If the government pays out less franking credits then that helps the government as it means taxpayers will get lesser refunds. Assuming what Labor plans gets passed, with the scenario you are describing, it would mean that not only do those on the lower income scales get no franking credits, but those on higher incomes get less franking credits than otherwise (which means they pay more tax overall). This only helps government coffers.
Holding back franking credits isn't putting a gun to the governments head as they only gain from it. In fact if those franking credits get retained until (if) the coalition gets back into power, it is still a plus for the Labor government as it means the new coalition government, assuming they go back to the current system, will have to refund more to taxpayers. Companies that would currently only pay partially franked dividends, may have enough retained franking credits to pay fully franked dividends.
