July 2022


The future of the Liberal Party

By George Megalogenis
Image of Peter Dutton and Sussan Ley

Peter Dutton and Sussan Ley. © Lukas Coch / AAP Images

Peter Dutton doesn’t just have a talent problem on his hands

In the days of bipartisan shock that followed the 2019 federal election, when the Coalition and Labor were asking themselves the same, simple question – what the hell just happened? – a senior member of Scott Morrison’s government told him not to take another victory for granted.

The result, as he explained to the prime minister, reminded him of Paul Keating’s great escape of 1993 when a tired government turned the very notion of incumbency on its head by making the campaign a referendum on the Opposition’s reform agenda and its unpopular leader. Then, as in 2019, the opinion polls missed not just the result but also the direction of the swing. Morrison, like Keating, had increased the government’s majority.

Left unsaid in the conversation between the prime minister and the trusted colleague from his home state of New South Wales was that the “miracle” of 2019 was a reprieve, not an endorsement. Get ahead of yourself, and the Coalition risked the equivalent of Labor’s electoral wipe-out in 1996.

Three years on, that gentle warning reads like a doomsday prophecy. On May 21, Morrison led the Liberals to a defeat without precedent for the middle-class party that Robert Menzies founded in 1944. It was the first change-of-government election to be decided solely on the urban side of Australia’s city–country divide, and it broke the postwar rule that only Labor is thrown out of office in a landslide.

Morrison had expected to lose a handful of seats in the cities, but thought he would take a few back from Labor in the outer suburbs and the regions. His goal was to finish ahead of Labor and retain power in a minority government. Instead, what he achieved was a historic realignment of the electorate at his party’s expense, breaking the two-party system in the cities while leaving the regions in a form of suspended animation.

Higher income electorates across Australia’s five largest cities, which had been reliably Liberal since their inception and boasted prime ministers and treasurers as their local members, shifted decisively to the left. Women generally, and younger voters in particular, turned these blue electorates Labor red, independent teal and even Green. A second wave, driven by a different set of voters, swept away most of the diverse electorates that the Liberals held in the middle-ring suburbs across Sydney and Melbourne, and returned them to Labor. Suddenly a parliament that had been stubbornly male and white in its composition looked more like the people it served. It is now more female, more migrant and more Indigenous than ever before. But the twist for the Coalition is that it returns to the Opposition benches after nine years in government with a party room that looks nothing like the Australia it needs to win back.

Every major voting bloc swung against Morrison’s government – against the Liberals in the cities and regions, against the Nationals in the regions and against the merged Liberal National Party in Queensland. But the toll was borne almost exclusively by the Liberals.

The Liberals and their colleagues in the LNP entered the 2022 campaign with 34 of the nation’s 84 urban electorates. They lost half of them, with Labor taking nine of the 17 and the teals another six, while the two LNP seats fell to the Greens.

The three Coalition parties held 42 of the 67 provincial and rural electorates, and retained all but one.

The remaining 17 Liberal and LNP members who serve city electorates are exiles within their own country. Most are huddled along the eastern seaboard – six in Sydney, a further six in Brisbane and the Gold Coast, and three in Melbourne. There is a sole survivor in Adelaide and another in Perth, while Canberra, Hobart and Darwin are Liberal-free zones. To put these figures in perspective, Labor now holds 16 seats in Melbourne alone.

The collapse of the Liberals in the cities is one part of the realignment. Another is the rise of the independent teals and Greens at the expense of both major parties. There were six on the crossbench going into the election – three in the cities, and three in regions. The crossbench is now 16-strong, with 13 representing urban electorates. In the two largest cities, the independents almost match the Liberals – eight seats versus nine. Labor’s total across Sydney and Melbourne is 30, more than three times the Liberal contingent. Perhaps we can retire the old jokes about the two cities’ rivalry because they have never been more in sync politically.

The final part of the realignment involves Labor, and it is the twist to the breaking of the two-party system in the cities. Labor suddenly looks stronger than it dared to dream, even though its primary vote is at its lowest level since the Depression.

The previous Labor leaders to take their party into government from Opposition – Gough Whitlam in 1972, Bob Hawke in 1983 and Kevin Rudd in 2007 – did so with a greater primary vote than the Coalition. Whitlam and Hawke entered office with primary votes just under 50 per cent, while the so-called Ruddslide was built on a more fragile base of 43.4 per cent.

Labor assumed, with the benefit of 120 years of electoral history, that an Opposition needs to pull votes directly from a government to unseat it. But the rise of the crossbench, and the protest vote to the right, opened the door to power for Labor via the back door of preferences.

