Labor's Paradox

Electoral Capital, No Courage

Labor was significantly burned by the 2019 electoral loss, in which they campaigned for major tax reforms. An incrementalist policy approach was consequently adopted under Albanese’s leadership and implemented during Labor’s first term, with one exception: the failed Voice referendum. Twice burned by bold reform, Labor persevered with its cautious approach. It proved effective at controlling inflation (this may now be changing). Combined with the Coalition’s non-substantive policies and Trumpian mimicry, Labor was rewarded with a landslide election victory.

With Labor winning 94 seats to the Coalition’s 43, electoral history suggests that Labor will likely hold power until at least 2031. This was before the Coalition abandoned net zero, thereby forfeiting the inner-city seats required to win back government. With vast political capital, there have been calls for Labor to adopt a more ambitious policy agenda. Australia faces structural pressures that demand reform: housing affordability, productivity, the clean-energy transition, and First Nations empowerment.

Labor has so far refused to change course from the incrementalist policies it took to the election. Beginning with First Nations policy, too many Closing the Gap indicators are stagnant or worsening. Albanese stated at the Garma Festival that he was there “because [his] optimism for a better future still burns.” Yet Labor’s post-referendum policies echo cursory Abbott-era approaches, prioritising economic partnerships and entrepreneurship while sidelining the deeper drivers of inequality like structural discrimination, education gaps, and health inequities.

Victoria offers an example. With the state Liberal Party largely impotent, Victorian Labor was able to pass the Statewide Treaty Bill 2025. Federally, Labor could likewise initiate treaty negotiations. The Voice referendum failed partly because it was a single-issue vote; a treaty pursued within the broader context of a general election would be less likely to dominate the agenda. Teal seats and formerly Liberal seats gained by Labor, strongly supported the Voice. Coalition opposition to a treaty would unlikely win many votes, particularly in the seats they need to reclaim.

Like First Nations outcomes, housing affordability continues to decline. Contributing factors include high construction costs, workforce shortages, elevated migration, and complex planning regulations. These pressures are amplified by tax concessions—negative gearing and the capital gains tax discount—which incentivise property investment, inflate demand, and drive prices higher. The concessions cost the federal budget tens of billions of dollars annually and entrench housing as a preferred investment for wealthier households, thereby limiting access for first-home buyers.

An audacious response would be to phase out negative gearing and the capital gains tax discount while introducing incentives for alternative investments to reduce housing’s dominance as an asset class. With supply constraints slow to fix, correcting these demand-side distortions is the most immediate lever. Instead, Labor has leaned on a 5% deposit scheme and a pledge to build 1.2 million homes. The former has pushed prices up, and the latter remains wanting. A similar pattern appears in energy policy, where caution again undermines long-term stability.

Energy prices have risen, but not because of renewables. High oil prices, ageing coal plants, and high interest rates are to blame. Prices would be even higher without renewables already in the grid. Renewables remain cheaper and more reliable than replacing coal or importing fossil fuels. It therefore makes sense to accelerate transmission infrastructure and planning approvals. Ambitious targets could also position Australia as a major exporter of renewable energy to South-East Asia and a global supplier of low-emissions products.

Labor, however, is sticking with cautious emissions targets, while the Coalition aims to reignite the climate wars that they lost at the 2022 election. Labor’s caution incurs an opportunity cost: delaying price stability and leaving the system exposed as old power stations retire without adequate replacement. By prioritising caution, Labor may also miss a rare chance to lock in structural reforms that drive economic diversification and strengthen Australia’s competitive position in a decarbonising global economy.

Labor’s approach to renewables mirrors its approach to productivity growth, now at a sixty-year low. This slowdown reflects reduced business dynamism and competition, slower technological diffusion, and weaker growth in capital per worker. Labour productivity has stalled because workers have less new capital to use (e.g., machinery) and because multifactor productivity—driven by technology and skills—has also declined. Productivity is Labor’s primary focus in its second term, which began with the much-lauded productivity roundtable. No policies or plans have come out of it.

The immediate reforms Australia actually needs consequently remain untouched. The tax system remains skewed toward inefficient income and company taxes. Housing supply is hampered by restrictive planning. Skills shortages persist because VET is fragmented and migration settings do not match industry needs. Investors also face slow, uncertain approval processes. Moreover, Australia remains one of the least diversified advanced economies, still overly dependent on commodity exports. Labor is six months into its second term, and productivity remains stagnant.

To be fair to Labor, they argue that they have a mandate to implement only the policies taken to the 2025 election. That may be true, but what legacy does the government seek to leave? Recent history offers two contrasting examples. In 2020, New Zealand (NZ) Labour won an unprecedented parliamentary majority. NZ shares many of the structural problems Australia faces. However, like Australian Labor, NZ Labour pursued incremental measures that failed to address structural causes. When NZ Labour was swept from office in 2023, its reform legacy was negligible.

By contrast, the Whitlam and Hawke-Keating governments seized their moment to reshape Australia. These governments dragged the nation into modernity. Landmark reforms in social and economic policy still underpin society decades later. Which path will today’s Labor choose? They show no signs of abandoning the incrementalist approach, which suggests a preference for managing mediocrity over structural reform. Without bold action on systemic issues while rich in political capital, Labor risks repeating NZ Labour’s trajectory: a missed opportunity gone with the wind.