Political pundits are predicting a poor year for the Albanese government, but circumstances, serendipity and strategy suggest a different story. Who will be right?
Polling conducted in December by Freshwater for The Australian Financial Review suggests the major parties are neck and neck on a two-party preferred basis, with Labor on a primary vote of just 31 per cent, well beneath the Coalition’s 39 per cent.
Pretty bleak for the Albanese government, would be the consensus view.
But experience teaches us that while levels of unfavourable economic variables are important, so too are changes in their direction.
Leading into the 1990 federal election, the Reserve Bank’s cash rate had soared to 17.5 per cent, but in the month before the election it began falling, enabling the Hawke government to argue the worst was over.
While routed in Victoria, the Hawke government was re-elected, gaining a net four seats in the other states.
A federal election is not due until 2025. By that time, the Reserve Bank will have lowered the cash rate at least twice and probably more.
It will do so because the inflation rate will continue falling.
For most workers, wage rises will at least match price rises. The government’s crackdown on bogus foreign student visas will help ensure this is the case for lower-paid Australian workers.
Immigration and NIMBYism have increased pressure on house prices and rents.
The intergenerational divide between those who own homes and those who cannot realistically aspire to do so is the defining issue of our time.
Younger renters and aspiring first homeowners are resentful of wealthy Boomers who not only own their own homes but several investment properties as well.
The Greens are advocating simplistic and ultimately self-defeating responses such as legislated rent ceilings.
Basic economics and historical experience teach us that price ceilings lead to shortages and black markets; just ask those who lived in the Soviet Union.
Nevertheless, by campaigning for rent ceilings the Greens have been successful in having conversations with young renters in language with which they identify.
The challenge for Labor is to look and be serious about responding to the intergenerational housing divide.
Rather than progressing sensible housing policy ideas through the national cabinet, which deals with myriad other policy issues, it might be wise for the Albanese government to create a special-purpose, federal-state housing forum that brings together all relevant policy initiatives – a national housing council – to consider and announce housing policy initiatives.
The energy transition is now well underway. Unlike the Greens, Climate Change and Energy Minister Chris Bowen, sees it as a transition rather than cold turkey. And unlike the Coalition, which is now campaigning against wind power and in favour of nuclear in 2040, if ever, Bowen is open to all renewable options: solar, wind, pumped hydro and batteries.
Rooftop solar in Australia is literally going through the roof with the highest penetration per capita in the world. But what if, instead of each household being obliged to buy its own expensive battery to store the electricity for the evenings when it’s most in need, a local community battery was available?
Imagine the savings – one community battery instead of hundreds of household batteries.
Well, that’s actually happening. The Albanese government’s community battery program has been rolling out local batteries no bigger than a shipping container to obviate the need for each home to purchase its own battery.
Proposals have been developed by Ausgrid in NSW to upsize the scale of community batteries.
Accelerating and upsizing the rollout of community batteries literally would deliver power to the people, helping to make the energy transition more tangible for Australian householders.
Community batteries will complement the rapid rollout of big batteries now underway providing, with gas, essential firming capacity for renewables.
Much of the wider economic reform task resides with the states. A revival of efforts towards creating a seamless national economy undertaken by previous Labor and Coalition governments – with incentive payments for co-operating states – would help revive productivity growth.
Albanese has flagged further cost-of-living relief. Delivering it through electricity prices and enhanced childcare subsidies would have the advantage of reducing the official inflation rate, since both are components of the Consumer Price Index.
This might help ease Reserve Bank concerns about stimulatory effects of cost-of-living relief.
Some forces shaping Australian politics, such as conflict in the Middle East and Ukraine, and the US presidential election, are beyond our control.
But with deft economic and political management, the Albanese government can end 2024 in a strong, election-winning position.
Craig Emerson is managing director of Emerson Economics. He is a distinguished fellow at the ANU, director of the Australian APEC Study Centre at RMIT and adjunct professor at Victoria University’s College of Business.