Labor’s primary vote actually fell by 0.8 per cent at the election, to just 32.6 per cent, while the Coalition’s crashed by 5.7 per cent to 35.7 per cent. This meant that the vote for none of the above, which covers the spectrum from the Greens to independents to Clive Palmer’s United Australia Party, crossed 30 per cent for the first time in history.

Labor emerged from the churn with a two-party vote of 52 per cent to the Coalition’s 48 per cent – a swing of 3.5 per cent. One step back on the primary, two steps forward on preferences delivered an additional eight seats to Labor – 10 from the Liberals minus the two seats it lost to the crossbench. Labor’s contingent in the lower house is an inversion of the Coalition’s: 54 of the MPs in Anthony Albanese’s government serve urban electorates while the remaining 23 are from the regions.

The Coalition could draw some encouragement from the fact that Labor’s two-seat majority is the tightest entry into office from Opposition for any major party since 1913. The previous Labor governments with narrow electoral mandates were inherently unstable. Whitlam’s majority in 1972 was just five seats, while Rudd’s in 2007 was eight. Both governments were destroyed in two terms, with landslides that began in the outer suburbs. Hawke, on the other hand, secured a 13-seat buffer in 1983, which set Labor up for 13 years in power.

Although Albanese’s government appears more vulnerable than Whitlam’s on paper, its position is closer to Hawke’s than to Rudd’s. The difference is the crossbench, which presents a significant barrier to re-entry for a majority Coalition government, and an opportunity for Labor to consolidate and even expand its numbers at the next election.

Consider the gap between the main parties when Whitlam faced re-election in 1974. Labor had 69 seats following the redistribution of boundaries, and the Coalition 58. As there were no independents in the parliament, the Coalition needed just six seats from Labor to reclaim government. It is why the Coalition felt so comfortable using its balance of power in the Senate to force not one but two early elections to bring down the Whitlam government. The Opposition leader in the Senate, Reg Withers, had telegraphed the plan early in the first term, telling the parliament that Labor was only in power because of the “temporary electoral insanity” of NSW and Victoria.

Scott Morrison left the gap between the Coalition and majority government at 18 seats. Look again at what the Liberals and LNP ceded in the cities – nine seats went to Labor, and eight to the teals and Greens. The Liberals lost another seat to Labor in the regions. They would need to recover all 18 to govern again in their own right, plus additional seats elsewhere to offset any other losses. Now imagine the playing field at the next election with the Coalition trying to take back seats from both the incumbent and the crossbench, while also defending its city survivors and its base in the regions from the next independent insurgency.

This is unchartered territory for the Coalition. The only comparable episode on the Labor side occurred during the Depression, when James Scullin’s government lost MPs to its right and left, and was crushed in a landslide in 1931. One group of Labor rebels led by Joseph Lyons joined the Nationalists and formed the United Australia Party. A second group moved to the crossbench under the leadership of NSW Labor premier Jack Lang. The sting in this analogy for the Coalition came at the following election. Labor lost more seats to the Lang group in 1934, and wasn’t competitive again until John Curtin took over as Opposition leader.

The Coalition enters the wilderness with a leader in Peter Dutton who hails from the same conservative wing of the party that alienated the Liberal base on May 21. While his shadow cabinet of 24 includes 10 women, the joint party room skews male and white in an electorate where 51.2 per cent of voters are women and more than half the population is either born overseas or has one migrant parent. These are the new cosmopolitan majorities that both main parties must reckon with. They will shape the policy agenda, from gender equality and energy reform to the Uluru statement and the cost of living. The professional women who drove the swing to the teals, and the Chinese Australians who switched to Labor in the middle-ring suburbs, are unlikely to return to the Liberals if Dutton maintains his hard line on climate change and his aggressive posture towards Beijing.

The existential question now facing the Liberals is whether the 2022 election defeat was personal or structural. That is, was there something uniquely polarising about Morrison’s character that provoked a one-off backlash in the cities, which will correct at the next election with the return of heartland seats such as Kooyong and Higgins in Melbourne, and Bennelong and Wentworth in Sydney? Or was the result the culmination of social forces building for a decade or more, which will continue to tilt the pendulum leftward in future elections?

First, let’s clear up the subject of class. While it is true that the Coalition lost higher income electorates, the Coalition and Labor did not swap positions at the fault line between higher-income and lower- and middle-income voters in 2022. The way to see this is by dividing the electorate between homeowners and renters, and checking the support for each side.

Dr Shaun Ratcliff, a lecturer at the University of Sydney and a data scientist at YouGov, ran these numbers with his academic colleagues as part of the 2022 Australian Cooperative Election Survey. The survey of more than 5800 voters found that the Coalition parties remain the parties of property.

