After the defeat of the voice referendum during the Albanese government’s first term, things looked pretty rough for Labor.
Labor slumped to some of its worst polling levels and government MPs were in a funk. The Coalition, then led by Peter Dutton, started to imagine the possibility of winning after one term. Labor’s polls went in the wrong direction for a year, only turning around in the months before the election.
Things have started to feel similarly ropey for the Albanese government in the past couple of weeks. Tuesday’s interest rate rise and Wednesday’s inflation numbers only compound the bad political vibes for Anthony Albanese and Jim Chalmers.
Headline inflation rose to 4% in the year to August, up from 3.5%, while trimmed mean inflation held steady at 3.6% for a third month. Last week, unemployment climbed to a near five-year high.
The Reserve Bank’s decision to lift the cash rate to 4.6% on Tuesday – the highest in 15 years – was bad enough. But the governor, Michele Bullock, also warned that more rises are possible, putting some of the blame on excess demand in the economy and describing the war in Iran as coming in addition to the existing problem at home.
That took the air out of Chalmers’ argument that global disruption from the strait of Hormuz was to blame for inflation. On Wednesday, the treasurer was even asked by media if he was “gaslighting” voters. Challenged over Labor’s big spending agenda, Chalmers insisted government spending was coming down, though he conceded there was more work they could do.
In a political sense, Labor faces an increasingly difficult period between now and the election.
Already changes to negative gearing and capital gains tax are cooling the housing market, meaning homeowners will have to pay more for their mortgages at the same time as the value of their home drops. Demand for more cost-of-living assistance comes with a big price tag and would do little to turn around inflation.
Labor doesn’t have many good options. It wants to deliver on election promises and help households, including by offering tax cuts and increased spending on childcare, Tafe courses and improved Medicare services – none of which comes cheap. Cuts to health or social services would break faith with Labor voters, some of whom are angry at $40bn in cuts to the NDIS. How the government can afford its universal childcare system plan is yet to be seen.
The times suit One Nation more and more. Pauline Hanson’s ability to reflect voters’ grievances and disillusionment back to them is unrivalled, and nothing is more powerful for protest parties than sustained economic pain for households.
It is unclear if Angus Taylor can improve the Coalition’s standing off the back of Labor’s woes. This week he attacked Chalmers for not understanding business or the economy, but then refused to acknowledge any international effect at all on inflation, including the Iran war.
Some Labor MPs have already spoken up privately about their concerns on the government’s economic message, urging Albanese and Chalmers to take on serious reform and do more to help small business. These measures would be hard won and likely slow moving.
If Labor is to avoid another malaise like the one that followed the voice referendum, turning the tide on inflation is essential. Restoring the party’s position in the polls will be harder than last time, with sustained interest rate rises sure to prompt a slow political death. One Nation might be the only winner.
• Tom McIlroy is Guardian Australia’s political editor
