It turns out there are limits to policy bravery, especially when the targets of your bravery are a clearly defined group.

Unlike negative gearing and capital gains tax reform, where the losers from Labor’s proposed reforms are diffuse and widespread, middle and high-income seniors are a well-defined and potent group. Many of them, by careful management of their wealth, are part-pensioners who receive some of the taxpayer-funded benefits of the aged pension while enjoying a lifestyle far beyond that of many full-time workers. Labor has now caved in and exempted part and full pensioners from its dividend imputation refundability policy, amusingly dressing the backdown up as the introduction of a “new pensioner guarantee”.

So, well done to the Turnbull government. It finally managed to put together a scare campaign worthy of the name, conjuring the image of Bill Shorten personally entering the home of each pensioner in the country and rifling through their wallets and purses. All it took was a couple of meetings with retired business people portrayed as hard-up pensioners.

That pensioners were never really the target of Labor’s refundability policy is demonstrated by the fact that — at least according to Labor’s numbers — the backflip will only knock $3.3 billion off the $59 billion savings from the policy over a decade. But the fact that Labor blinked will give a deeply troubled government some heart that not everything it touches turns to manure.

It also serves to demonstrate just how hard it is to take something off powerful, narrowly defined interests: wealthy seniors who manipulate their wealth to qualify for a part-pension are exploiting Australian workers and younger people, not the deserving poor who have earned the gratitude of a nation for their efforts. But they’ll be looked after just fine, thanks.

It will also harden Labor’s determination to exploit the government’s vulnerability on Catholic schools by promising a special deal to the Catholic Church to maintain already over-generous levels of funding. There, the roles are completely and perfectly reversed: the government is trying to put in place fair and fiscally sensible policy while Labor has cynically exploited it by pandering to a wealthy, influential group.

Labor probably has the better of the deal because the targets of its policy don’t tend to vote Labor — as those hilarious media stories of seniors gazing sadly at their waterfront views and swaying yacht masts and saying “I’ve voted Labor all my life and I’m outraged” indicate — while the Catholic schools vote may be crucial in marginal seats.