With Anthony Albanese in a rush to beat the 2025 election clock, Labor is scrambling to deliver on its policy agenda and climate change targets amid a cost-of-living crisis, wars in Europe and the Middle East, the rise of artificial intelligence and US-China competition in the Indo-Pacific.
Cost-of-living crisis
Labor has struggled to cut through on the cost-of-living crisis, which consistently ranks as the top priority for voters. Senior ALP strategists are concerned about residual damage for the Prime Minister following the failed Indigenous voice referendum and growing household anger over living costs.
The government is worried about dissent in Western Australia, Queensland and Tasmania, as well as outer suburban and regional electorates. The first of 13 Reserve Bank interest rate hikes came two days after Albanese used his election campaign launch speech in Perth last year to promise that life would be cheaper under Labor. Within four weeks of Labor taking office, its pledge to cut power bills by $275 a year from 2025 was in tatters.
While global and domestic factors keep inflation higher for longer, key elements of Labor’s manifesto are in doubt as recession fears intensify and productivity flatlines. After blaming the Coalition for 12 months, the incumbent is copping all incoming fire. The 2025 election will be fought over who has the best plan to manage record energy, insurance and grocery bills; a housing and rental crisis; huge rises in mortgage repayments and petrol prices; and a surge in migration.
Voice disaster
Albanese suffered his biggest personal blow on October 14 following the emphatic rejection of Labor’s referendum asking voters to enshrine an Indigenous voice to parliament in the Constitution.
Despite a dramatic slide in support for the voice, Albanese refused to provide details on the functions of a voice body, would not pursue bipartisan support and ignored suggestions the referendum be delayed. His Indigenous policy agenda and Uluru Statement from the Heart treaty and truth-telling commitments are in disarray after more than 60 per cent of Australians in every state and territory, except the ACT, torpedoed the voice.
Climate wars
Labor’s Powering Australia plan is under extreme pressure, with emissions reduction targets in doubt and the rollout of renewables and transmission lines moving too slowly. Climate Change and Energy Minister Chris Bowen has 73 months to slash emissions by 43 per cent and lift renewables to 82 per cent. Albanese is expected to announce a 2035 emissions reduction target next year to help land a bid to co-host a UN COP31 climate summit with the Pacific.
The big climate agenda, focused on electric vehicles, renewables and batteries, is stoking anger in regional Labor seats where voters are protesting against offshore wind farms and overhead transmission lines. Residents in NSW’s Hunter and on the south coast, and in central and north Queensland, home to electorates Labor must hold or win to maintain majority government, are anxious about the transition from coal to wind farms and renewables. Labor’s broken promise to lower energy bills, record price hikes and blackout fears opened the door for the Coalition to endorse small modular nuclear reactors as the pathway to net zero by 2050. The climate wars Albanese pledged to end are alive and well.
Protecting Australia
Defence Minister Richard Marles has copped criticism for failing to get on top of budget blowouts and project delays crippling an understaffed and under-equipped Australian Defence Force. The stakes have never been higher, with Beijing and Washington locked in ruthless strategic competition; China, Russia, Iran and North Korea forging closer military ties; hostile states sponsoring industrial-scale cyber attacks; and rising fears of major global conflict.
The Defence Strategic Review and extending the tenure of Defence Force chief Angus Campbell by two years stalled decision-making, budget allocations and cultural change. The $368bn price tag for nuclear-powered submarines also has proved hard to sell when delivery is decades away and not assured. In response to cyber attacks targeting critical infrastructure and companies including Optus, Medibank and DP World, the government is under pressure to strengthen cyber laws and better align security and policy bureaucracies across Defence and three other departments.
Albanese, who promised to be tough on national security and avoid a Rudd-Gillard border-protection disaster, dismantled the Home Affairs super department and diminished the influence of secretary Mike Pezzullo, an architect of Operation Sovereign Borders. The government unravelled Coalition-era policies including temporary protection visas and deporting visa-holders on character grounds. A High Court ruling against indefinite detention, leading to the release of serious offenders into the community, left the government open to Coalition attacks for being unprepared.
