Neither Anthony Albanese nor Peter Dutton seem able to face the challenges ahead
Election 2025 looms as one of the most dangerous elections for many decades, as neither leader appears up to the challenge of the new strategic realities faced by Australia.
The emergency signals are flashing: the eruption of Donald Trump, the Chinese flotilla circumnavigating the continent, a predicted decade of budget deficits, devastating misjudgment of spending priorities, moribund productivity and the exhaustion of economic reform.
The fear is the coming election will bring to a zenith the long-festering Australian malaise – that our political system cannot effectively identify and respond to the numerous and contradictory demands being imposed on Australia. Australia looks static, lost in a world moving too fast, defined by strategic danger, deepening economic competition, technological upheaval and unresolved fiscal demands. Apart from a few concessions neither Anthony Albanese nor Peter Dutton seem capable of putting an agenda to the public that is fit to meet the disruption, opportunity and transformation lying ahead.
Elections have the potential for renewal and redirection. But election 2025 looms as one of the most irrelevant, insubstantial and uninspiring for many decades because the main parties – Labor and the Coalition – are decoupled from the realities of the times. The upshot may be minority government, a weakened executive, a more difficult parliament and a split country.
Aside from the long-run notion of nuclear power – probably unrealistic – and this week’s belated moves on the defence front, the election is devoid of new ideas, political courage and any effort to break the years of complacency and third-best national policy that have diminished Australia and led to a community that is frustrated and worried about the future.
Australia, like other rich countries, seems trapped. The electorate knows things aren’t working, living standards are too stagnant; the status quo is fracturing, beset by cultural division, weak economic growth, social inequity and erupting security threats – but the public remains suspicious of change and our political leaders prefer tactical fiddles to any robust exposition of the fundamental departures that are needed.
The media, naturally, is obsessed by the competition between Albanese and Dutton. Yet this misses the point entirely. Neither offers an adequate agenda. The campaign shapes as a contest between two highly unsatisfactory offerings. This is so obvious, yet we seem incapable of recognising the obvious and demanding something better.
Trump’s chaotic meaning is unmistakeable – the purpose of government is to lead. Without strong constructive leadership a frustrated public will vote an alternative. In the US that was Trump; in Australia it may become a further vote against the existing two-party system.
Both Albanese and Dutton are locked into negative campaigns against each other. Yet the extraordinary story is the shared policy agenda between Labor and Coalition, a reality both seek to conceal with their inflamed rhetoric.
Don’t fall for the myth this election is a great battle of ideology and ideas. The rhetorical differences are huge and the policy differences are minor, energy aside.
Don’t expect the Coalition to run on big tax reform or a bold winding back of Labor’s workplace laws. Dutton’s focus is on seven quarters of shrinking GDP per capita.
Since January Albanese has offered a serial spending agenda – $8.5bn for extra Medicare, $644m for care clinics, $7.2bn to upgrade the Bruce Highway in Queensland, a combined federal and state $2.4bn support for the Whyalla steelworks and $3bn to upgrade the NBN – all matched by the Coalition (some with policy adjustments).
Tactics and caution drive this campaign. Albanese promises more of the same – more spending in health, education, childcare and renewables while Jim Chalmers uses the latest statistics to say “inflation is down, incomes are strengthening, unemployment is very low and interest rates are coming down”.
Any second Albanese term will duplicate and follow the first. It’s the status quo – but the status quo is heading into a dead end.
Labor is caught out by a changing world, chronic budget deficits, the demographic time bomb and erupting strategic risk. Its low and middle-class spending is unsustainable given it refuses to engage in serious tax reform, while its defence agenda is grossly inadequate with Labor on election eve facing huge pressure to revise upwards its defence budget with the guaranteed upheaval this means for its political and social agendas.
The Coalition, meanwhile, is shy of putting its policy money on the table. On election eve, its core economic policies and numbers are largely unknown. Its message is smaller government, lower tax, less regulation, fewer public servants, prioritising gas and then nuclear in energy, but the details are sparse. Dutton is desperate to deny Albanese a big scare – anywhere. The fear is the long wait will be followed by a deeply insubstantial policy agenda.
Independent economist and budget guru Chris Richardson tells Inquirer there is a silent pact between the politicians and the people: “We, as an electorate, have asked our politicians to avoid challenging us. It is becoming easier to become prime minister but much harder to do something as prime minister.
“In this election the two sides seem to be agreeing on mediocrity. In terms of the forward estimates I think they are agreeing on more than 99 per cent of the budget. That’s an acceptance of a status quo that is failing. We have stopped fighting harder for our future. And our politicians have stopped challenging us.”
