News

“Inflation has returned to the RBA’s 2-3 per cent target band, with some assistance from tightening fiscal policy as temporary pandemic-related fiscal measures were reduced in magnitude over 2022-23 and 2023-24…The Albanese Government’s most significant failures were those concerning the need to bring power prices down; its failure to manage immigration and improve housing affordability; and the embedding of significant deficits into the budget outlook…”
— Gene Tunny, “The Australian Economy over the Albanese Government’s First Term” in Promise and Performance: Albanese’s First Term

Introduction

When the Albanese Government took office in May 2022, it promised to reduce the cost of living, lift real wages, and transform Australia into a “renewable energy superpower” and “manufacturing powerhouse.”

My chapter in Promise and Performance: Albanese’s First Term reviews how well those promises were met. The record is mixed: while the Government oversaw a return to lower inflation and strong employment growth, Australia also suffered a per capita recession, sluggish productivity, and worsening housing affordability.

Inflation Control and Fiscal Restraint

Inflation was the major challenge at the start of the Albanese Government’s term, running at 6.1% in mid-2022.

By late 2024, headline CPI inflation had fallen to 2.4%, within the Reserve Bank’s 2-3% target band.

Treasurer Jim Chalmers deserves credit for holding the line on spending despite political pressures to deliver more cost-of-living relief. The Government achieved back-to-back budget surpluses in 2022-23 and 2023-24 — a first in 15 years.

However, those surpluses were built on temporary commodity revenue windfalls rather than structural improvements. Treasury’s cyclically adjusted balance indicates that fiscal policy could have been tighter to support the RBA’s disinflation efforts.

The CPI “Hack” and Energy Policy Shortfalls

One of the more controversial cost-of-living measures was the $300 electricity rebate introduced in the 2024-25 Budget.

While it temporarily lowered measured inflation, it did little to tackle the underlying drivers of high power costs.

Between mid-2022 and mid-2024, electricity prices climbed about 20% before the rebate took effect.

Once those subsidies expire, prices are likely to rebound.

“The failure to address the underlying high cost of electricity, along with gas, has significant cost implications for Australian industry and households”

The lack of reform to Australia’s electricity and gas markets continues to weigh heavily on both household budgets and industrial competitiveness.

Falling Productivity and Living Standards

Australia experienced seven consecutive quarters of falling real GDP per capita from early 2023 to late 2024 — a “per capita recession.”

By early 2025, real GDP per capita was 1.7% below its mid-2022 level, and real net national disposable income per capita had fallen by 4.7%.

OECD data confirm that Australia suffered one of the largest declines in living standards among advanced economies since 2019 (Figure 1).

These outcomes reflect weak productivity growth and rapid population growth driven by record immigration.

Real wages, meanwhile, fell sharply during 2022 and 2023, recovering only slowly thereafter.

While the Government attributes wage gains to policies such as aged-care pay rises and the Closing Loopholes legislation, these measures risk reducing labour market flexibility and dampening long-run productivity.

Jobs Boom — But in the Public Sector

Employment growth was a bright spot, with more than 1.1 million jobs created between 2022 and 2025 and unemployment remaining around 4%.

Yet much of this job creation occurred in government-subsidised sectors — health care, education, and public administration — rather than in the private, trade-exposed economy.

ABS data show that half of all new jobs during the Government’s first term were in publicly funded sectors.

While this supports service provision, it also helps explain the stagnation in national productivity.

Immigration and Housing: A Policy Mismatch

Net overseas migration surged to a record of over 500,000 people in 2022-23, adding to housing demand and worsening affordability.

Although the Albanese Government later tightened visa rules, its early stance encouraged high migration levels — exemplified by the 2023 Migration and Mobility Partnership Agreement with India.

Housing supply has failed to keep pace.

Vacancy rates in capital cities fell to 1.3% in mid-2025, while new dwelling completions lagged far behind the levels needed to meet national targets.

The Government’s flagship initiative, the Housing Australia Future Fund (HAFF) — a $10 billion investment vehicle for community housing — is expected to deliver only 30,000 homes over five years.

That represents a minimal impact on national supply and affordability.

From Market Reform to Interventionism

A key theme of my analysis is that the Albanese Government has moved decisively away from the market-oriented reform tradition of the Hawke-Keating and Howard years.

Treasurer Chalmers’ 2023 essay in The Monthly, “Capitalism After the Crises,” outlined a vision of “values-based capitalism.”

In practice, this has meant more industrial subsidies, protectionism, and labour market regulation.

The shift from reform to interventionism — symbolised by the Future Made in Australia agenda — may undermine productivity and weaken the budget’s resilience to future shocks.

Overall Assessment

Strengths

• Inflation returned to the RBA’s target band.
  
• Unemployment remained historically low.
  
• Fiscal restraint was maintained in the face of spending pressures.

Weaknesses

• Living standards, real incomes, and productivity declined.
  
• Energy and housing affordability worsened.
  
• Economic management became increasingly interventionist.
  

“Treasurer Jim Chalmers has promised to make productivity the focus of the Government’s second term. But the Albanese Government’s first-term agenda does not inspire much confidence that the government can boost productivity.”

About the Book

📘 Promise and Performance: Albanese’s First Term

Edited by Dr. Scott Prasser

Connor Court Publishing, 2025

ISBN: 9781923224759 | Paperback | 436 pages | RRP $39.95

The volume brings together leading experts, including Gary Banks, Saul Eslake, Richard Calver, Michael Easson, Peter van Onselen, and others.

They assess the Albanese Government’s record across the economy, fiscal policy, productivity, industrial relations, energy, defence, and more.

Buy the Book

Order Promise and Performance: Albanese’s First Term from

Connor Court Publishing

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