The night before Jim Chalmers addressed business economists in Melbourne to warn of the severe budget damage a prolonged war in the Middle East could cause, he fronted a very different crowd in Brisbane.
The host of the 18 March event was the Australian Workers Heritage Centre, whose home in the central-west Queensland town of Barcaldine is considered the birthplace of the Labor party.
In previously unreported, off-the-cuff remarks, the federal treasurer laid out Labor’s mission in an uncertain and “fragmenting” world marked by war, economic upheaval and technological shifts, including the energy transition.
Labor’s task, he said, was to ensure that “working people are beneficiaries and not the victims of all this churn and change”.
“Our heritage is that whenever we go through a big shift we put working people front and centre. That’s our reason for being,” he said, before framing the urgency of the task.
Anthony Albanese and Jim Chalmers during the 2025 election. Labor’s 2026 budget could be a defining test of the party’s mission – and its risk appetite. Photograph: Lukas Coch/AAP
“We’re not here to mark time, we’re here to make a difference.”
Chalmers’ remarks offered one answer to a question increasingly asked of the Albanese government, including by some of its own MPs and rank-and-file members: what is the point of it?
‘They’re worried about what Labor is really doing’
Guardian Australia has spoken to more than 20 Labor figures, including cabinet ministers, backbenchers and party strategists, to examine the mission of the Albanese government as it enters its fourth year in office.
The historic 94-seat haul at the 2025 federal election was viewed internally not as a green light to pursue transformative change but rather validation of the prime minister’s political judgment and cautious, centrist approach to governing.
The scale of victory entrenched Albanese as the most powerful modern Labor leader and solidified the influence of his inner circle, which includes Penny Wong, Mark Butler and Katy Gallagher.
But restlessness is building in parts of the Labor caucus about the pace and scale of reform and the prime minister’s willingness to confront the worsening structural problems in the budget, economy and society.
No one doubts Albanese’s long-term strategy or political radar, but concerns linger about his handling of crises and the lack of robust debate inside the government, including in cabinet.
Albanese celebrating Labor’s 2025 election victory with his partner Jodie Haydon (R), son Nathan and Penny Wong (L). Senior party members argue that governing solely for Labor progressive base is not an election-winning strategy. Photograph: Saeed Khan/AFP/Getty Images
The national interest imperative to deal with the mounting policy challenges dovetails with an increasingly urgent political motive for Labor, whose fragile support base has been obscured by its parliamentary majority and the collapse of the Coalition.
Against the backdrop of rising inflation fuelled by the biggest energy crisis in history, the 12 May budget shapes as a defining test of Labor’s mission – and Albanese’s appetite for risk.
The prime minister is promising the government’s most ambitious economic package so far, with changes to property investor tax concessions firming as the centrepiece of a “fairness” budget.
“People aren’t silly about what they want,” says one Labor MP, who, like their colleagues, spoke on condition of anonymity. “They are electing a reformist, progressive Labor government.
“They’re just worried about what Labor is really doing.”
Building trust
The question of what this government stands for was the subject of a Quarterly Essay by the former Rudd and Gillard adviser Sean Kelly.
One interpretation of Kelly’s thesis – that Albanese has sacrificed Labor’s role as the party of reform in pursuit of turning it into the “natural party of government” – rankles with many Labor MPs, who resent the suggestion this is not a progressive, ambitious government.
Since the 2022 election win, Labor has backed wage rises in female-dominated care sectors, rebalanced the workplace bargaining regime, legislated climate targets and environment laws, rejigged the stage-three tax cuts in favour of lower-paid workers, invested record amounts in women’s health and social housing and poured billions into Medicare.
The clean energy transition is considered internally as significant a reform as the Hawke government floating the dollar in 1983.
“All of this stuff is good, left-wing, social democratic policy,” says one MP.
Yet the government continues to approve fossil fuel projects, has repeatedly rejected advice to substantially increase the rate of jobseeker payments, balked at a blanket ban on gambling advertising, is resisting pressure to tax gas exports and remains in lockstep with the US despite Donald Trump’s hostility and disregard for international law.
One right faction MP describes the government’s record as “95%” centrist, naming the voice to parliament referendum and recognition of a Palestinian state as the only major exceptions.