“Coalition support among homeowners was almost twice as high as it was from non-owners at the same income level,” Ratcliff tells me.

“Approximately 40 per cent of lower income homeowners and more than 40 per cent of homeowners with household incomes $150,000 and higher voted Coalition. Support from those who did not own their homes was never above 26 per cent.”

Labor, on the other hand, won the support of around a third of homeowners, and just under 40 per cent of renters. (At the other end of this equation are the Greens, who had the support of 9 to 13 per cent of homeowners and 18 to 23 per cent of renters.)

The Coalition’s vote among homeowners was around five points higher than its primary vote, while the Labor and Greens vote among renters was around seven points higher than their respective primary votes.

But there was one exception to this general rule, and the voters concerned happen to live in large numbers in the very seats that the Liberals and LNP lost to Labor and the Greens in Melbourne and Brisbane. Homeowners aged under 35 were twice as likely to vote Labor and Green than Coalition, according to the poll. Among renters, who make up the majority of voters aged 18 to 34 across the nation, the poll found just 16 per cent support for the Coalition, 38 per cent for Labor and 35 per cent for the Greens. These numbers read like a terminal diagnosis for the party of Menzies, especially in its once-safe city electorates.

The drift from left to right as voters acquire property is common among Western democracies. By the time they reach retirement age, they are overwhelmingly conservative. As John Howard explained to me in an interview during his final term: “If you have got low- and middle-income families contented with you, and if you are getting an above-average portion of the over-55s, it is very hard to lose.”

But what if the young property owners, and the higher income earners currently locked out of the housing market stick with Labor or the Greens into middle age, and perhaps even into retirement? What are the implications in the inner-city electorates that are gentrifying as young professionals move, either as renters or buyers, into the many new apartments?

Going into this year’s election, the Coalition held just nine of the top 30 electorates for voters aged under 35. They lost six, including Higgins, the inner-eastern electorate in Melbourne that voted Labor for the first time. I grew up in Higgins, and am still wrapping my head around the idea that the electorate with Toorak at its heart, with an honour board of previous members including Liberal prime ministers Harold Holt and John Gorton, and Liberal treasurer Peter Costello, could turn so decisively from blue to red. Labor’s two-party swing of 4.7 per cent was 1.2 points above its national swing, even though the party was reluctant to put the seat on its target list because of its history and geography. To the east of Higgins is Kooyong, the seat Menzies held for 32 years. To the south is Goldstein, centred around Brighton, another lifetime Liberal seat.

All three electorates are wealthy, with above-average shares of female voters likely to be turned off by Scott Morrison. But Higgins is notably younger than its neighbours.

It sits in a different category to the teal seats of Kooyong and Goldstein, their sister seats in Sydney – Mackellar, North Sydney, Warringah and Wentworth – and Curtin in Perth. There is nothing in those electorates’ results, yet, to suggest their demography is moving from centre right to centre left. Higgins is where gentrification has taken its first bite out of the Liberal base and transferred the seat to Labor.

I asked the former Liberal member Katie Allen, who lost Higgins to Labor’s Michelle Ananda-Rajah, what she thought went wrong. “I don’t believe it’s just down to changing demographics,” she says. “The swing happened across the inner-city seats too quickly for that. I think we lost the vote of progressive professionals. There was a perception that neither major party was acting quickly enough so the vote went elsewhere. In Higgins all the preferences went against the government.”

That was reflected in the swings across both the apartment and mansion belts in the electorate. At the apartment-belt South Yarra booth at my alma mater, Melbourne High School, Ananda-Rajah won the two-party vote 66 to 34 for Labor after a swing of almost 16 per cent. At the reliably conservative Toorak Uniting Church booth, the swing to Labor was 7 per cent (but Allen still easily won the booth for the Liberals). The pattern repeated across Higgins. While the richest parts of the electorate remained Liberal, they were overwhelmed by the votes from Labor’s young middle class.

Allen was one of a sizeable group of Liberal MPs who advised Morrison early on to change course on climate change. It was a message that Morrison’s NSW colleague also delivered firsthand in their conversation quoted at the start of this essay. The ploy to wedge Labor between its inner-city and regional constituents could only work once, they argued.

They were right, and Morrison did change the Coalition’s policy in response to their concerns. But he couldn’t shift perceptions that the Coalition remained opposed to genuine action. Pollster Kos Samaras surveyed 10 seats that changed hands across Sydney, Melbourne and Brisbane, including Higgins, and found climate change was the number-one issue for voters in each. “In 2022 climate change had a bigger impact on seats than coal did in 2019,” he tweeted.