It’s probably a forlorn hope. But the nation needs to avoid an election based on bipartisan mediocrity and that means some shock policy adjustments as we enter the campaign. Don’t hold your breath.
The status quo – spending at an exceptional high of 27.2 per cent of GDP in 2025-26 compared with 24.4 per cent of GDP in 2022-23 – testifies to a remarkable surge over three Labor years. Richardson identifies what has made it possible – the lottery of a massive, temporary, revenue boost worth an extra $173bn (with more coming) across the past two years.
What did Labor do? Richardson says since coming to office Labor has taken decisions to increase spending by $124bn and to raise taxes by $46bn.
“That explains how you can have a budget that moved into surplus and yet a budget whose fundamentals are worsening at the same time,” he says. “The permanent promises will go on, but the temporary luck will fall away.”
The budget papers tell the dismal story – deficits running for the next 10 years until 2034-35. But the situation is worse because this excludes what the states are doing and the new cult of off-budget spending.
What this means is Australia is bereft of options and the rising demands are everywhere – witness healthcare driven by demography and the rising imperative of defence given Trump and China’s intensified assertion. Labor’s presentation of its China policy as “stabilisation” is obsolete, with China’s flotilla a symbol of our deteriorating situation and our capability inadequacies.
The pressure cooker of providing the funding by ongoing, concealed, personal income tax increases via bracket creep will explode – it can’t do the job. Australia faces a collision between its refusal to revamp economic growth through productivity reform measures and the demands on the budget arising from a transformed world and ageing population. The solution: the political system offers none.
The Trump administration has put in headlights for the first time what it expects from Australia – defence spending to lift to 3 per cent of GDP; that’s a 50 per cent increase on where we are now. Nobody is surprised, yet in truth we have been taken by surprise. Our politicians have been in a confused scramble all week with senior Trump administration official Elbridge Colby nominating the 3 per cent in his confirmation hearings. Trump, of course, says he wants allies at 5 per cent, an absurd figure.
Albanese is being defiant. But Labor will be compelled to do more – it can get proactive or be driven into the ignominy of embarrassing catch-up.
“My government is delivering increased defence assets and increased defence capability,” Albanese says, defending the status quo.
Yet a couple of days earlier the Prime Minister left open the idea of providing an Australian force to any Ukraine mission being mounted by the Europeans. He is rummaging in the dark seeking better security credentials.
Defence Minister Richard Marles points to Labor’s record, promising an extra $50bn in defence spending across the decade, mainly outside the forward estimates. He says Labor’s commitment is “well understood” by the US administration. Really? Marles says he understands the US wanting its allies to do more and that is a conversation “we will continue to have with the US administration”. This is feeble stuff.
Let’s get real. Any Australian government will be required to do more. Labor should say this now – otherwise it will fall into the odium of being depicted as succumbing to pressure from Trump. The current defence trajectory is inadequate. That’s not the view of the Labor cabinet or the Labor leadership group but its priorities are going to be overtaken. As usual, Labor looks as though it cannot effectively manage unfolding events.
Labor, presumably, doesn’t want its election agenda and spending decisions disrupted by a greater commitment to defence, a step that would be widely unpopular within much of the party. Under Labor, defence spending is slated to be 2.03 per cent of GDP in 2024-25, rising to 2.33 per cent in 2033-34. Those numbers are untenable given Australia’s national security needs. At a United States Studies Centre conference in November 2024, both the former head of the Defence Department, Dennis Richardson, and former defence force chief Sir Angus Houston said the defence budget needed to lift to 3 per cent of GDP.
Albanese needs to be extremely careful. If Trump makes a public statement about the need for Australia to do more the issue will become politically inflamed. His management of ties with the Trump administration will come into question – unfairly – if, as expected, Australia fails to win the exemption it seeks on Trump’s tariff increases.
The Coalition, however, has been remarkably cautious about its own defence plans. Last year opposition defence spokesman Andrew Hastie committed to a stronger defence budget than Labor. But it was only last weekend that Dutton announced a $3bn pledge to buy the fourth squadron of F-35 fighter jets that Labor had cancelled.
The Coalition says the $3bn is a minimum commitment. Obviously, it needs to come in the forward estimates. This is a tangible sign of an increased defence budget under the Coalition – though many experts doubt whether the F-35s are the correct priority. The Coalition has yet to announce the share of GDP it will devote to defence, but it would be folly, given the deteriorating strategic situation and the attitude of the Trump administration, not to commit to 3 per cent.