The approach has frustrated and alienated parts of Labor’s left-leaning membership, provoked condemnation from the Greens and independents and painted the perception of Albanese as timid, even weak. It has not been resisted in Albanese’s own left faction out of a mix of loyalty and fear of reprisal.
But senior MPs and party operatives argue that governing for a progressive base is not a viable strategy.
“We’re in a very different political environment to the Howard years,” one strategist says, “with a fragmented media landscape, fewer voters ‘rusted on’ to either side, and lower levels of trust.
“It’s no longer a contest between the major parties for a narrow band of undecided and swinging voters. We have to continually build trust across the whole of the community.”
One minister says Labor’s main opponent now is not the Coalition or One Nation but the “pervasive cynicism and pessimism” festering in the community.
“That’s what we are trying to combat through our work every day,” they say, pointing to fee-free Tafe and urgent care clinics as two initiatives designed to restore faith in the role of government.
“Our challenge is to recognise that a lot of Australians, like a lot of people in every advanced economy, feel that nothing can work. The idea of a better future being possible is the antidote to that.”
Safe – too safe?
The second force shaping the government is the lessons and scars of the Rudd and Gillard governments, of which many in the cabinet – Albanese, Wong, Butler, Tony Burke, Tanya Plibersek, Chris Bowen – were a part.
The Rudd-Gillard veterans don’t regret the leadership turmoil as much as the brevity of the term, which allowed Tony Abbott to unwind signature policies, in particular the carbon price.
Maintaining power long enough to entrench reforms that improve the lives of working people is what unites the 123-member caucus.
Medicare serves as the inspiration: it took the longevity of the Hawke-Keating governments to finally embed universal healthcare after it was contested at several elections.
Some Labor insiders are worried that progressive policies could be reversed if support for the party collapses, as happened after the Rudd government’s electoral defeat. Photograph: Lukas Coch/AAP
“We saw how we frittered away a big opportunity [under Rudd and Gillard]”, one senior MP says. “We saw the consequences over nine years in opposition.”
Where MPs diverge is on ambition and timing: How much is the government prepared to do, and how much time does it have to do it?
Some cabinet ministers are confident Labor has the electoral breathing-room to continue with a patient, incrementalist approach. Others aren’t so sure, having witnessed under Rudd and Gillard how quickly things can collapse.
Six of the MPs who spoke to Guardian Australia want the government to embark on serious, structural tax reform, with the goal of substantially lowering the overall burden on workers. That, one said, would be “landmark left-wing reform”.
There is broad support internally for new taxes on multinational gas companies and, at least in parts of the left, winding back the fuel tax credit scheme for miners.
“Everything [Albanese] has done has been OK and safe. Now he’s got to do something that is less safe,” one MP says.
‘A sense of fairness’
Albanese had a three-stage plan for his second term – 2025 was for delivering election promises, 2026 was earmarked for reform and 2027 was to consolidate ahead of the election due in 2028.
But after the Bondi beach terrorist attack cast a pall over December and January, the US and Israel’s war on Iran reset the context and parameters for Albanese’s big year of reform.
The budget outline that Chalmers and the expenditure review committee of cabinet sketched out over summer has been substantially redrawn as the global oil shock consumes the government’s bandwidth.
The option of a new tax on gas exports has been shelved to avoid the possibility of antagonising the Asian trading partners that Australia is leaning on for fuel supplies.
But changes to negative gearing and the 50% capital gains tax discount are expected to feature in the budget, resurrecting a version of the reforms that Albanese dumped after Bill Shorten’s 2019 election loss.
‘For many young people, they feel like they haven’t got a fair crack compared with my generation and the generations beforehand,’ Albanese says. Photograph: Hollie Adams/Reuters
Cabinet believes there is broader support for winding back the concessions than there was seven years ago, just as senior ministers believe there is a mandate to rein in the costs of the national disability insurance scheme.
In casting the property tax breaks, which overwhelmingly favour older, wealthier Australians, as a matter of intergenerational equity, Albanese has begun re-prosecuting an old argument about the Labor mission.
“Something that defines a Labor government is that sense of fairness,” he said this week.
“And in Australian society, what we know is that for many young people, they feel like they haven’t got a fair crack compared with my generation and the generations beforehand.”
Whether that will be enough to satisfy the voices calling for more urgent reform remains to be seen.