Photo: Prime Minister Malcolm Turnbull and Treasurer Scott Morrison. Photo: Alex Ellinghausen

Tensions emerge between Malcolm Turnbull and Scott Morrison as PM dumps Stuart Robert

February 12, 2016

(Translation of this article appears in Arabic section)

Little-known tensions between Malcolm Turnbull and Treasurer Scott Morrison prompted the Prime Minister to push previously secret Treasury modelling into the public on Friday - earlier than originally planned.

Sources say relations between Mr Turnbull and Mr Morrison have become tense over the extent of tax reform policy, with the Treasurer keen to see larger-scale, more ambitious reform including significant income tax cuts paid for by a politically unpopular 50 per cent hike to the GST.

It is understood there are also differences between them over the future of Human Services Minister Stuart Robert, with Mr Morrison urging the Prime Minister not to buckle to opposition and public pressure by sacking the embattled Queensland conservative.

Mr Turnbull however has formed a different view. Mr Robert will be axed ahead of a wider reshuffle, which is most likely set for Sunday. An announcement on Mr Robert's future is expected Friday.

Labor is demanding Mr Robert's scalp, having accused him of a clear breach of ministerial standards by behaving as a minister while accompanying a millionaire businessman and Liberal Party donor in China in 2014. Mr Robert had been on leave at the time and maintains he was acting entirely in a private capacity.

While a source said Mr Morrison and Mr Turnbull were working effectively, the signs of a deterioration of trust between the pair, at such an early stage of the reconfigured government, suggests future difficulties.

Fairfax Media understands the Prime Minister was concerned that Mr Morrison would commit the government to a more difficult path on tax reform than was politically tenable when he makes his first appearance at the National Press Club as Treasurer, on Tuesday.

It was for that reason that a decision was taken to release the modelling this weekend. However, even that timetable was altered on Thursday to ensure Mr Morrison's hardline approach did not become policy through other comments made by the Treasurer in media interviews.

The modelling showed that the economic gains from a GST hike were miniscule compared to the political pain likely to afflict the government heading into the 2016 election. Labor had been mounting a powerful scare campaign against the GST hike warning it was a great big tax on everything and would harm middle Australian households and the poor, in order to cut taxes for the rich and boost company profits.

In an exclusive interview with Fairfax Media on Thursday, Mr Morrison explained why he favoured action now to make room to income tax cuts without adding to the deficit.

"If you have higher and higher taxes" as a result, "it will be a drag on growth," he told the Sydney Morning Herald's  Peter Hartcher.

"We have to find a way to mitigate that now."

Mr Morrison is yet to hand down a budget. His forthcoming Press Club speech is expected to set out the parameters of his economic thinking which will inform the design of the crucial pre-election budget.

Friction between prime ministers and treasurers is not uncommon in Australian politics and has produced some of the most successful reform partnerships. Paul Keating and then prime minister Bob Hawke had a notoriously strained relationship yet managed to pull off some of the biggest reforms in Australian economic history. John Howard also was forced to manage Peter Costello's ambitions and resentment.