For Dutton, that is an absolute benchmark for his security credibility. And it will raise fiscal problems for the Coalition.
Albanese’s status quo mentality about China became a national embarrassment when he suggested its unprecedented firing drills in the Tasman Sea were unremarkable and when Australia’s surveillance was obviously exposed as inadequate. By contrast, Defence Department head Greg Moriarty told Senate estimates the Chinese “are practising and rehearsing” and collecting intelligence. Rehearsing for what?
Former head of the Home Affairs Department, Mike Pezzullo, tells Inquirer that China’s strategic attitude towards Australia is largely divorced from the bilateral relationship, whether that is good, bad or indifferent, a point lost in the public debate.
Addressing the “rehearsal’ point, Pezzullo says: “I don’t think the Chinese want a war with the Americans. I think Xi Jinping’s strategy will be to use the Trump presidency to try to settle new strategic terms in Asia that benefit China without a war. But if you’re a Chinese war planner you’ve got to plan on the basis that this strategy might not work. The flotilla was not really about the bilateral China-Australia relationship.
“It’s a rehearsal because in any war China will need to destroy a series of bases and facilities in Australia to deny their use to the Americans. This is about a strike on Australia. I know people are hurting with cost-of-living issues and grocery prices, but there’s no point having assurances around them and not having a country.
“Nobody is taking away the importance of social and other benefits, but you make choices in life. We can have social benefits or we can have a country. This is the new world Australia has to live with.”
Pezzullo says the real issue is whether Australia will retain its sovereign autonomy. The dangers arise from the combination of a Trump administration less interested in alliance guarantees and China’s assertion. He says: “This is not about an invasion but about our freedom of action and choice. Do you really think an Australian government – if we’re not spending 3, 4 or 5 per cent of GDP on defence – would be able to say to China things like we can’t accept Huawei in our network? In that situation our ability to make sovereign choices is completely constrained or obliterated.
“We should do more on defence spending because that is our national interest. We should not be waiting for Donald Trump and we should not think of an increased defence budget as some form of tribute. The wake-up call from this Chinese naval task group should indicate that the phasing and sequencing this government has put on our defence expansion is completely inadequate and inappropriate. We need to end up quickly at about 3 per cent of GDP and that’s just to do the crewing, maintenance and getting the current force battle ready.”
Richardson sums up our dilemma: “The world is now moving very fast. But Australia is moving very slowly. We are not match fit. We have a tax system that is increasingly littered with disasters. We have a spending system that is wasting lots of money. We have a defence system now absolutely caught on the hop by the rise of China.
“Looking back to what Paul Keating did, it wasn’t perfect but it took courage, and that courage is so spectacularly lacking today. We have both sides of politics now promising mediocrity, and I believe their promises.”
Inadequate budget policy penetrates to the heart of the problem. University of NSW economics professor Richard Holden tells Inquirer: “Neither the government nor the opposition seem to have a plan to close our structural deficit – other than bracket creep over a decade. In other words, a constant tax increase on work and workers. Peter Dutton understandably doesn’t want to announce spending cuts in the lead-up to the election. But this leaves him vulnerable to the ‘tell us what spending you’d cut’ line from the government. Hence the response: it will be cuts to the public service.
“The United States has shown what happens when a political system is incapable of fiscal responsibility – either denial (Democrats) or a slash-and-burn figure like (Elon) Musk appears on the scene.”
In his Australian Financial Review column this week, Holden wrote: “We’ve entrusted our prospects to a set of political leaders – left, right and centre – who show no signs of being up to the task.”
This week the Business Council of Australia called for major reforms to deliver sustainable health and care services given the dramatic consequence from an ageing population. BCA chief executive Bran Black says: “This is no longer a future problem – it’s here today – with large cohorts of the baby boomer generation due to turn 80 by 2027, placing significant pressures on our health system and the budget.”
Current projections show there will be fewer working-age people to pay for care in the future, with the number of working Australians per retiree projected to fall from about 6.4 in 1980 to less than three within 40 years. The message is the need for internal reform of the health system – much is being done yet this only touches the surface of the problem. At this election both sides of politics should offer a researched, comprehensive new health and funding model for the future.
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The world is putting Australia on notice. This is an age of transformation. But Australia is locked in a culture of denial and obsolete thinking – election 2025 shapes as a dispiriting project with neither the Albanese government nor the Dutton opposition confronting the challenges the nation faces.