By Sunday night the press releases were calling the carve out a sensible refinement. By Monday morning the small business sector was calling it what it actually is, which is a full strategic surrender carried out under fire from the business pages. Anthony Albanese and Jim Chalmers walked into a press conference last Thursday and announced that the capital gains tax overhaul they had spent six weeks defending would now exempt 2.7 million small enterprises . The threshold for the existing small business 50 per cent active asset concession rose from $2 million in turnover to $10 million. Startups and testamentary trusts were also carved out.

This is the second backdown in a fortnight. The first was the cancellation of the proposed sweeping ministerial powers for the Treasurer. The second is now this. Tim Wilson, who has spent most of the past month polishing the political assault for Angus Taylor, told Patricia Karvelas the obvious thing about the optics, which is that the Prime Minister and the Treasurer were "like hostages in their own press conference, backing down from their budget measures".

The mechanics of the climbdown are worth itemising because they are the mechanics of a government discovering that its budget was written for nobody in particular. The original CGT package moved Australia from a uniform 50 per cent CGT discount to an inflation linked system. The argument, made elegantly in the budget papers and badly at the dispatch box, was that this was fair. The flaw was that it caught everybody, including the corner cafe with a turnover of $2.4 million and three employees, in the same net as a private equity exit on the Sydney Harbour foreshore. By Sunday the Prime Minister was explaining, on the Adelaide tarmac, that the changes were really only about the foreshore.

Angus Taylor's response was not nuanced. He said the government should "abandon the budget reforms" and "start again". He called the compromise "half-arsed" and said the government was "compounding failure upon failure." Whether or not you find Angus Taylor a persuasive shadow treasurer, those are the words that landed.

The political damage is contained, in the technical sense, by the size of the carve out. Two point seven million businesses is roughly 98 per cent of active businesses in Australia. The remaining 2 per cent now know with certainty that the original architecture was about them. The other 98 per cent now know with certainty that the government can be moved by sustained business page criticism, by elite agent press releases and by Tim Wilson on every breakfast television show in the country. That is not the lesson a first term government wants to teach its opponents in week three of the budget cycle.

The deeper problem is reputational and slow burning. A budget is a statement of priorities. A budget that is amended on the fly in response to lobbying is a statement that the priorities were not real. By Friday morning Jim Chalmers was defending the backdown on the basis that the government had "lost political paint" but kept the policy. The paint, in this metaphor, was the part of the budget the cabinet had been telling Australians was the principle. The car is still there. It just has 2.7 million dents.

When the Treasurer's office briefs the press gallery on the next reform package, the gallery now knows two things. The package will be revised. The revision will be larger than the original concession.