Three more years
A bolder policy agenda is needed to restore economic growth and fund government spending in a way that is fairer to younger generations.
The past weekend saw Anthony Albanese and the Australian Labor Party emphatically secure a second term. Labor’s 55% share of the two-party-preferred vote (as at today) is the largest vote share won in 50 years.
The result followed a lacklustre election – at least for anyone hoping for significant economic policy debate. But Labor now enters its second term with a healthy majority in the lower house, a much friendlier path through the Senate, and a platform from which to implement its policy agenda.
The election was largely contested around Australia’s present day cost-of-living challenges. Both sides focused their policies on the near term and kept their distance from the structural economic reforms that could lift Australia’s long-term living standards.
Labor’s main proposals included two years of modest income tax cuts that will essentially freeze bracket creep in 2025-26 and 2026-27. These cuts had already been factored into the 2025-26 Budget at a cost of $17.1 billion over four years. The election campaign saw Labor commit another $2.4 billion of personal income tax relief in the form ‘instant’ work-related tax deductions.
Other spending commitments include a $9 billion boost to Medicare bulk billing and a $16 billion reduction in student debt. A $600m expansion of the First Home Guarantee Scheme, more funding for fee-free TAFE, and subsidies for household batteries were also promised.
Individually, most of the government’s policies have some merit – notwithstanding the loud chorus of warnings against demand-side housing policies. The bigger concern is the lack of ambition in the policy agenda as a whole.
Following the election win, Treasurer Jim Chalmers, was quick to point out that “the first term was primarily inflation without forgetting productivity; the second term will be primarily productivity without forgetting inflation”.
Yet with an overwhelming focus on the near term, the policy agenda to date fails to tackle the major economic challenges that will confront the nation over the next decade.
Australia faces budget deficits as far as the eye can see. Government spending requirements are growing quickly as the population ages and the world around us grows more hostile. Yet the tax system is not set up to pay for that spending efficiently or fairly. Without reform, an outsized share of the tax burden is set to fall on Australia’s younger generations.
Clunky Commonwealth-State relations are a drag on the ability to tackle major policy challenges. Australia is not building enough houses to keep up with population growth, educational attainment rates are stagnating, and productivity growth has floundered for the past decade.
Bolder reforms are needed to restore economic growth and fund government spending in a way that is fairer to younger generations. With Gen Y, Gen Z and Gen Alpha set to make up the majority of Australia’s voting age population in coming years, the government should take the opportunity to reset the policy agenda with a stronger focus on structural economic reform.
A majority government is a good result for many reasons. It will help Australia swiftly navigate a more volatile global economy. Investment should respond kindly to greater certainty in the domestic policy environment. But perhaps most importantly, a strong majority government should provide an opportunity to move away from the short-termism that has dominated politics of late.
The government has a strong platform to deliver on its campaign policy promises. This should help it build the political capital it needs to introduce the public to a more ambitious reform agenda. With any luck, that means Australia will be able to have a more meaningful economic policy debate three years from now.
This newsletter was on 7th May 2025. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Daniel Weber, Manager at Deloitte Access Economics
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