Labor has won Australia’s 2022 federal election, removing the Liberal-Nationals Coalition from government after almost a decade in power.
Labor’s win comes at a significant inflection point for the country as it faces growing economic headwinds, grapples with the effects of climate change and adjusts to new strategic realities in its region.
In the first days of Anthony Albanese’s Prime Ministership, many have cited another former Labor Prime Minister, and one of the country’s great reformers, Paul Keating, who said “when the government changes, the country changes.”
While the new government is in its early days, here is what we can expect.
Economy and the Workforce
Labor inherits a challenging economic outlook. Despite high commodity prices and low unemployment, Treasurer Jim Chalmers has tempered expectations of a near term improvement in the budget. Current forecasts show cumulative deficits of $224 billion over the next four years and gross debt of $1.2 trillion.
As in other countries, inflation has risen higher and faster than expected. The Reserve Bank of Australia (RBA) has raised interest rates for the first time in over a decade in a bid to suppress it. It is now priming Australians for a series of rapid rate hikes which have come much earlier than expected.
While rising inflation and interest rates are putting pressure on household budgets, wage growth remains stubbornly low.
Labor has pinned much on its ability to help lift wages. Prime Minister Albanese has backed an increase to the minimum wage to ensure it keeps pace with inflation, which at the current annualised figure would be an increase of 5.1%.
Mr Albanese also wants to close the gender wage gap. He has pledged to raise wages in the female-dominated aged care sector, and mandate that large companies publicly publish gender pay gaps and prohibit secrecy clauses around pay disclosure. He has also pledged to increase childcare subsidies for 96% of families using childcare and has said the lowest-income families would have 90% of their childcare fees subsidised.
There will be a greater focus on local jobs and manufacturing, and that government expenditure supports these. A key refrain of Labor has been that “Australia needs to be a country that makes things.” To this end, it has allocated $15 billion to a National Reconstruction Fund to invest in clean energy and technologies, medical manufacturing, value adding in resources, critical technologies, advanced manufacturing, agriculture, forestry, fisheries, food and fiber.
Climate Change
Greater action on climate change has emerged as one of the biggest winners from Labor’s election win. Labor has committed to cut emissions by 43% by 2030 in order to reach net zero by 2050 and has ambitions to host a UN Climate Conference (COP) in 2024. It has also said it will put emissions limits on the country’s top 215 emitters through safeguard measures, spend $20 billion to work towards having 82% of Australia’s electricity grid powered by renewables by 2030 and spend $500 million encouraging the uptake of electric vehicles.
It is likely to introduce these climate measures reasonably quickly, given the ground Australia needs to make up to position itself alongside global peers on climate action and to build credibility for any bid to host a COP in 2024.
The composition of the 47th parliament of Australia means Labor is unlikely to face significant resistance to implement its climate agenda – an unusual scenario for Australia. With vote counting still underway, Labor is creeping towards a majority of 76 seats in the lower house. Even if it falls short, this election saw a wave of climate focused independents and members of The Greens successfully elected to occupy the crossbench.
In the Senate, while Labor will not have a majority, it is only likely to need a small number of progressive Green and independent Senators to pass legislation through the upper house.
Foreign Policy
In opposition, Labor adopted many of the same foreign policy and national security settings as the then Coalition government. Labor will continue to support the Quad and AUKUS structures and seek opportunities for greater trade and economic integration through them.
Cyber will remain a high priority, with Labor saying it will appoint a dedicated cybersecurity minister. The focus on defence capability will persist, with undertakings to keep defence spending at ~2% of GDP and to conduct a Defence Force Posture Review – the first since 2012 – to assess Australia’s long-term strategic posture and short-term capability needs.
The bilateral relationship with Australia’s largest trading partner, China, will remain challenging. China’s early overtures to the Albanese government have been conciliatory, but cautious, as they test the new government. Mr Albanese’s comments on the relationship during his first Quad meeting in Japan have been more circumspect.
There is no indication that Labor intends to change the current Foreign Investment Review Board’s settings after provisions to screen investments on national security grounds were introduced in 2021. Businesses with exposure to China will have to continue to manage risks carefully.
Labor will lift engagement more broadly across the region. Its approach to foreign policy and trade will seek to be more inclusive and collaborative. An early indication of this is its undertaking to be a vehicle for neighbouring countries to have a greater voice in the region’s security structures and to place climate action at the centre of its regional foreign policy strategy, particularly in the pacific.
Conclusion
After almost ten years in opposition, it has been a long time since Labor has governed. But Mr Albanese and his senior leadership team are experienced, with several high performing MPs and Senators taking up key cabinet posts.
In the 110 years since Australia’s federation, Labor has only governed for roughly one third of them. With the pendulum of government having paused on the conservative side of politics for some time, Labor will not want to squander the opportunity.
Businesses will need to adapt to expectations on:
- Wage fairness, transparency and measures to support workforce participation
- Local jobs, manufacturing and skills development (in-line with government incentives)
- Climate action, including with respect to disclosure and reporting
- Managing risks arising from challenging regional dynamics