Shaky surplus
In his first budget, five months after taking office, Jim Chalmers outlined a grim state of affairs. He attacked the Coalition for enormous deficits and record debt. The politically charged budget allowed Labor to cut Coalition spending and reallocate funding to pet government projects. Within seven months, the Treasurer announced Australia’s first surplus in 15 years. Coal, liquefied natural gas and iron ore exports, historically low unemployment, higher tax receipts and high post-pandemic migration delivered a $22.1bn surplus. Tens of billions of dollars underwriting Labor policies were kept off the books and siphoned into “off-budget” funds. Labor’s election attacks on the Morrison government for amassing “$1 trillion of debt” were undermined by a Treasury review that found JobKeeper had “laid the foundation for a speedy recovery”.
Seeking to re-establish Labor’s economic management credentials, Chalmers and Finance Minister Katy Gallagher launched savings drives across all portfolios, slashing programs and projects.
With deficits and cost blowouts projected over the decade, Labor’s promise to reduce National Disability Insurance Scheme spending by $59bn, including $15bn across four years, is heroic. Reining in NDIS spending underpins Treasury’s long-term forecasts and the structural integrity of the budget. Failure to curb NDIS spending would be disastrous.
Albanese and Chalmers have been criticised for dodging major tax and federation reforms, outside of tweaks to the petroleum resource rent tax and a higher tax rate for Australians with superannuation balances above $3m. Desperate to avoid cash handouts, they have struggled to sell their $23bn, 10-point cost-of-living plan. Pleas from economists and industry chiefs to recast or shelve pre-election promises have fallen on deaf ears.
High-stakes diplomacy
Albanese, who became the first Prime Minister since 2016 to visit China, embraced the opportunity to reset relations with Beijing after four years of Chinese aggression and economic coercion. The widely condemned campaign was launched after the Turnbull and Morrison governments pushed back against foreign interference, cyber attacks and espionage, and called for a probe into the origins of Covid-19. The Chinese government, faced with an economic downturn and intensifying strategic clashes with the US, used Labor’s election win as cover to ease tensions, lift export bans, re-engage with a key trading partner and halt “wolf warrior” diplomacy.
Albanese inherited Scott Morrison’s AUKUS pact and revived the Quadrilateral Security Dialogue, which has aligned Australia’s security interests with the US, Britain, Japan and India. Albanese and Foreign Minister Penny Wong successfully reconnected with China while enhancing the alliance with Washington focused on processing and refining Australia’s critical minerals and rare earths deposits. They also positively re-engaged Pacific leaders targeted under Beijing’s big-spending soft-diplomacy push.
The challenge ahead is whether Australia can sustain dual relationships with superpowers locked in a heated battle for supremacy in our own backyard, and Chinese President Xi Jinping’s commitment to reunite Taiwan with mainland China.
Mealy-mouthed responses to the Israel-Hamas war by government figures sparked consternation in Labor ranks as Albanese and Wong, both left-wing powerbrokers, sought to balance sympathies for Palestinians with ugly scenes of anti-Semitism in Melbourne and Sydney. Albanese, who upset Israel after scrapping Morrison’s decision to recognise West Jerusalem as its capital, was one of the last Western leaders to speak with Israeli Prime Minister Benjamin Netanyahu following Hamas’s October 7 massacre.
IR fight
As union power permeates across government, business leaders and company executives regret cosying up to Albanese ahead of last year’s election. Albanese, who promised to end class warfare and unite business and unions, hosted a jobs summit that fell well short of Bob Hawke’s historic 1983 economic summit. Industry chiefs felt they were used as cover to progress Labor’s radical IR agenda.
Facing new climate and environmental laws, and having lost their fight over multi-employer bargaining, industry groups and companies joined forces on a multimillion-dollar rearguard action against Tony Burke’s union-backed Closing Loopholes Bill. If Labor’s overhaul of rules on casuals and labour hire passes parliament next year, employers will spend millions more campaigning in marginal battleground seats ahead of the 2025 election.
Day-to-day business
Albanese has passed all legislation from Labor’s election policy manifesto. Boasting a slim majority in the lower house, Labor has benefited from a friendly Senate crossbench. Apart from Greens grandstanding on climate and housing legislation, the left-wing party joined with crossbenchers including David Pocock and Jacqui Lambie to support most government bills.
While legislating its election promises, the government is on track to eclipse the Rudd-Gillard governments in ordering reviews, inquiries and white papers that are heavy on rhetoric but lacking in substantive reform. Albanese, who criticised Morrison for reviews, is sticking with his off-budget funds – $15bn National Reconstruction Fund, $10bn Housing Australia Future Fund and $20bn Rewiring the Nation fund – to win re-election.
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