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June 2, 2025
Shadow finance minister James Paterson has admitted it was a mistake to oppose Labor's income tax cut at the election because it betrayed Liberal principles, arguing the Coalition must re-establish its economic credentials as the party of lower spending and smaller government.
Liberals also needed to be less antagonistic towards big business and support free enterprise, Paterson said, after the party's fractured relationship with the big end of town under Peter Dutton.
In an interview with The Australian Financial Review, Paterson said volatility in the international economy and financial markets from Donald Trump's on-and-off tariffs meant that budget responsibility would be vital.
''If we're to win the next election, we must win the economic debate, and we must also restore our brand equities on the economy,'' Paterson said on Friday.
'We have to resemble a traditional Liberal Party that our supporters in the community recognise when it comes to tax and when it comes to budget management in particular.'' Paterson, as the opposition's home affairs spokesman, developed a passion for foreign affairs and national security, but he was tapped by Opposition Leader Sussan Ley to fill the finance portfolio to replace the dumped Jane Hume after the Coalition's devastating election loss in May. He was the election campaign spokesman.
Pressed on what went wrong at the election, the Victorian senator admitted the centre-right party made economic policy mistakes.
''I think we made some tactical errors which confused some of our supporters, for example, opposing a tax cut and going to an election saying we're going to reverse a tax cut.
''When people vote Liberal, one of the things they expect from us is lower taxes, and we should never get ourselves in a position again where Labor can make any sort of claim to be a lower taxing party than us.'' Paterson admitted on Sky News yesterday he should have pushed harder internally on these issues during the last term of parliament.
Under Dutton, the Coalition vowed to unwind Labor's legislated cut in the bottom marginal tax rate from 16 per cent to 14 per cent, which will deliver a $536 a year tax cut to most workers, once fully implemented by 2027-28. The Coalition did not match Labor's $1000 automatic deduction for tax returns.
The Coalition instead offered a temporary 12-month, $8.9 billion halving of the fuel excise to attract suburban and regional voters, a one-off tax offset of up to $1200 at a budget cost of $10 billion and mortgage interest deductibility for first home buyers.
The Coalition matched much of Labor's big spending, such as $8.5 billion for Medicare, while pledging to lift defence spending by $21 billion over five years. As a result, the Coalition offered bigger budget deficits than Labor in the first two years, but smaller deficits over four years.
Paterson said the Coalition must always present a stronger budget position than Labor and he planned to introduce stricter budget rules around spending, including for the $100 billion in off-budget spending Labor has forecast over five years.
''I'm going to have a laser-like focus on debt and deficit, on restoring our fiscal buffers and getting our fiscal house back in order because the international economic volatility that we are entering into requires stronger fiscal buffers, not weaker ones,'' he said.
''Just at the time, where we've got bond markets in turmoil and enormous international policy uncertainty initiated by the tariffs from the United States, Labor's plan is to increase the deficit and increase the debt.'' After Treasurer Jim Chalmers and Finance Minister Katy Gallagher delivered two budget surpluses, a decade of deficits is forecast by Treasury and gross debt is on track to surpass
$1 trillion next financial year. With Paterson expressing philosophical support for lower taxes than Labor, lower spending will be required by the Coalition to deliver a better budget bottom line.
Paterson said he would develop strict spending rules for the Coalition to abide by in opposition and government if it returned to the Treasury benches.
On relations with business, Paterson said Liberals needed to restore their brand as the party of free enterprise.
''It was counterproductive in some ways to be seen to be at odds with the business community,'' he said.
''We're not here to push the barrow of businesses, big or small. We're here to defend the free enterprise system because it delivers the best outcome for consumers, and we're a pro-competition party, but we don't want to be at odds with anyone in the business community.''
But he said big business strayed beyond its social licence by actively campaigning for the Indigenous Voice to parliament, so the Coalition had been right to call it out.
''I think what works best is when politicians stick to what is our domain and businesses stick to what is their domain.''
Paterson has served on Senate committees for finance and public administration, after studying commerce at the University of Melbourne. He entered politics from right-wing think tank the Institute of Public Affairs.