Former prime minister Paul Keating’s interview with Laura Tingle on ABC television’s 7.30 last Tuesday has set up a debate within the Labor Party over its defeat in the May election.

Some Labor supporters agree with Keating that Labor, under Bill Shorten’s leadership, “failed to understand the middle-class economy” that Keating claims to have created along with Bob Hawke between March 1983 and March 1996.

Others hold a different view. Samantha Maiden reported at The New Daily on Wednesday that “Labor frontbenchers past and present say Mr Keating’s remarks are wrong because it was the failure to secure a greater number of working-class voters in Queensland and Western Australia that was the problem, not the middle class”. The only Labor politician named was the Left faction’s Kim Carr.

The more accurate analysis is that Labor failed to understand a significant number of the middle class and the working class. Except that the term working class, as used by Carr and others, is somewhat out of date. Many of those once classified as working class are now described more accurately as tradies. They may work primarily with tools but they are well paid.

Shorten ran into this reality when meeting a group of workers at Gladstone Ports in Queensland in the early weeks of the campaign. One worker told the Labor leader that some of his colleagues earned $250,000 a year, primarily due to penalty rates for night shifts.

The message was that they wanted a tax cut. Shorten promised to look into the issue, but ignored the fact Labor’s policy was to increase the top marginal tax rate, for a couple of years at least, from 45 per cent to 47 per cent.

Once upon a time someone employed in a place such as Gladstone Ports would have been described as working class. Not any more. Sure, there are low-paid workers, but they are found in blue and white-collar jobs alike.

Keating’s criticism of the policy that Labor frontbenchers Shorten, Chris Bowen and Jim Chalmers took to the election is essentially correct. Keating would have supported widening the tax base by the cuts to tax expenditures (franking credits, negative gearing and the like) provided the revenue gained was used to reduce income-tax rates.

Instead Labor proposed to increase marginal tax rates. Keating wants a top rate of no higher than 39 per cent.

No opposition has won office by promising to increase taxation. The Hawke-Keating government reduced the top marginal rate from 60 per cent to 47 per cent. It was one of the reasons Labor governed for five terms.

Tingle put it to Keating that one of the lessons of this year’s campaign was that “oppositions shouldn’t be brave”. The former prime minister did not concur.

Keating’s position is not that Shorten was brave but that he was wrong. In committing Labor to substantial tax increases, he upset both retirees whose income was, in many cases, to be significantly reduced and also workers who felt that they were paying sufficient tax already.

Labor has won office from opposition on only three occasions since the end of World War II. In 1972, after 23 years of Coalition government, Gough Whitlam led Labor to victory with a radical agenda. But he survived as prime minister for only three years and in 1975 and 1977 suffered two of the biggest defeats in Australian electoral history.

When Labor returned to office in 1983, under the leadership of Hawke and then Keating, it was determined not to repeat the errors of the Whitlam years. In The Hawke Memoirs (1994), the former prime minister referred to the Whitlam government’s “fiscal irresponsibility”. In 1987 Keating acknowledged that Whitlam and his ministers had “no policy for dealing with inflation and unemployment”. Hawke and Keating in office were determined to govern professionally. In 1983, Hawke’s pitch to the electorate was to bring about consensus.

As opposition leader after Whitlam, Bill Hayden made Labor credible on the economic front. There followed the Hawke-Keating government until John Howard led the Coalition to victory in 1996. Kevin Rudd was the third Labor leader to win office from opposition. In 2007 he presented himself to the electorate as an “economic conservative”, like Howard.

On reflection, Shorten’s election economic agenda was a bit like Whitlam’s — but not at all like that of Hawke or Rudd. In the process he upset sufficient retirees, miners and tradies to ensure that Scott Morrison remained in the Lodge.

Keating’s critique of Shorten Labor’s failing to understand the middle class is correct in so far as it goes. But it doesn’t go far enough.

In May Labor also upset many social conservatives of all income groups. Here it failed to recognise the difference between the essentially inner-city secular professional classes and the essentially socially conservative men and women of the suburban, regional and rural areas.

Bowen, who suffered a swing against him of 5.5 per cent in the seat of McMahon in western Sydney, recognised the problem in the wake of Labor’s defeat.

He told The Australian that it had been raised with him “that people of faith no longer feel that progressive politics cares about them”.

According to Bowen, Labor needs to “tackle this seriously”. The member for McMahon lives in an ethnically diverse seat. When he states that people of faith no longer feel that Labor cares about them, he is not simply referring to mainstream Christians but also the believers who follow religions that are less popular in Australia than others.

It is true that the Morrison government has a majority of only two seats. However it increased the Coalition’s majority in many previously marginal seats. And it retains strong support in Queens­land and Western Australia.

Labor will win again sometime in the future. But not before it addresses its failure to gain sufficient support from retirees, within mining areas, among well-paid workers and from social conservatives. It’s a big task — but Keating has opened up the debate.

Gerard Henderson is executive director of the Sydney Institute. His Media Watch Dog blog can be found at