices with almost $3 billion of excise band-aids, because a war on the other side of the world exposed two decades of neglected fuel security.
That neglect spans governments of all stripes, but the fuel security pen sits today with Chris Bowen, and his answer to a strategic fuel problem has been the same as his answer to everything else, a press conference and a promise.
The threat has been visible the whole time. We simply weren’t looking. The difference between JORN and our fuel stocks is the difference between a country that plans in decades and a government that plans in media cycles. The radar deal shouldn’t be a once-in-a-generation headline. It should be our business model.
Weekly Wrap
Step back and the three stories share a single thread, and that is the passage of time.
The 1 July package is a government thinking in months, every measure timed for a headline, the bill postdated to your next tank of fuel.
Victoria is a state thinking about an election five months from now, so desperate to punish a rotten government that its voters are flirting with the very split that could keep it in power.
Then there’s JORN, a country thinking in decades, and proof that the surest way to keep the next war over the horizon is a radar that can see beyond it.
The talent that turned a spool of Hills Hoist wire into a $6.5 billion export program never left this country. What’s gone missing is the foresight to back things whose ribbons someone else will cut, whose plaques someone else will unveil. The ministers who signed off on Jindalee and the Collins boats, and the ones who followed who nurtured and protected both, knew the applause would land long after they’d left the stage, but they proceeded anyway.
We always reminisce through rose-tinted lenses, but in this instance, it really was Labor and Coalition governments of yesteryear thinking about tomorrow and the day after.
Meanwhile, today’s political class thinks only about itself. The Coalition in both Melbourne and Canberra fights internally over scraps and lets bad governments off the hook.
So, when the lot of them inevitably come asking for your vote, whether it’s for the treasury benches on Spring Street this November or in Canberra soon enough thereafter, put the 50-year question to them. What are you building that will outlast you? The silence that follows will be deafening.
A country that taught itself to see 3,000 kilometres over the horizon has no business being led by people who can’t see past the next headline or TikTok video.