The year ended on a high for Anthony Albanese, with opinion polls showing the Labor government and its leader are only growing in popularity, across all states.
The new government spent its first seven months ticking off election promises and recalibrating Australia’s standing on the world stage. Albanese aimed to keep politics off the front page as much as possible. In that, it has been somewhat successful, with the biggest headlines featuring his predecessor, Scott Morrison. But every honeymoon must come to an end and as we head into 2023, the domestic political challenges for the Albanese government will soon loom large.
Indigenous voice to parliament
One of the biggest tests for the government is to hold a successful referendum enshrining First Nations people in the constitution and establishing a voice to parliament. The reform was one of three recommendations in the Uluru statement from the heart in 2017, and one of the first pledges Anthony Albanese made upon learning he had won government. The referendum is due to be held sometime in the second half of 2023, but the yes campaign has a big job ahead of it – not only dealing with detractors, who claim there is not enough detail, but also explaining the concept to voters. (The former minister for Indigenous Australians, Ken Wyatt, has strongly rebutted suggestions from his own side of politics about a lack of detail.) Opinion polls say Australians are in favour of the voice, but a successful referendum requires a double majority – an overall majority of voters plus a majority of voters in at least four states.
Energy
The rising cost of energy saw parliament recalled for an extraordinary sitting in December to pass the energy relief package. Energy costs are likely to dominate political conversation in 2023 as well, as the government attempts to navigate choppy international markets and ageing domestic infrastructure. The energy sector has had one of its best years on record – with share prices of major energy prices soaring in 2022, while the broader ASX 200 actually fell by more than 5%.
Labor is expected to flesh out its climate policy in 2023, and the May budget will include some aspects of this. The electrification package Labor was working on now has the added pressure of having been part of a deal with the Greens. Measures to bring down power prices include energy subsidy plans for low and middle income earners on the east coast, with details to be worked out with the states. That has to be done without adding to inflationary pressures. And then there is the issue of placating the gas industry while working on a mandatory code of conduct. That’s before Labor gets started on its “rewiring the nation” plan, or tackles the safeguard mechanism. Energy minister Chris Bowen has a pretty big year ahead.
Cost of living
Everything is going up except your wages was one of Labor’s election slogans – it now has to fix the problem. Even with a tight labour market wages haven’t increased. In fact, because of the rising cost of living, real wages are falling faster than they have since 1997. Energy and food prices are up and the rental market is in absolute crisis, with the national vacancy rate at about 1%, leading to rent increases that leave even full-time workers unable to secure housing. The impact of the rate rises will be felt harder in 2023, as more mortgage holders roll off their fixed interest rates and into the new variable market. Australia looks like avoiding a recession, but that doesn’t mean it won’t be tough. It’s going to be fiscal tightrope for the government to walk.
Inflation and the global landscape
Inflation was expected to peak at about 8% over the December quarter and gradually begin to decrease over the first six months of next year. The RBA has signalled it will continue to raise interest rates for as long as necessary and the IMF’s latest report showed the proportion of people in Australia paying over 40% of their income on housing is one of the highest in the OECD. All of that is raising questions over whether Australia’s housing bubble might be heading for a bust. There is only so much domestically which can be done to control inflation, with Australia at the mercy of the global situation – and the US, the UK, Europe and China are all battling with even trickier economic situations. That is not great news for Australia, which is linked to these economies and needs them to perform well in order to combat its own inflationary issues.
Stage-three tax cuts
The stage-three tax cuts, which will create a flat tax rate for anyone earning over $40,000 and under $200,000, are due to come into effect from July 2024. Labor’s policy on the tax cuts, legislated by the Morrison government in 2019, has not changed from one of reluctant support. It is estimated the cuts will cost the budget $243bn in lost revenue over the decade after they are introduced.
Jim Chalmers and Katy Gallagher parked the stage-three tax debate before the October mini-budget but left the door open to at least delay implementation. Chalmers has repeatedly said Labor’s policy had not changed, in the same breath as pointing out the challenging economic headwinds Australia is facing. There is also the cautionary tale of the Liz Truss prime ministership, which crashed and burned in spectacular fashion, over some questionable economic decisions, including tax cuts for high income earners.
Social security and jobseeker
As part of its negotiations with ACT senator David Pocock to get its industrial relations legislation through the senate, Labor committed to an annual review of the adequacy of jobseeker and associated social security payments. The review will be conducted by the economic inclusion committee. The government isn’t under any legal obligation to raise the rate based on the committee’s recommendations, but there is now an expectation at least thatit will increase. Nearly 14% of Australians are already living below the poverty line and the housing pressures and cost-of-living increases are expected to see more people slip further and further behind.
Second round of IR changes
Labor may have won the first battle with its IR bill, but the battle over the second round of changes is only just beginning. Next up is the commitment to a broader industrial relations overhaul, including tackling “same job, same pay” and an extension of minimum conditions to employment-like work arrangements. Companies who have outsourced work to labour hire firms have already begun to protest the proposed changes.
