Australian Political Outlook for 2026: Key Issues and Government Challenges

The Albanese government faces various challenges in 2026, following its election victory. Economic pressures, social cohesion concerns, and policy reforms are among the areas under focus for political observers.

National Security and Social Cohesion

Following a terror attack in Bondi, national security and social cohesion have become prominent political agenda items for 2026. Discussions include responses to rising antisemitism and the need for support for those affected by the attack. Future inquiries and the implementation of recommendations related to the incident are anticipated. The government is also expected to respond formally to a report on combating antisemitism by special envoy Jillian Segal, with ongoing scrutiny from the Coalition.

Economic Management and Budgetary Decisions

Inflation and the economy are identified as primary concerns. The government is expected to address the cost-of-living crisis and high housing costs. 2026 is projected to involve difficult budgetary decisions, potentially requiring spending reductions to manage inflation. This period, often the middle year of an electoral cycle, is where governments frequently implement less popular economic measures.

Key areas for economic focus include:

• The May budget, which may feature tough decisions regarding budget repair, including potential spending cuts or new revenue measures.
• Addressing the tax system, particularly its impact on younger Australians.
• Potential differences in approach between the Treasurer and the Prime Minister regarding economic strategy.

Parliamentary and Electoral Reform

Several parliamentary and electoral reforms are under consideration:

• Expansion of Parliament: A parliamentary committee (JSCEM) is reviewing the conduct of the 2025 election and electoral laws, including the possibility of increasing the number of federal politicians. The last expansion of parliament occurred in 1984. Arguments for expansion cite increased constituent workload per MP, while opponents express concerns about cost and the need for more politicians. An increase in the House of Representatives would necessitate an increase in the Senate.
• Fixed Four-Year Terms: The government is also exploring implementing fixed four-year terms, which would require a referendum. Following the recent referendum outcome, bipartisan support would likely be necessary for such a proposal.

Technology and Artificial Intelligence

Artificial intelligence (AI) is identified as a rapidly evolving field with significant impacts on work and daily life. While the government has an existing AI strategy, further developments in the technology are expected to prompt all political parties to define their stances on AI usage, regulation, and the role of human oversight.

Climate Change Policy

2026 is anticipated as a year for the federal government to demonstrate progress on climate change commitments. The government acknowledges that it is currently not aligned with projections to meet its 2030 target. The Coalition has indicated it will not be bound by specific requirements for its next climate commitment, allowing it to critique the government's energy and climate change approach. The effectiveness of foundational policies laid in the previous term will be under evaluation.

Social Policy and the NDIS

Management of changes to the National Disability Insurance Scheme (NDIS) is a significant policy area. Budgetary pressures mean the government is considering adjustments to the scheme's growth rate, potentially reducing it from an 8 percent cap to 5 or 6 percent. Concerns have been raised regarding:

• The use of automated planning processes with reduced human oversight.
• Modified appeals processes.
• Reports of funding reductions for participants, impacting essential support.

These changes have led to comparisons with past criticisms of the Coalition's approach to the NDIS, and their management will be crucial for the scheme's future and its role as a key Labor policy.

Youth Voter Engagement

Younger voters, who previously supported Labor, exhibit low party loyalty. The government faces the challenge of demonstrating its commitment to addressing significant structural issues beyond minor adjustments to retain this demographic. Expectations among younger voters include substantive policy changes to improve their economic and social conditions.

International Relations

Future developments in the relationship between the United States (US) and China are a focus for international observers. The potential for a