The Albanese government finds itself in policy quicksand on three core issues: its budget tax reforms, its wrestle to curb the National Disability Insurance Scheme (NDIS), and the electorally sensitive area of migration. This comes just over a year into its second term, with Pauline Hanson turning politics upside down.
Tax Package Changes
On Thursday, the government announced changes worth $475 million over the forward estimates to its tax package, which is yet to be legislated. While the budget indicated there would be consultations with stakeholders about detail, these measures aim to allay the fierce post-budget backlash from vested interests and some commentators. Prime Minister Anthony Albanese fronted Thursday's news conference with Treasurer Jim Chalmers, perhaps to make it clear he personally has been listening and taking account of feedback.
The government says its changes mean "all 2.7 million active small businesses" will be eligible for the capital gains tax concessions. The threshold is being lifted from $2 million turnover to $10 million. The government is also proposing special arrangements for start-ups that are "innovative." In addition, it seeks to quash the scare campaign about a "death tax" by exempting all kinds of testamentary trusts from its planned 30% tax on discretionary trust distributions.
The government will amend its tax legislation in the Senate to provide more certainty on detail, as the current version leaves much up to the treasurer's discretion.
NDIS Reform
In what will be an intense fortnight sitting beginning Monday, ahead of the winter parliamentary break, the government hopes to pass both its tax legislation and its NDIS reform legislation. It is looking to the Greens as partners to pass the tax reforms and to the Coalition to support the NDIS legislation.
The NDIS legislation sets the framework for a more restricted scheme, with its cost growing at only 2% annually over the next four years, rising to about 5% after that, compared to the present 10%. The government says the measures will "fight fraud and stop rorts, slow rapid cost increases, [and] make eligibility requirements clearer." Critics argue they will worsen the lives of vulnerable people.
As happened with the government's reform push last term, the states are reluctant to take on sufficient responsibility as the Commonwealth cuts back. They are collectively resisting. The federal government thinks this is posturing.
Equally damaging for the government has been the evidence at the Senate inquiry, with heart-tugging stories of people potentially disadvantaged by the cutbacks to come. Reform of the scheme will take years, so the government can expect a drawn-out, concerted campaign to soften its stance. But the more it does so, and the longer it takes to put in place state government supports to fill gaps, the less the prospect of meeting the financial targets, especially that highly ambitious one of an annual cost increase of only 2%.
Migration Policy
The reform task in migration is less acknowledged by the government, but also imperative. On Thursday, the latest National Overseas Migration numbers for the 2025 calendar year were released, a total of 301,000. Although it has come down from the stratospheric annual peak of about 550,000 it reached post-pandemic, the levels of the last several quarters suggest the NOM is settling at around 300,000 annually. This is well above the long-run average forecast of about 225,000.
For political and substantive reasons, the government knows the NOM has to be shaved. The opposition is committed to slashing immigration, although it has not released a specific number. More importantly, immigration is a springboard for One Nation. A suite of issues around immigration need review, but as with tax policy and NDIS reform, there are complications wherever the government looks.
Reducing immigration has implications for economic growth, the overall workforce, particular industries and sectors, exports, and education. Many jobs Australians won't do, at least in enough numbers, rely on migrants. This is most obvious in aged care. Construction requires more skilled workers, and without enough workers, the housing crisis will worsen. The agricultural sector relies on temporary workers. Higher intakes in previous years have increased pressure for family reunions, which currently take years. Crackdowns on student numbers come at the cost of tertiary institutions and one of Australia's leading export industries.
The government's priorities in this area will be different from the opposition's, but the difficulties it faces in making the system more fit for purpose are formidable.