Allen explains that while her constituents supported the Coalition’s core policies, they wanted to see their aspirations for Australia reflected as well. “They want good economics, good defence,” she says. “But they also want to see their values reflected in policies to ensure Australia is modern, open and inclusive. These values are now normalised in professional workplaces with a constant eye to ESG [environmental, social and governance] goals.”

She doesn’t accept the post-election analysis of some on the right that the Liberals should abandon the inner cities. “Please stop calling them inner-city elites, they are often professionals. They might be on $80,000 but they are aspirational, they want to be the architects of their own destiny. Menzies included professionals in the ‘forgotten people’ speech. They are our people. We need to hear their roar – not just in Melbourne but right across the country.”

Morrison was certainly aware of the dilemma of gentrification in electorates such as Higgins, and tried to buy back the base with a scheme to let young Australians dip into their superannuation to help buy their first home. It was announced in the final week in the campaign – far too late to stop the swing.

Mass homeownership had been one of the great achievements of the Menzies government. At the end of the Second World War, barely half the population owned their own home or were paying off a mortgage. By 1966, when Menzies retired after 16 uninterrupted years as prime minister, the homeownership rate had peaked at 71 per cent. It remained around 70 per cent until the turn of the century, but has been creeping lower since then, shedding a percentage point every five or so years to reach 66 per cent by 2020. The drop is explained by generational forces, which are compounded by soaring property prices. It is the structural change that helps explain the ticking time bomb in the cities for the Liberal Party.

Almost 70 per cent of the first wave of baby boomers had bought a home before they turned 35, when property was cheap. The figure for generation Xers born between 1982 and 1986 was just 50 per cent at the same stage in their adult lives, when our capital cities’ prices were among the most expensive in the world. Their later start, and the likelihood that millennials will wait even longer before buying, will further reduce the homeownership rate. The next Coalition government will need to look beyond its shrinking base of property owners if it wants to rule again in its own right.

The change in the composition of inner-city and middle-ring seats is sharpest in Melbourne because it was our fastest growing city or town in the decade before the pandemic. The fastest growing part of Melbourne was its western suburbs; the second fastest was the inner city. Morrison imagined that his “quiet Australians” in the outer suburbs of the Victorian capital and their counterparts in Sydney could blunt the effects of inner-city gentrification. It didn’t happen on May 21, and it is difficult to find enough seats on the city fringes to make up for what has already been lost.

But Morrison didn’t let go of his strategy, even in defeat, telling colleagues that the Coalition should be recast to form an Australia-wide LNP. According to The Australian’s Sharri Markson, “Instead of the Nationals being the Coalition partner, he has suggested setting a new progressive Liberal movement as the Coalition partner. It could run a different brand in the inner-city seats.”

Menzies would be turning in his grave at this suggestion. Looking back on his career, he nominated the maintenance of the Liberal­–Country Party Coalition as one his three proudest achievements. The other two were the extension of Commonwealth involvement in higher education and the development of Canberra – legacies that the Liberal Party of John Howard already undermined by elevating private schools above universities for budget support, by running down and politicising the public service, and by using Kirribilli instead of the Lodge as the prime minister’s main residence. If the Liberals and Nationals fold into the LNP it will mark the end of the party of Menzies as we know it.

The three previous Coalition regimes that were thrown out of office – William McMahon’s in 1972, Malcolm Fraser’s in 1983 and John Howard’s in 2007 – still retained at least 40 per cent of the seats in the House of Representatives, and a share of the balance of power in the Senate with like-minded parties on the centre right. The Coalition now has barely a third of the seats in the lower house and no effective leverage in the upper house unless it joins forces with the Greens to block Labor’s legislation.

To compound the misery of being in Opposition, the Liberals are outnumbered in the Coalition for the first time. They held 43 of the Coalition’s 76 seats going into the election, and came out with just 27 of 58. The 21 MPs from the Queensland LNP and the 10 Nationals in NSW and Victoria are the largest Opposition grouping by default. This is reflected in the new Coalition leadership team. Peter Dutton, the leader of the Opposition, and David Littleproud, the leader of the Nationals, are both members of the LNP. But Queensland is not the best place from which to recover seats in Sydney and Melbourne. This is Morrison’s legacy. He reduced the party of Menzies to a junior partner in the Coalition, with no easy path back to power in a nation where two out of three people live in the capital cities.

George Megalogenis

George Megalogenis is a journalist and author of books including The Longest Decade, The Australian Moment and The Football Solution.

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